Alright guys, looking for some input here. About 6 months ago I made the decision that I was ready to buy a house. After doing some looking I found one that I really liked. The house is a 3BR, 1.5 bath, good sized living room, and a mud-room. Has 2 small outbuildings. 1 car attached garage. It sits on 2.5-3 acres out in the country, neighbors up to a hay field beside, woodlot behind. The house is older (1957), but very nice and clean. Needs some updates but it's been very well maintained. I went in, made an offer of $82K (asking price was $88k, and we settled on $86k). That was based on their appraisal of $85k. The bank then had to do it's own appraisal which came in for $92K. So everything was looking great until the well test came back positive for pollutants (coliforms). Under the terms of this loan, I can't buy the house with a failed well test. I have 2 options: treat the well and always worry about whether or not the well is bad again, or put in the rural water company's water that is essentially like being on city water. The cost for that would be about $5,000. I asked the sellers to compensate for the cost of the installation of the city water. I'm waiting to hear back from them. My banker said that I could finance the cost of the installation into the loan, making my loan more like $91k when the appraisal came in at $92k. Being new to all this, it sounded like a decent back up plan. But then I talked to my stepdad (who is a home builder himself) and he brought up a very good point. He said when I offered $86k, I was offering that money under the assumption that the house had good, potable water. Valid point. The catch is, it doesn't, so that lowers the value of the house significantly. So he said, "Why would you be willing to finance $5k more than your original offer for something that's actually worth atleast $5k less than your original offer?" I hadn't thought of it that way. He said I should walk if they aren't willing to get the house to the point where it has potable water, or they should take the cost of the installation off of the purchase agreement price. Any input guys and gals? What would you all do?
Stepdad is spot on. Here’s the deal. You agreed to the price based on buying a home with safe drinking water. Now that the test has been done you are in the cat bird seat. They have been informed that the house has bad water and they must declare it to anybody that wants to buy it. This means their asking price just went down because like you, other potential buyers banks wont lend them money for a house without safe drinking water. The onus is on the seller to make the water safe, not you. The purchase is pending inspections, (that’s why they do inspections) a discovery was made and now you get to walk away or renegotiate. The cost of this is on the seller, not you. Walk away bu tell them you would be willing to come back to the table if one of two things take place. 1. they correct the situation (verified by another inspection that they pay for) 2. they discount the asking price by the amount of the total cost to make the water safe.
I agree to an extent. However, adding rural water to the property will actually increase the resale value. The fact is, you will now know you have good clean water always and never have to worry about pollutants or the well running dry. The price you offered was for a home with potable water. For those reasons, I think it would only be fair for the current owners to split the cost of adding rural water to the property. It's a win for both. I would tell them it is a one time offer and give them 24 hours to respond. Let the realtor know that you are ready to walk if necessary. I will be very surprised if they do not take you up on this reasonable offer.
I agree with Rancid and your stepdad's advice. You don't want to have to pay extra and financing the fix would equate to much more than 5k when you factor in interest, additional PMI, etc. Though I suspect this could be the way this plays out.: seller won't want to pay all of the 'additional' cost and may desire to either split the cost with you or knock something less than 5k off the price with the rationale that they already were under their asking price. Which may sound rational, except that (see Rancid's point #2 above) the situation will probably need to be remediated before closing to get the loan. So the seller discounting 5k off the price will likely be a problem. Similarly, the splitting the cost may seem 'fair', but if not fixed before closing, it could be the same problem with the bank loan. Hold fast. If the seller wanted to add the cost of repair into the price, I.e. They cancel the deal, then fix the problem, then want to 'put it back on the market' (or something equally creative), and you didn't want to pay any additional, then you still can say 'no'. Assuming you aren't in a situation where you have to buy, you really are in the catbird seat.
A couple points to consider. #1.They are more than likely legally bound to provide all utlilities in working order unless they disclosed to you prior to your offer some other condition to which you both agreed. That is, of course, unless you are in a "buyer beware" state. Get them to spring for the public water and at the very least, get them to go halfsies but only if you really like the house and it is worth a little extra cost. Its just a bummer to get hit from the start. I am going with your step-dad's advice on this one. #2 Another thing to consider is, if contaminated, the source of contaminants must be identified and isolated... sounds expensive and potentially dangerous and if the source of contamination is on your property, you may be legally liable for the cleanup costs which could be tens of thousands... or more. Remember, when it comes to the EPA, laws, codes, zones, etc... change constantly and the cleanup cost burden is usually placed on the owner. I would be very wary of this one and would call the EPA before I went any further. Could be more than the water that stinks here.
It's really a question of what other options are available to you. If it's by far the right house, in the right location........then I'd likely be willing to split the cost. With that said, I'd still be trying to negotiate the full cost of water hookup into the price, I just wouldn't actually walk if they didn't compromise.
Is coliform the only thing that came back positive? It in and of itself is not harmful but is an "indicator" species. You could always disinfect the well yourself (or the home owner could), and have it re-tested. We have two wells at the resort and on came back positive earlier this year. There's an easy and cheap way to disinfect the well and flush it. All results have been negative since I did it. Took me 24 hrs and cost me $15. I can get into more detail if you are interested.
Thanks for the advice guys! Drove past it a little while back and had a doe and fawn in the back yard. Fitz the Nitrates were at a safe level it said. The health department gave me information about treating the well with bleach, but my stepdad told me to to ask them to have a professional treat it. The house sits vacant because the original owners who were 91 and 82 passed away, and left it to their 5 or 6 kids. All the kids live hours away.
Another option may be installing a well water filtration system. I googled them and they seem pretty straight forward.
http://www.cleanwaterstore.com/mighty-pure-uv.html I googles the well water filtration systems, and they seem pretty nice. This UV system is $725. Significantly cheaper than running the Rural Water in. Water are your thoughts on these systems? What if they refuse to run Rural Water? Do I opt for this as a back-up??
I cant imagine they will refuse. Its now a known problem that they will have to disclose to all buyers should you walk away. Play hardball on this one. Don’t offer to pay for anything.
I was just thinking outside the box a bit and thought of that. I'm pretty ignorant as to the details at this point but it does seem like an option worth exploring.
If the home selling market is anything like it is around here, they may be willing to pony up the $5000 to get the county water installed. Sellers around here are having a very tuff time getting offers. I'd at least feel them out on paying the whole bill. If they won't then negotiate. See how bad they want to get rid of it first. You can always up your offer.
Sounds like your in a good positions. As mentioned if it's a great deal even with installing a filtration system then try to work with them. Another option is if your paying $5k more than is there a better home for that price. Bottom line is will it worth more in 5-10yrs to make you want to purchase it? If not keep looking or rent.
If I were in your position, I'd try and read how desperate they are. How long has it been on the market? etc... If I wanted it, knowing how easy disinfecting a well is, I wouldn't let it stop me. Might even get them to knock another $5K off the price, then do it myself and have $4985 in my pocket. Depending on how deep the well is, you might be able to do it for $7.50
It all depends on the condition of the house (will it increase or decrease in value from this point forward) and whether it is just a house, or the house you really want. Good luck either way.
