DEAR BOB: We are first-time home buyers who have been looking for a home since March.
We found a fixer-upper in a great neighborhood with outstanding schools for our two children. The sellers accepted our offer that included a contingency clause for a professional inspection. Our inspector found several serious problems that the sellers failed to list on their disclosure form.
The estimated repair costs total about $14,500. When we asked the sellers to pay for the repairs (such as a roof leaking into the attic), they reminded us the house is listed for sale "as is." We really want this "as is" house, but the sellers refuse to make the necessary repairs or give us a price reduction.
Do we have any recourse? _ Ted G.
DEAR TED: Yes. You can cancel the purchase and get your earnest money deposit refunded, based on your professional inspection report contingency.
When a home is listed for sale "as is," that means the seller will not pay for any repairs. However, the seller still must disclose any known defects. Perhaps the seller didn't know about those $14,500 worth of repairs your inspector discovered.
When confronted with a written, professional inspection report showing undisclosed, serious defects, most sellers will compromise and agree to pay for all or part of the repairs or reduce the agreed sales price.
You might politely remind the listing agent and seller that, if you cancel your purchase, the seller and listing agent now have a fiduciary duty to disclose all the defects your inspector discovered to other prospective buyers. This might make the seller and listing agent realize that a price reduction credit for the necessary repairs, or at least half of that amount, would be a wise decision.
DEAR BOB: I am a new Realtor who has an old friend, age 84. He wants to sell the only home he ever owned. His wife is deceased. He has a living trust. I know he will have a large capital gain. I'm new to real estate sales and need to know if this home sale is any different than a regular home sale listing? _ Dolores C.
DEAR DOLORES: There is no major difference between the sale of a home whose title is in a revocable living trust and an ordinary home sale. When you find an acceptable buyer, the seller simply signs the deed as trustee of his living trust.
Your home seller still will be entitled to his $250,000 home-sale tax exemption. That's presuming he owned and lived in his principal residence at least two of the five years before the sale.
You mentioned the seller's wife is deceased. If she was on the title, the surviving husband probably received a new "stepped-up basis" when she died. Depending on how title was held, he may have received a new stepped-up basis on 50 percent or 100 percent of the home's market value at that time.
His capital gain, subject to the $250,000 exemption, will be the difference between his stepped-up basis and the net sales price after paying a sales commission. Your seller should consult his tax adviser to estimate how much his taxable capital gain, if any, will be.
_ Tribune Media Services Inc.