Buying properties with Unresolved Violations
Hi, I’m wondering if anyone reading has experience buying or negotiating on properties for sale with outstanding building violations? If you know you need to do renovations to the property any way can taking on the outstanding violations be a useful bargaining tool to obtain a lower sale price? Or is it more headache than…
Hi,
I’m wondering if anyone reading has experience buying or negotiating on properties for sale with outstanding building violations?
If you know you need to do renovations to the property any way can taking on the outstanding violations be a useful bargaining tool to obtain a lower sale price?
Or is it more headache than it’s worth?
I’d like to get an idea of the potential pitfalls. Any advice is appreciated.
Thanks.
Thanks for the helpful advice. This one has some pretty significant problems. It’s looking like it may not be worth the headache.
I appreciate the advice.
I second bikerboynycny: do your homework. We just bought a property with 2 active violations on it. In a nutshell, they illegally converted the English basement into a 1-bedroom.
The fines have been paid by the previous owner, and she also removed one of the illegal installation. The DOB records show that the only thing left is to clear the violation by having an inspection done. (http://www.nyc.gov/html/dob/html/violations/violations.shtml)
So we went in knowing exactly what we were up against. By all means check the DOB records as they show what’s going on. In our case we could have asked the seller to cure the violations as a condition for the sale. However, we opted for a faster transaction and got a nice discount for taking care of them ourselves.
Our attorney also mentioned an option to put some funds in escrow and let the seller manage the clearance of active violations after closing. However, we didn’t choose to do this.
From the banks perspective we didn’t hit any road bump. Actually this topic didn’t even come up. That said, the violations you have might be a different story.
In short: 1) perform your due diligence, 2) speak with your real estate attorney about your options, 3) check your bases with your bank (ie ensure violations are not a deal killer), and 4) negotiate a discount
Good luck
It all depends upon the type of violations – some are easier to deal with than others. If you are planning to do alteration work, you may be able to remove the violations as part of the work. Landmarks violations can be a problem – changing windows without permit might require new approved windows. And boiler violations -are a nightmare but can usually be removed with money – pay the fines. Do some careful research so you don’t get stuck with a violation that has some real costs attached; unless the price you negotiate is so sweet, it doesn’t matter.
1 – Find out what the violations are and have a strategy on how to deal with them. Do your homework.
2- Depending on the deal, you may be able to reduce the price.
3- Maybe you lender will be squeamish, maybe not. The lender may want to hold back some part of the loan while you still get to pay interest on it. Lousy deal but not as bad as no mortgage at all.
I’ve been through this. DO YOUR HOMEWORK. Make the buyer understand that this is an awful condition and you are the best chance they have to get rid of this rathole that could send them to jail. Make the lender understand that the seller has done all of the work and just couldn’t do the sign-offs on the violations because they overseas doing good works.
We fell in love with a house that had many violations. I was glad we didn’t get involved with it because several potential buyers got caught up in the mess and haven’t received their deposits back even after a year!
Banks do not want to give mortgages on homes which have certain structural violations.
Yes, you can get them to put $$$ in escrow to take care of clearing it all up. Talk with your real estate lawyer.
One problem is that with certain violations you can’t get a mortgage. Mortgage company won’t allow it. You need to find that out.