- Differentiate between ‘must be fixed now’ versus ‘monitor and fix later as needed.’
- Everyone knows something and is generally eager to help from their perspective.
- Consider the context to determine if it’s the right advice at the right time for you.
Recently, a client canceled their home purchase on the last day of their inspection contingency period. The property had received multiple offers, including even a higher-priced backup offer after the seller accepted my client’s offer.
By all standards, this was a hot, desirable property in a market defined by a shortage of available Honolulu homes for sale.
The property featured a rare in-law suite with a separate entrance, which could generate rental income to help pay the mortgage. It was on a quiet cul-de-sac yet remarkably close to town. Multiple large decks offered lush green valley views and some distant ocean views.
This home was an excellent match that met most of the buyers’ requirements. The purchase price was within their budget, and the appraised value came in even $20K above the accepted price.
So what went wrong?
Granted, it was an older house. It was not a perfect unicorn because… those don’t exist.
In Hawaii’s real estate market, you must become comfortable striving to find an excellent match instead of a perfect match. Real life requires practical thinking. That often includes compromises with good enough solutions.
See related article: How To Zero In On The Right Property (The PDE Method)
Every Opportunity Comes With Certain Risks Attached
A real estate purchase is one of the most significant financial decisions you make. It can be nerve-wracking. I never met anybody who did not get severe anxiety when they made their first real estate purchase.
It often requires a considerable cash downpayment, depleting savings, and committing to making costly regular monthly mortgage payments for over a third of a century. All that seems overwhelmingly frightening.
However, years later, after paying off their mortgage, most people agree that buying their home was one of their best decisions despite all the required sacrifices. Real estate owners enjoy long-term appreciation and create priceless family memories in their homes.
Buyers tend to recognize the full extent of the opportunity and its benefits only years after their purchase. When buying, they tend to focus on all the potential risks.
Those perceived risks are plentiful and tend to mushroom quickly immediately after the contract acceptance. That’s when the buying decision is carefully evaluated for rational justification.
Uncertainty about the future and the possible adverse outcomes can create dread.
“How can we keep up with the responsibility of maintaining and repairing the house on top of all those monthly mortgage payments?”
Doubt creeps in, and fear rules the day.
Soon after, my client became overwhelmed by different opinions and confusing advice. It’s called buyer’s remorse, and it happens all the time.
![Waves against the sunset](https://www.hawaiiliving.com/blog/wp-content/uploads/2024/07/1-Rough-Waves-against-the-sunset.jpg)
The Busted Roof That Didn’t Need To Be Replaced
A little side story to entertain your neurons:
Years ago, another client bought a small single-family home to raise their children. The house was old, but they liked the neighborhood and the level yard.
The home inspection report detailed that “although the roof was not leaking yet, it was about 34 years old and well beyond its life expectancy. It showed severe wear and tear and should be replaced asap.”
We negotiated a seller’s credit for the buyer toward a new roof. Receiving the credit mitigated the buyer’s anxieties over the perceived risk of an imminent repair.
My client was lucky because not every seller would agree to it, especially in a hot market, where the next buyer would be eager to purchase if the first buyer was nervous about their purchase and canceled.
Ten years later, my client called me to sell their house. The kids had moved to different schools, and it was time to sell.
I asked the client what improvements or upgrades they had made to the house during their decade of ownership. To my surprise, they had done no upgrades to their home! The roof never started leaking, so they never replaced it!
The credit they received for the roof was used in some other way that was most practical at that moment in their busy life. – Oops.
The house looked tired and shabby. Before listing it on the market, we painted it all white inside, replaced all carpets, and cut back some overgrown bushes in the yard. These minor cosmetic improvements cost about $12K at the time and significantly impacted the appearance. The home became alive. It looked fresh and inviting.
We received multiple offers, several of them significantly above the asking price.
So, what happened to the worn-out roof, which was now another ten years older and way beyond its life expectancy?
My client decided to work with the highest offer and credited the buyer with the exact amount they had received toward a new roof, provided that their house was otherwise to be sold ‘AS IS’ with no further credits or repairs.
It was a win-win!
The buyer was lucky to get a lovely, fresh-looking house in a great neighborhood with a roof credit against all other competing buyers.
The seller was lucky to have utilized the roof credit most practically at the time because the roof was holding up for another decade and never needed replacement during their ownership.
So much about a busted roof that wasn’t.
“I’ve had a lot of worries in my life, most of which never happened.”
~ Mark Twain
The picture above does not show the actual house! – This one is the Madonna Del Monte, an ancient Italian monastery built in 1303.
Inspection Reports – Give Me Clarity, Not Volume
It is prudent for a home buyer to get a thorough home evaluation. Professional home inspectors are an excellent choice. They have general knowledge about home components without a conflict of interest or incentive to sell repair or maintenance services. Their job is to evaluate the home objectively and render a professional opinion based on their experience. Typically, the inspector provides a written report.
But there are some limitations and concerns:
- Home inspectors have no oversight, licensing, or continued education requirements. Anybody could start a home inspection business without any required standardized qualifications. Some home inspectors are former roofers, firemen, electricians, construction workers, or retired city employees. Every home inspector has a skill set but also possibly some blind spots.
- To make up for possible blind spots, home inspectors add:
- “No Warranty or Guarantee” and “Hold Harmless” disclaimers, and
- refer to further evaluations by specialized subject professionals.
All this is fine, but it can overwhelm the buyer.
My client’s subject property inspection report was 361(!) pages long. That’s excellent for nerds but impractical for most others. It’s too much.
The items of concern could all have been categorized and summarized into the following seven groups:
- Exterior, water management: 3x items
- Exterior stairs, lanais, and windows: 3x items
- Crawl space and footings: 2x items
- Roof and gutters: 3x items
- Carport: 3x items
- Electrical: 6x items
- Plumbing: 2x items
22 items in total. This is a typical number of line items for a home inspection of an older home, particularly one built in the 1950s. The entire findings could have been presented in a report that fits eight to ten pages, no more than that.
Instead, the report was stretched over 361 pages, and every single line item had the same ‘further evaluation’ recommendation:
“*Suggest contacting your local government building department for building code and professional trade compliance updates and parameters. *Note: New builds have/require also. *Suggest proactive maintenance and consideration of component installation. *For a further in-depth, technically exhaustive evaluation and guidance, contact a reputable licensed trade professional.”
![Colosseum, Rome, built ~72 AD](https://www.hawaiiliving.com/blog/wp-content/uploads/2024/07/3-Colosseum.jpg)
In addition, fifteen inspection report pages were dedicated to listing 87 (!) specialized, reputable, licensed trade professionals.
The report raised more questions than answers. ☹
Granted, the inspector means well with good intentions, covering the inspector’s three main objectives:
- Give a detailed overview of the inspection results for the client’s benefit.
- Justify the cost of the inspection report by adding extra fluff that could be useful.
- For self-preservation, add disclaimers for legal protection against lawsuits.
The last 14 pages of the report outlined the terms of the inspection contract with bold printed ‘indemnify and hold harmless’ language. Instead of additional overwhelm, this could have been summarized in one simple sentence:
“If we goofed, you may sue us only for up to the inspection report cost.”
Volume doesn’t equal clarity. It adds confusion and doubt for the client.
Some clients are prone to a cognitive ‘availability’ bias, called ‘extrapolation bias.‘ It involves overestimating probabilities of events associated with memorable or dramatic occurrences.
“If the inspector found this many maintenance issues, given the age of the home, how many more repairs will pop up right after we close?”
Further Evaluation – Repair Quotes
To further evaluate the home, we obtained a structural foundation expert and a general contractor to estimate the cost and address the concerns outlined in the report.
Sometimes, service providers make recommendations that reflect their appetite to get a job.
However, in this case, their advice seemed balanced and objective:
“The foundation looks fine, consistent with what you can expect with the age of the home and this type of post & pier construction on sloped terrain. The corner of the house that has settled in the past has already been leveled correctly, and the footings have been fixed. Installing rain gutters with downspouts will improve water management and could be all that’s needed. For now, continue to monitor and assess every six to twelve months if additional action is required.”
The general contractor provided itemized quotes totaling $22,000, which included new rain gutters, extended drip edges, and downspouts. It seemed a reasonable dollar amount for the scope of work.
Before formulating a credit request for the seller, we negotiated an extension of the inspection contingency. This gave the buyer an extra four days to speak again with the structural foundation expert and share the inspection report with friends and family members.
Friends and Family Advice
Imagine you have friends and family members who bought a new home in Rancho Cucamonga, CA, for ~$420K in 2012 with a 30-year fixed-rate mortgage at 3.5%. Their house is now worth $836K. Now imagine you ask them for their advice on purchasing a 1950s post & pier construction Honolulu home at $1.2Mill after they review a 361-page inspection report.
“It seems too expensive for an old house that needs repairs.”
Friends and family mean well. But consider the context. They don’t understand the local Honolulu market.
After their input, my client felt that everything in the report needed to be fixed, and the total amount required now should be $60,000.
How much credit a buyer would like to ask from the seller is entirely up to them. However, remember that this seller also accepted a higher back-up offer. That diminishes the chances of success in negotiating a sizable credit.
As a realtor, I aim to get clients a solution that matches their desires.
I asked the following test question: “What is your desired ideal outcome? Would you be happy with this home purchase if the seller gave you a $60,000 credit?”
To my surprise, the answer was “no.”
The buyer still had doubts, and instead of requesting the credit, the buyer decided to cancel.
Home Maintenance vs Condo HOA Maintenance Fees
Many buyers prefer single-family homes over condos because they think monthly condo HOA maintenance fees are excessive. But are they? Compared to what?
Often, HOA maintenance fees cover the condo building’s monthly water, sewer, cable, internet, insurance, electricity to the common elements, regular landscaping service, pool service, 24-hour staff, security services, pest control, and the daily operation and maintenance of the building.
In addition to these regular recurring expenses, maintenance fees also incrementally build up reserves for future capital improvements, such as re-roofing, repainting, replacing elevators, and resurfacing pools, pool decks, driveways, and walkways. These expenses must be budgeted years in advance.
Instead of a maintenance fee, single-family homes require, ..well, maintenance. Owning a house gives you maximum control, but maintaining it is on you.
That includes re-roofing every 25-30 years, resurfacing the pool every 10-20 years, painting the exterior every ten years or more often if your home is close to the ocean, yard work, pool service, and security alarm service.
In addition to water, sewer, electricity, cable, internet, and utility bills, you may need to pay for fire, hurricane, and flood insurance.
Don’t underestimate the total monthly costs of maintaining your home, including the reserves needed for expensive future capital improvements.
The benefit of total control of your home maintenance decisions comes with the responsibility to schedule workers or do the work yourself. It’s not just the money; more importantly, it’s also the time and energy.
After carefully analyzing maintenance requirements, you will recognize that condo HOA maintenance fees are often not unreasonable.
See related article: Hawaii Living – Condo Or Single-Family Home?
The estimated $60,000 that the buyer felt was needed to fix everything was, in fact, for items that did not need to be done immediately. These items could be addressed over time, possibly stretched over ten years, and done as needed, just like condo associations do.
As in the above story, sometimes the roof doesn’t need to be replaced.
Focus Only On The One Item Next On Your List
Buyer’s remorse is genuine. Doubt, fear, and being overwhelmed can get the best of us.
Unless…we overcome our fears by learning to break down what overwhelms us.
High achievers habitually forge forward by analyzing and quickly isolating the real issues. They focus only on the most urgent and essential issues and implement the required solutions effectively. They separate the signal from the noise and successfully eliminate all distractions.
Focus only on that one item, whatever is next on your list, regardless of how long your list is.
This reduces anxiety and simplifies life. It prevents you from spinning in circles and minimizes the risk of analysis paralysis.
It moves you forward in a single flow direction. Fear gets replaced with purposeful action, which generates the desired results.
You place one foot in front of the other to finish a marathon and write one sentence at a time to finish an entire book. Yes, you can do it all, ..over time, but never all at once.
Simple, but not easy. Otherwise, more perpetual doubters would gain traction and morph into doers.
“I cannot change the laws of physics, Captain. If I keep pushing any harder, we will blow the engine.”
~ Scotty, chief engineer, starship Enterprise
So, Was It Overwhelm, Bad Advice, Or Not The Right House?
Buying an older home is not for everyone. It can be challenging, especially if you have a full-time job and a young family to raise.
Yes, the inspection report was overwhelming, and advice from friends and family was based on different market dynamics. Ultimately, it wasn’t the right house or time for this buyer.
The good news is that there is never a last house that sells. New home listings hit the market daily, and the right property will eventually become available.
This buyer has gotten closer to that point and will be ready and better prepared the next time. – Hopefully, you will too.
— We don’t just write about this stuff. We are expert realtors representing buyers and sellers of real estate in any market condition. We are committed to providing the most excellent service available on the planet. We love what we do and look forward to assisting you too!
Contact us when you are serious and ready. We are here to help.
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