Five Pre-Buy Questions

Home buyers can't ask too many questions before purchasing. The better informed the buyer is, the greater the probability the home will be a long-term, satisfying purchase. But home buyers who fail to ask key questions and only discover problems after purchase may have little practical recourse.

Here are five of the toughest questions to ask a seller.

1. Why are you selling your home? The reason it is important for buyers to know why the seller is selling is to determine how flexible and motivated the seller will be with price and terms. As a buyer, it is shocking to discover how many listing agents either don't know the seller's true reason for selling or they pretend they don't know.

Sometimes, it is none of the buyer's business why the seller is selling such as a divorce or family problems. But often it is vital for the buyer to know the true reason, such as when there is a pending foreclosure and the buyer must be able to complete the purchase before the foreclosure sale deadline. One excellent tactic is to obtain the Property Identification Number for the property from the County Treasurer's Office and go the Recorder of Deeds to see if there has been a Lis Pendens filed to notify the public of a pending foreclosure or a building code violation case.

My favorite reason for a home sale that I love to hear is: "The seller is retiring and moving to Florida (or Arizona, Texas or wherever)." Then I know there is an excellent chance the retiree seller will carry back a first or second mortgage for extra retirement income.

If a house or condo has been listed for sale for more than 90 days, chances are the seller is not highly motivated to sell.  But when a house has been listed for sale a long time, it becomes a "tired listing," which often carries a negotiation opportunity with little competition from other buyers.

2.  How did your determine the asking price?  Smart home sellers and their listing agents set the asking price based on recent sales prices of nearby comparable homes.  But some home sellers, especially do-it-yourself "for sale by owners," set their asking prices based on their purchase price plus capital improvements added, plus the inflation rate or some other nonsense method that bears no relationship to actual market value.  Still other sellers irrationally set their asking prices at the total cash they need to pay off their mortgage(s) and other debts.

Naive home sellers don't realize most buyers are not dummies.  Buyers often know vast details about competitive homes, which sellers haven't even inspected.  That's why it is so important for serious buyers to inquire of sellers and their realty agents how the asking price was established to discover if it is realistic or plucked from air.

3.  What was your purchase price?  If the home was purchased many years ago at a price far below today's market value, the seller has lots of room to negotiate.  However, if the purchase price was close to today's current market value, then the seller will usually be inflexible negotiating the price and terms.

Occasionally, the seller overpays for a home at the time of purchase.  This is especially true for luxury homes for which there is limited buyer demand.  There overpriced residences often languish on the market unsold for many months until the seller becomes motivated to sell at the current market value even if it's a loss.

Even when a home seller or the listing agent refuses to tell a serious buyer the purchase price, it is still possible in most communities to discover this information at the county recorder's office.  There usually is a transfer tax that is paid when property is sold and transfer tax stamps are purchased and either placed on the deed when recorded or the amount written upon the deed.  In Illinois the transfer tax is $1 per $1,000 of the purchase price so that if stamps of $200 were placed on the deed, for example, the sales price would have been $200,000.  

Another source is the local tax assessor or the tax collector's office.  Depending on how local property taxes are established, the purchase price will usually be part of the official records.  Many cities and counties now have this information available online.

4.  What home defects have you reported on the disclosure statement?  If you are buying a house or condo that is listed for sale with a professional realty agent, then the agent should provide you with a written disclosure statement from the seller as part of the listing procedure.

Many states, by law, now require home sales defect disclosure statements to prevent future lawsuits for misrepresentation.  Even in states where written disclosures are not required, smart sellers and their realty agents voluntarily provide defect disclosures to prevent future legal problems.

After the buyer's purchase offer is accepted by the seller, if it contains an inspection contingency clause and that inspection reveals unexpected defects, the buyer has several choices: (a) a repair credit can be negotiated with the seller, (b) the buyer can cancel the purchase and obtain a refund of the good faith deposit, or (c) proceed with the home purchase anyway.

Home buyers, and their buyer's buyer's realty agent, should always accompany their professional inspector to discuss any problems discovered.  What looks like a serious defect often turns out to be unimportant after the inspector explains it to the home buyer.

5.  Are there any current or planned off-site facts that will affect his home?  The listing agent, home seller and the buyer's selling agent should be aware of any significant off-site facts that affect or might affect the home such as a nearby airport that has a flight path over the house or a planned street-widening project that will take some of the front yard away from a home. 

Conclusion: Just remember, every home has drawbacks and no home is perfect.  However, home buyers who ask tough questions in advance will likely maximize their long-term satisfaction with their new home.