Pleasanton Weekly

Real Estate - June 24, 2011

Find property problems before you buy

Make sure sellers disclose any property defects or neighborhood issues

by Dian Hymer

To avoid a bad experience that could end up in a legal battle with the sellers over property problems, make sure your purchase agreement includes an inspection contingency.

Your mission during the inspection contingency period is to find out as much as possible about the property and surrounding area, insurability of the property, permit history, zoning issues and cost to repair defects. Investigate any issues that could affect whether or not the property will suit your long-term needs at a price you can afford.

Most states have home seller disclosure requirements. If you are buying in a state that doesn't require sellers to disclosure material facts, ask the sellers to disclose in writing any property defects or neighborhood issues they know about.

Also, find out if there are systems that require routine maintenance, such as the furnace, drainage system, skylights and roof. After you clear the inspection hurdle, ask the seller to provide you with contact information for any people who have worked on the property that the sellers would recommend.

Find out when major components were replaced and when the house was last painted. Find out how much the sellers pay for utilities. Ask for copies of proposals and paid invoices for any significant work done on the property.

Basically, you want to know any problems the seller had with the property, what was done about it, by whom and when. If the roof was recently replaced, find out if it's covered by a warranty and if it's transferable to you.

You may feel uncomfortable asking the sellers to provide additional information at the time you make the offer, particularly if there are multiple offers. In this case, ask the sellers for answers to your questions during the inspection contingency time frame. Questions will undoubtedly come up during your inspections.

House Hunting Tip: Even if the sellers have provided presale inspection reports and disclosures, have your own inspectors give the property a thorough exam. Some buyers hire the seller's home inspector to meet them at the property to explain the presale report and ask questions. This may save you money. But, saving money should not be the primary goal when having a property inspected.

Buyers of newly built homes should ask the sellers for any construction-related documents like the geotechnical report, engineering calculations, and letters to the planning department confirming that the geotechnical engineer monitored the construction and confirmed that the house was built according to his recommendations. Ask the seller to leave the architectural plans, if they're available.

Verifying livable square footage is a big issue in today's cautious mortgage environment. Many lenders won't count additions or renovations that add square footage in the appraised valuation of the property.

If the sellers can't provide the supporting documentation, such as copies of approved permits, the property could appraise for less than you agreed to pay. This might jeopardize the transaction if the lender approved a lower mortgage amount than you requested.

It's a good idea to check the permit history at the planning department yourself if the sellers can't provide copies of permits for work done. This should let you know if renovations were done with permits and if the permits received final approval. You should have this information before removing the inspection contingency.

Many planning departments won't issue a new permit if there is a permit on record that never received final approval. The new owners might incur fees to clear up any outstanding permits before they can move forward with new improvements.

The Closing: With probate and REOs (bank-owned properties) you will receive minimal, if any, information about the property condition. Be extra careful with your due diligence investigations.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

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