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My husband John and I have an offer in on a house back home in western PA. The market there is ridiculously cheap compared to what we're used to seeing in Boston, but we don't want to just accept any price and the financial responsibility of necessary repairs to the point that we're in over the market value of the area. The house we want to buy has been up for sale for nearly a year and has been vacant since then, it was listed originally at $119,900 in July 2013 and they took only one price reduction in October 2013 down to $109,900. It's a beautiful 2300 sq ft antique home on a very small property lot and when we pulled comps, other houses of the same size with more land but not as updated-looking were listed in the range of $90k-$120k. We put a strong offer in of $100,700 plus $5700 seller's assist and they countered with $104,700 with $5700 assist. We love the home and we didn't want to squabble over a couple thousand dollars, so we accepted their offer. We had our home inspection done on Monday and it came back with 2/3 of the house still wired with knob and tube, a 30+ year old furnace (it seems to be working fine at the moment), asbestos siding (it's sealed and in good condition, though), a patio roof that needs replacing, and a third level that is heated, but is uninsulated, needs to be replastered and needs all the windows replaced.
The electrical work is what scares me the most about the house. I hadn't noticed anything in the seller's disclosure initially about any known electrical issues, but I looked at it again the other day and the seller's left the question about known knob and tube blank, after having been very thorough in all other aspects of the disclosure.
We had an electrician go in today with our realtor to take a look at things so as to work up an estimate, because with the house as it is, there's no way we could get homeowners insurance, and therefore no mortgage. (We are trying to get a USDA loan, which requires that any flagged issues be repaired prior to closing.) The reality is that I know NO buyer looking to obtain any kind of mortgage will be approved for that house with the wiring being in the condition it's in, so I feel we have the upper hand in this scenario, especially since they were at slightly sketchy by leaving the knob and tube question blank on the disclosure.
I won't know until Monday what the electrician says about an estimate, but he had guesstimated prior to seeing the home that a re-wire of a substantial portion of the house would run around $16k, knowing that they'll have to get into walls and possibly floors/ceilings, too. As soon as we get his estimate, we need to put together an addendum to the current sales agreement, and part of the stress in this is finessing the counter offer in order to have the work done prior to closing.
My question is what is reasonable for us to ask of the sellers, assuming the electrician comes back with a sizable estimate? My realtor, god bless her, isn't very good at coaching us through this. She mostly has asked us "what are your thoughts? or "how do you think you'd like to proceed?" When I ask her how SHE thinks we should proceed, I don't get a very direct answer, so I'm bothering every real estate friend I know. I feel that due to the time the house has been on the market, the others comps in the area, and the fact that we are currently settled on a price that's not terribly far from where they started a year ago, we should be able to expect them to get the wiring updated, or at least that they cover a substantial amount of the cost. We're not planning on hassling them about the other issues that came up in the inspection, as we feel we need to place a large amount of importance on the electrical work since that will be the biggest bill and amount of work. We know that with an older home comes older systems, but anyone other than a cash buyer is essentially eliminated from the running of this house as it stands.
I also happen to know that the sellers purchased the house for only $45k in 2007. Granted, I don't know what condition the house was in 7 years ago, but from what we gathered from the disclosure of work done and our inspection, they seem to have only done cosmetic updates, which in my opinion doesn't warrant a $60k increase. I would appreciate any insight or suggestion on what is appropriate to ask of the seller, or what a realistic expectation would be of the outcome. I don't want to bully them into refusing us and walking away from the sale, but I also want to firm and not get dicked around just because we're first time homebuyers. Thanks so much!
You know.. that $16,000 is going to balloon. That's just the electrician's cost. You'll have to have the plaster/drywall redone after they've done their job and it's been inspected.
Now you know why the house has been sitting on the market for so long.
Personally, I would go find something else.
I have a history of buying old properties and renovating them. However, I've taken each one down to studs and renovated up to code current at the time. Not just cosmetic improvements.
You'll probably end up with a 40k bill. You'll need to upgrade the main panel and if the house has aluminum wiring you will want to replace that too.
Drywall will run anywhere from 4-7k maybe even 10k easy. It's far cheaper to take out whole bay or even sheet than to play trying to. Fix holes here and there. And that doesn't cover painting. New drywall requires primer and texture too.
Most likely the electrician will cut a road.
TELL them DO NOT USE A HAMMER to break the drywall. Everything to be cut either with saws all or drywall saw.
I did a upgrade on a rental. The electrical parts alone ran me 1800. That's just parts. No labor. And I only upgraded a kitchen and some circuits in two bathrooms That's the wire the outlets switches fans and lighting. And I went with cheap basic rental fixtures and mid grade fans nothing fancy. Fixtures and fans get expensive fast. So does wire and outlets and switches.
That's not counting anything you will find when you start tearing into walls. And I guarantee you will find something that needs repair.
You better be really willing to buy the house. I would ask for a good 60-70% of the bill to be picked up or walk. Someone will buy it its a matter of how much and how long the seller can hold out.
You need to talk to a general contractor to get a complete estimate, includimpng demo, dumpsters, permits, and restoration. If plaster is important to you because of the vintage nature of the house, that will be more than drywall.
I would ask for the complete amount as a credit, or I would walk. After all, you note that comps for this house are in the $90-$120 range. If you pay $105, then throw $25k into he electrical system, you are now paying $10-$40k more than everybody else.
It doesn't matter what they paid in 2007. The market was totally different then.
Anyway, it sounds like y'all are in WAY over your heads. Don't let a house with ancient infrastructure be your learning experience. It will be a very expensive lesson.
Why does the remaining knob and tube need replacing? Is it frayed or in bad condition? Sparking? Evidence of old fire? Or is it just that it's an old system?
We have some knob and tube left in our 1920 farmhouse, and were told it does NOT need to be replaced unless it's causing an issue.
Almost 100 years old and that knob and tube wiring has not caused a single problem in all of these years!
If the only way someone is going to be able to buy this house is all cash or by wrapping needed repairs in a 203 style loan which will allow you to finance repairs and you don't have all cash or ability to do 203 just keep looking. Frankly if you were my client and and I knew you were trying to do just a USDA loan I probably would not have let you make an offer on the place.
Knob and tube is not an electrical issue -- the issue is if you want to draw more than what it can accommodate (multiple window AC, hair dryer/microwave same time, flat screen tv, etc.)
In Mass, MPIUA underwrites all insurance policies for our older buildings with knob and tube. Check in PA how your homeowners insurance is handled and the price difference.
The current owners got a mortgage - so you should be able to, as well, with the same conditions. My building has it and we've had multiple HO6 insurance policies and mortgages with our old wiring!
For me, the asbestos shingles are the bigger issue. In Mass, they're a headache to deal with.
Prices sure are cheap, but it sounds like you're trying to build more than the neighborhood can bear. Repeating what Fishbrains said above, don't upgrade a house out of its neighborhood.
If no other house is selling at 175k-200k, you will be stuck for a long long long time with that laundry list of repairs you think you need if you buy at 105k-109k.
Think like a PA buyer and not a relocated Mass buyer giddy over the super cheap prices. Remember, not everything was a bargain at Filenes Basement !!!
Good luck!
Last edited by flowbe202; 06-13-2014 at 11:08 PM..
Reason: Stoopid auto correct
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Probably not the house for you...
!!!
