Ask Phyllis: a blog series of frequently asked real estate questions. Please email us here.
Dear Phyllis,
We have a flat roof that leaks. As the seller, we would rather disclose, at the time of sale, the leaky roof problem than spend all the money and time now replacing it. Does this make sense? Also, I understand the banks will not loan on a home with a leaky roof. What are your thoughts on selling with a leaky roof?
Barry
PS: I enjoy reading your thoughts in the “CV Weekly.”
Dear Barry,
As I have an extensive background in Real Estate Lending before my real estate career, you asked the right Realtor. This issue can be confusing. You are correct that if the bank knows your roof leaks, they will not lend on your home. There are a few ways for the bank to know that your roof is a problem:
1) As part of the paperwork the bank accumulates for the loan, they receive a copy of the “Residential Purchase Agreement.” This outlines the sale details, purchase price, contingencies, closing, etc. If noted in this contract something to the effect of “Seller will credit buyer $5,000 for roof repairs,” this will alert the bank that there is an issue with the roof. While if you were to instead credit the same sum to the buyer for closing costs, no red flag would be raised.
2) The appraiser will be the primary reason the bank will suspect your roof is an issue. The roof is obviously worn if you have a tarp on the roof. If the appraiser sees ceiling stains, the appraiser will likely ask for a roof certification. A roof certification is a statement from a licensed roofer stating that they certify the roof to be watertight for 3-5 years (time depends on the lender).
3) On the “Residential Purchase Agreement,” there are “check boxes” as to who pays for which inspections. If noted here that the buyer will pay for the home inspection report, the bank may ask for a copy.
I suggest you obtain an estimate from a roofer and disclose it to potential buyers so that the cost of the roof can be factored into the price the buyer agrees to pay. The buyer may “guess” high without this estimate, impacting their offered price. Or if the buyer believes the cost to be less and later obtains their own estimate, they may attempt to renegotiate the selling price.
As you may have gathered, selling with a leaky roof is complicated to explain, especially with limited column space. I suggest contacting me personally to review other options, such as lender withholds.
I understand that not every home seller wants to sell their home for the highest possible price. Also, sometimes convenience is a significant factor. But please be sure to discuss with a Realtor the value of your home AS IS and AS REPAIRED. This way, you can make an informed decision about your best approach.
Best of luck, and stay dry!
