Over the years I have come across a number of situations where the heirs to a real estate succession based the property value solely on the appraised value of a home. . . and one heir ended up buying the property based on that appraisal.
Caution: When buying a home, whether on the open market or from a loved one’s estate, you must treat the transaction as an independent real estate purchase. Besides an appraisal, you must do your due-diligence and have home inspections done.
I recently had a client who, working through a real estate succession, bought out her husband’s children (from a prior marriage) based entirely on the appraised value of the home. No inspections. She assumed because she lived in the home, she knew all its quirks. However, several years later when she decided to downsize, she discovered her house was not in as good a condition as she thought it was.
When the first buyer had a home inspection done, there was a long laundry list of things like flashing around the chimney and flues, an undersized chimney cap, a broken a/c vent that was leaking air into the attic, no GFI outlets in the kitchen or baths, settling, etc, etc. But the worse was when the home inspection revealed termites in the attic over the garage. Needless to say the buyer walked away.
There were several more buyers who rejected the house after the initial home inspection, but one buyer liked the house enough to buy it anyway. Then came the killer – he had a sewer inspection done and discovered multiple breaks in the sewer line under the slab. (This home was in Jefferson Parish where this sort of thing is not uncommon.) Again the buyer walked.
Now that the seller knew about the sewer issues, she could not put the genie back in the bottle. . . it had to be included on the property disclosures. And knowing that she could never sell a house with busted sewer lines, she had to do the repairs – to the tune of $11,000!
While the sewer work was being done, another buyer came along who fell in love with the house, and was actually reassured knowing the home had all new plumbing underneath. However, he was concerned about the 5-1/2” slope in the slab. . . something my seller thought was just normal settling. The buyer hired a shoring company to give him an estimate to level the house. A whopping $17,000!
Needless to say the seller took a beating on the sale of her home. She cut her losses (and price) and let the buyer have the house at a bargain. She simply did not have another $17,000, nor the additional funds to cover the sheetrock repairs that often follow a house leveling.
Would my homeowner have bought the house from the heirs at the appraised value had she known at the time that the house had all these hidden problems? Not likely. Unfortunately, real estate successions are handled by attorneys who don’t always think like Realtors – they don’t suggest a full array of home inspections. Had this lady’s attorney done so, she no doubt would have based her decision on ALL the facts, not just an appraised value.
In the end, the homeowner ended up taking a sizable loss on the sale of her home. Not only did she have to put out $26,000 in repairs just to sell her house, she had to adjust her price downward because of the slab issues. All in all, it was a very disappointing experience.