It does not matter how many real estate transactions you have been involved in there is still always the chance to run into something new. I think that is what keeps me in this business, the fact that no two real estate transactions are the same, and there is no easy one. I just was involved in a transaction that I was sure could never happen. I mean, what happened is beat into agents heads from the first day of pre-licensing class they start drilling into your head it is a huge no-no. I am still trying to decide if I should name names, if I decide to I will come back and edit. In fact, I may do a follow up to this as the story unfolds.
So, what happened? First, you need a little background, some basic real estate terminology. You need to know the definition of latent defect. The short answer is, it is something that if the buyer knew about it they might change their mind about purchasing the home. You also should know, for this story, the definition of as-is as it relates to real estate. Many people, even agents do not realize this. As-is means that the home will be in the same condition at settlement as it was the time the buyer made their offer on the house. If a hurricane blows it away, you are not obligated to purchase it. With that primer, you should have no problem following this story.
Mr. and Mrs. Buyer made an offer to purchase a house. They were told there were multiple offers and to submit their highest and best. No changes were made to the offer and the seller countered the buyer reducing the closing help they requested, and making the transaction “as-is.” Mr. and Mrs. Buyer accept the counter and go under contract moving on to the home inspection. Home inspection reveals a few seemingly minor things. The roof was new and had a few things that were not completed correctly. There was no gas to test the heater for the hot tub and the compressor on the A/C was making a funny noise in addition to the coils being dirty. Buyer says to seller “we realize this is an as-is transaction but are walking if you don’t address these issues” sellers verbal response is that they will and proceed to do so. The roofer comes back to fix the roof, and the HVAC is under a service agreement so that contractor is called. To make things interesting the appraisal then comes in low. The seller comes back and says that since they are reducing the price they will only address the items that were not going to cost them anything. No gas for the heater, and no cleaning of the coils on the HVAC. This is not a big deal because they have a receipt from the purchase of a new heater, the roof was covered under warranty, and the listing agent assures us that the HVAC mechanic said everything as working fine just needs to be cleaned.
Fast forward to the day before settlement, everyone has stated walk-through must take place no more than 24 hours before settlement. This is odd to me as typically we will go a few days before settlement so there is time to address any issues before sitting at the table with a quick walk-through an hour or so before settlement. No big deal right? We can take the buyers by the day before then meet the listing agent the day of to sign off on her form. We arrive with the buyers to find the HVAC shut off. It has never been shut off before no worries we will turn it on and check tomorrow. Tomorrow comes…
We arrive with M/M Buyer minutes behind the listing agent, who has, for some reason turned off the HVAC. It had to of been the first thing she did when she walked in the door. Why, it’ almost as if she wanted to make sure she got there first and it was not running. No worries we turn it on to see what it does between now and settlement. We will come back we say. Are you surprised to find we return an hour and a half later, after letting it run for an hour earlier to find no change in the temperature of the house? No, we are not either. It is clear at this point that the HVAC does not work; it is also clear that the listing agent is aware and has been that it does not work. Her answer, sometimes the compressor freezes on HVAC units, that must be what happened.
This story is to be continued, but with the information you have now do you think the seller agent knew the HVAC compressor was bad? If so, when do you think she knew it? Do you think she is incompetent, or just shady and trying to hide a material defect?