BATS IN THE BELFRY??
It appears that you cannot discourage some folks from buying homes no matter what the defects.
An article posted today by Mike Montague is a classic example.
The house has bats. The house had bats when they purchased. The bats have done what bats 
do and now the house has an "excess" of bat droppings, dropped bats and lots of damage dropped on the owners WHO KNEW ABOUT THE BATS WHEN THEY PURCHASED.
Now they're suing. WHY??? Whom are they suing?? Perhaps they are suing themselves for buying a house that they knew had bats in the attic, or is this a case of "Bats in the Belfry" in the sense that we used in Middle School??
SOMETIMES YOU CAN'T STOP A BUYER FROM BUYING A BAD HOUSE.
WHAT ABOUT THE WET BASEMENT??
This one strikes close to home. I sold a home to a lovely couple who now have a home to sell that they bought AFTER getting disclosure from the former owners that the basement flooded "a few times".
BEYOND USEFUL LIFE?? How often do we see that in a home inspection report?? How often do buyers look at a home with a roof that clearly needs to be replaced, but doesn't leak?? Quite often. They are told by their agent "Oh, the home inspector will make the sellers put on a new one". NO, THE HOME INSPECTOR WILL NOT, CANNOT AND PROBABLY WOULDN'T IF THEY COULD make the seller do anything. The home inspector can inspect, identify and recommend repairs, replacements, etc. but they cannot "make" a seller do anything. In my experience and I've seen it many times, if the roof isn't leaking, there is no way to force the seller to do much of anything. In my area, unless you have an FHA or VA contract whereby the appraiser will make a new roof a condition of the appraisal, it becomes a matter of negotiation between the buyer and seller as to what is repaired or replaced. Obviously, if a roof leaks, the seller will usually make repairs to get the house sold. But, if that roof isn't leaking, it's doing what it was designed to do, STOP WATER. The roof may not be stopping water for very long, but if it isn't leaking now, many sellers, particularly investment owners are loathe to replace it.
Of course, after settlement, if there is a roof leak, the new owners are going to contact their agent and want to know "Who is going to fix my leaking roof?" Baring any agreements beyond what is in the Contract of Sale, the new owner is going to fix the leaking roof. They knew it was old, they didn't make a new roof a condition of the contract. They purchased the home even after the home inspector said the roof was "beyond it's useful life".
THAT WINTER HOME INSPECTION LEAVES A FEW THINGS HANGING
How many home buyers will settle on a home without an inspection of the air conditioner because the home inspector says "You can't inspect air conditioners in the cold weather". Or "You can inspect heat pumps in the winter temperatures". How many agents get an escrow to cover an inspection when the weather permits?? What I often hear is, "Oh, it's O.K., you have a HOME WARRANTY." Fine, you go to settlement and the new owners move in. Come the end of May when you have a heat waver, the buyer calls you and says "My air conditioner isn't working and the Home Warranty Company won't fix it. They came out and said that it is a "Pre-existing Condition". Oops. Things like this can get downright ugly. This is a case where an experienced agent is not going to leave the buyers at the mercy of the Home Warranty Company, but will escrow money to make sure the dang thing works. Money can be released to cover repairs if needed or returned to the sellers. At least the new buyers won't be unprotected and won't think that REALTORS are , well, you know what they'll think if they don't have an air conditioner.
Be careful. Don't leave a stone unturned. If a defect is discovered in the inspection, don't leave matters without a remedy. Don't rely on Home Warranty companies for after settlement repairs of pre-settlement defects. THAT is a fraud on the Home Warranty company.
If the sellers take a contract with a home inspection, get the repairs made before settlement. If the sellers won't make or pay for repairs, perhaps the buyers shouldn't be buying that house. If sellers won't make repairs and the buyers want the home anyway, put it in writing that you advised them that they were purchasing a home with a known defect that could cause them repair costs after settlement. 
How do YOU handle buyers who want a home with visible defects when the seller won't make repairs??
How do YOU write repair NOTICES when the inspector says he can't test the air conditioner or heat pump??
How do YOU write Home Inspection Notices when the inspector says "Furnace and Air Conditioner should be serviced"??
How do YOU write termite treatment repairs when the estimated treatment and repairs exceed the limit in the contract??
How do YOU advise a buyer when the home inspector writes that the house has had obvious water penetration??
How do YOU advise a seller when the home inspector writes that the house has had obvious water penetration??
You may not be able to protect the buyers, but you can PROTECT YOURSELF.
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Yes Lenn,
If the roof doesn't show any water damage or leakage...there's not going to be a requirement for a new one.
We use attorneys in our neck of the woods (Naperville, Illinois) who look at the inspection report and then discuss it with the buyers. The attorney then sends a letter to the seller's attorney requesting repairs. Most of the time these items are repaired, corrected or a new item is purchased.
In this market most sellers are doing everything they can.
In the event that the seller refuses to do the repairs then the contract can be voided with complete return of earnest money.
Great article, Lenn. Some important issues to keep in mind. I always advise buyers about the potential for repairs after settlement in writing - it's their choice but I want it is writing that they were told about the problems and have decided to pursue anyhow. I have also escrowed money for later testing on AC back east - not really an issue here in CA (never to cold to not run AC). I hate to hear about the water issue - not so much a problem here but had plenty of "wet" or "damp" basements back in Boston. Some sellers had to install systems to correct the problem in order to sell, which gets expensive. I have, at times, been surprised at what buyers are willing to put up with regarding an inspection, espcially when the seller will not take on the repairs.
Jeff
Thanks for commenting Eileen.
As you know, agents and brokers manage the transactions here. Unfortunately, buyers often buy a pig in a poke and the look for remedies following settlement.
Thanks Jeff. Exactly my point. It's amazing what buyers, especially unsophisticated buyers will see in a home. They don't focus on future repairs. They just focus on the home. It's our job to protect them where we can. It's also our job to protect ourselves.
It's amazing that I have listed homes that were sold to people where repairs were needed, and not addressed and the home price didn't reflect the need either.
I listed a home last year that had a roof issue. They bought the house two years ago and it was listed at a price that should have been reflective of a home in good shape. The agent told them they needed to offer more than asking (it had been on the market for 67 days with no bites....) and advised them that if they asked for the roof to be repaired the seller would refuse anyway....
SAD!!!!!!!!!!!!!!!
Purchasing a home is not always a logical process. Just like the Saint Bennard Puppy in the window, people see what they want and buy it. They choose to ignore the consequences that a 140 pound dog, or bats, or constant flooding, will have on their lives.
Great article Lynn. I just had a agent blast my client because he found out about foundation problems on a house he had made an offer on----also three adjacent homes in a lawsuit against the builder for the same problems, two homes bought back by the builder, etc. We terminated the offer just after they accepted (we just barely missed being able to withdraw BEFORE they accepted. We thought the other agent should have let us know before the offer was made. This is very major stuff, not just minor separation. She blew up on us and told us, even though she was aware of the major problems, she was not required to disclose until the offer was accepted! Couldn't believe it---!
Wow Sandra. That agent must have gotten her license at Wol-Mart.
Daniel. Agreed. Knowing the consequences of this huge buying decision is something we can help them with. When I have a buyer of limited means and they are looking at homes that I know will be expensive to maintain, I advise them that the home will be a "money pit".
Chris. Thanks. You are right. Too many agents simply look to the commission check.
I think that there is a form used up here (MLS Form 17) where the buyer is required to list all known defects in the property. If the agent helps the seller fill out Form 17 in any way, shape or form, he is now liable for anything that the seller leaves out, accidentally or intentionally.
Lenn,
Thanks for that great blog! Sometimes love is "blind" and a buyer fell in love regardless of any problems. I am at fault of that myself (Even with years of Real Estate experience). We bought our house without an inspection, and didn't care about the faults. We knew we would just fix them. Afterwards we think.... hey why should WE fix what the last homeowner neglected. I tell that to my buyers now. Protect yourself and get a home inspection.... EVERY time. And I encourage them to ask for these repairs if they are found.
Diane - I purchased a home in 2002 that needed a total remodel. But, that's why I bought it. Made a bundle on it when I sold it. But, most buyers are not buying for investment. They need to know what's wrong and make "informed" decisions.
Then on the other hand, sometimes when you tell them thay are buying a 'MONEY PIT", they want it anyway.
Thanks for commenting.
I like the sound of that form. MLS Form 17. I might have to lobby for that around these parts.
It never ceases to amaze me. I had a buyer who walked away (thank goodness) after the seller refused to make repairs or concessions for the $20,000 in termite damage that was there!!
RUN!!! RUN AWAY!!!
Lenn, Another reason I'm glad I rarely deal with buyers. As a listing broker, as much as I dislike home inspections, I cringe when the buyer doesn't want one. I want the house inspected so any issues can be dealt with or a hold harmless can be signed. I stress very firmly with my sellers the importance of full disclosure. Some listen, some don't. But one thing I have found is when an inspection issue comes up, the seller was ALREADY aware of the problem and choose not to disclose. Not good. Disclose, fix it or price it accordingly. The problem is not just going to disappear.
I can't imagine suing over something you knew about. Did they honsetly not know that bats go to the bathroom too??
Virginia - We had a buyer walk away from a house with serious termite damage this year. The seller and the seller's agent wouldn't let our contractor in to determine the cost of repairs. They offered up to 2% because that's what our contract says, but if you don't know, you don't know. Go figure.
Bryant - I agree. I hate inspections too and sometimes they are just silly. Pay $400 to find out you need $2.00 light fixture. But, on homes with basements and old homes with poor maintenance, it helps to know the condition of the systems. For me, I don't have them, but I do one before I sell a home.
Christy. That one is a puzzlement.
Thanks for all of the comments folks.
Buying is an emotional process - most times it has little to do with logic
Great post. I always try to be careful. All my buyers either have a home inspection performed. If they do not, they sign a waiver saying they were told to have an inspection, but did not want one...
Lenn...
You would be amazed by how many Seller's we have had that knew about a pre-existing condition and did not disclose it.
You would be absolutely amazed :)
We hear a lot of "Well I didn't think I needed to disclose that". HUH? LOL.
TLW...ROAR!
Yah. I know. That was a little off topic :)
TLW
Ohhhhhhh, No I would not. I would not be surprised at all.
But, they can't hide their defects from me. I've seen them all.
That is a great post!
So, any news on your listing with the wet basement? Have they decided what they are going to do about it?
Lenn-
Some things just are not explainable! I'm not sure which makes less sense, the buyer that does a home inspection, finds a major problem and still buys or the buyer that doesn't do any inspection before buying.?!?!?!?!? Good post!
You can not over disclose...you can not over disclose...you can not....well you get the point. Being in Cal if Or nee ay those are golden little gems that must be follow and even then people still try and sue for any little thing. I remember about 7 years ago I had a buyer that purchased a home and I told her about 4 times that she should get a home inspection! She said she didn't want to spend the $195.00. Then when her heater went out in the winter guess who she called and demanded a new heater from?/ NO not the sellers...they were gone...yes that's right me... I mentioned the conversations we had about home inspections and warranties and it was interesting....she didn't seem to remember any of those??/ lol
Cynthia - Exactly. Thanks Cynthia. I have no problem with a knowledgeable buyer buying without an inspection. Old homes with inground basements need an expection, IMO.
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Richard - Document, document, document. We have a form for buyers who elect to NOT have an inspection. Thanks Richard.
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Chuck - Sometimes buyers don't understand he value added by remodeling and overdue for the market value of the home. Not unusual. Thanks for
commenting.
It is amazing what some clients will do against the advice of the agent that they hire to protect their interest. Even beyond the defects issue. Remember 2005 when the buyer could not buy it fast enough and took major risks to purchase the home.
An investor that we had against our advice purchased an apartment conversion. Less than 30% had been converted but there was a line of people that wanted those conversions. Most investors and after I expalned why we needed to move on and look for a better investment he refused and said he did not want to loose out on this opportunity. We closed the transaction and I submitted a letter to him re-stating my advice and that he proceeded at his own risk. He concurred. Sure enough, 18 months later he wanted to sell his condo that he purchased that was not updated. He did not update his unit. 33% of the units were up for sale, some udated and some not. Sale prices were about the same for both and the market relaxed to a normal state.
It was impossible to get the price he wanted for his unit. He was not happy. We did help him later and he was receptive to taking our advice the second time around.
Hi Lenn!!
I love the topic and have enjoyed reading everyone's comments...
I've come across this issue as well. You've brought up such great points!
My own strategy with clients is to forecast what sort of representation would earn client loyalty for their return to me in the future. A tenet I've committed myself to is not to merely sell homes but to act as a client advocate.
This means addressing issues head on. If the house has 20k water damage and the sellers won't address the problem or adequately adjust the price, I let my buyers know that in pursuing the purchase they are paying over market value for their home (if it's price is not in line with damages). I address resellability factors. With roofs, airconditioning or heating concerns, I stress to my clients the importance of calling in experts for analysis and price quotes. If something is of concern and the concern is merited, we shouldn't just sign off the inspection contingency!
I have found that in the case where the buyer is not giving much concern, it often stems from inexperience in the home-buying arena. Good representation where the agent proactively addresses issues that can be concerns seems to be an ethical duty of the realtor. The realtor should address the concerns and put them before the client even if the client doesn't know better.
I have seldom, if ever, sold a home (as either a buyer's agent, or as a dual agent) without insisting on the buyer having a Whole House Inspection (at the very least) completed. And always with "inspection findings acceptable to the buyers", as a contingency to the sale.
And, when requesting such an inspection, I always include an additional statement requesting "any other inspections as indicated by the whole house inspection".
In the event that the buyers are willing to accept any unsatisfactory findings of the inspections, I have actually typed out a statement saying that "the buyers are aware of the specific defects, and accept the home in its present condition". I then have the buyer's sign the statement and keep an original copy in my deal folder.
By doing this with every buyer, on a consistent basis, it helps protect everyone involved from frivolous law-suits.
It's our duty to educate and advise our buyers to the best of our ability, After all we are suppose to be the experts
Document everything. Even if nly in your journal, write down what you THINK might be going on with the buyers or sellers, etc. Write what is said, and write what you think they mean. When there is a problem later, these notes will BAIL YOUR HINEY OUT if the lawyers come calling. Of course, this level of detail implies that you also have prepared a very thorough purchase contract, regardless of who you represent. Think of your records as defense witnesses - and work to make sure they tell the story YOUR way - the TRUTHFUL way. No guessing!
Disclose, disclose, disclose,....and journal, journal and journal...I agree with Patrick there....never can cover behind enough in those situations. (I go as far as email read receipts, phone log/records)...then again, what can we do if the buyer insists to buy something with so many defects? Get it in writing! YUP...they wanted it and hold me harmless.....how's that?
Lenn, Do you really get money escrowed on a winter closing in case the AC doesn't work in the summer? How much do you get them to put up? I hate when that comes up but never thought of doing anything about it.
I once had a little debacle over bats in a house. The Real Estate Commission showed up at my office because the buyers filed a complaint. Of course, nothing ever came of it, but the day was interesting to say the least.
Jeff & Jane Daley Sometimes buyers and sellers will just not listen. The only thing you can do is stop working with them or document your advice.
Sara Washburn The worst two words in real estate are "wet basement". It's like having a Tiger by the tail. All we can do with the one we have now
is disclose, disclose, disclose.
I have seldom, if ever, sold a home (as either a buyer's agent, or as a dual agent) without insisting on the buyer having a Whole House Inspection (at the very least) completed. And always with "inspection findings acceptable to the buyers", as a contingency to the sale.
http://activerain.com/pauldavidh0426 - I would NEVER advise a buyer or seller that the house shouldn't have an inspection. However, depending on the
inspector, some are not worth the paper they are written on.
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Nattalie Cornwall - We're the experts in Brokerage, which means we protect our client buyers or sellers. But, the consumer makes their own decisions.
Document everything.
Patrick Harfst - THAT is the key to survival, along with Disclose.
Disclose, disclose, disclose,...
Celeste "Sally" Cheeseman ABSOLUTELY! !
Lenn, Do you really get money escrowed on a winter closing in case the AC doesn't work in the summer? How much do you get them to put up? I hate when that comes up but never thought of doing anything about it.
Tim Maitski - Sure Tim. For a winter inspection when the AC or heat pump isn't tested for coolant or compressor, we escrow sufficient money to pay for a new one, anywhere from $1,500 to $6,000 depending on the unit involved. We also put a home warranty on which permits us to get the replacement units at a VERY low price.
I once had a little debacle over bats in a house. Diane Bell - Not a problem I would want to have.
Oh....haven't heard of bats....but I once saw a house infested with gecko's.
But gecko's are cute. Most people are afraid of bats. This reminds me of problem one of Jacqui's agents went through. Buyers bought a house with a pool that needed work.....then they tried to sue about the pool needing work. -charles