Taking The Property Condition Warranty Away from Home Buyers in DC Area

Recent changes to our local Regional Sales Contract have taken the property condition warranty from buyers and have lowered the standard for the transfer of all resale properties to those of foreclosures and other "as-is" properties. Although this change was made to remove the conflict that occurs when negotiating home inspection repairs, this anti-consumer change is designed to shrink the gap between traditional home sales and foreclosure sales, a market that some agents fear will hit the market in the coming years.

As an exclusive buyer agent, I find this change appalling.

1. The DC real estate market is one of the strongest in the country. Changing what is included in every property devalues all homes in the DC real estate market. If you had a choice of purchasing a home where the seller guarantees that all plumbing, electrical, and mechanical systems as well as all appliances are working or a home that is sold “as-is” which would you choose? Which would you pay more to own?

2. If more and more DC area home buyers purchase “as-is”properties because it is the new norm, we should be seeing more foreclosures. Buyers will be walking into homes that need repairs and therefore, immediate additional costs to the buyer.

3. Under the new sales contract, listings will not have to reflect the fact that the home is "as-is", but the offer that agents write will make all homes "as-is" This will make researching comparable sales more difficult for consumers. You might say that agents will navigate the buyers through this properly, but most agents who work with buyers are also working for the sellers. It may not be the same person, but it can be their partner, their co-worker, their team leader. How will a broker who represents both parties evaluate the price of a property? Will they let them know that all home sold before 1/1/2012 included a seller warranty that that all systems and appliances were in working order and that those afterwards do not? Evaluating the comparable pricing of homes is a very important part of the pricing process. Will consumers doing their research online be aware of this huge change?

4. Lenders do not allow cash credits for repairs. They make buyers and sellers pretend that it is a seller closing cost credit so they don't have to re-appraise the property as less valuable than it would be if everything was working. But that is what it is - less valuable. This will affect all buyers purchasing a home with a mortgage, especially those with loans with limits on the amount of allowable closing cost credit. This means all buyers using FHA loans and most loans where the buyer puts less than 20% down. It will limit the amount the purchaser can receive from the seller and cap the amount the buyer can receive for repairs that the seller has traditionally been responsible for making.

5. So who wants this change? Home buyers certainly wouldn’t vote to have this change. Home sellers who maintain their homes do not want to sell their homes “as-is” so they sell at the same level as the foreclosures. Exclusive Buyer Agents don’t want to see this change. Maybe banks, who have trouble selling their “as-is” foreclosure properties like this idea. Do listing agents? Who decided to lower the standard at which all homes would be conveyed to match that of foreclosure homes?

This horrible change to the Regional Sales Contract is something that buyers will really need to pay attention to at all stages in the home buying process. My advice - ask your agent about this change and use an exclusive buyer agent who is legally looking out for your interest.

Dana Hollish Hill

Vice President, Buyer’s Edge Company, Inc.

Representing People, Not Properties

cell 202.271.5301 web Hollish.com