Health and Safety Issues Delay & Kill Deals!
Apparently, people don’t like to be sued.
Especially lenders and appraisers and HOAs and home inspectors and contractors and underwriters and lenders… and regulators.
People also don’t like to see other people get hurt – which is a good thing.
And – you can’t just pour a bunch of kitty litter on the ground to fix a standing water issue. Who knew?
All this is to lead into the topic at hand:
Health and Safety Issues
I want to address health and safety issues for a few reasons: (1) a few agents asked me to address them in response to my condo blogs like this one: WARNING: Condo Delays; Blame Canada! Or “Big HOA”; and (2) health and safety issues often delay closings and sometimes kill deals altogether.
Health and safety issues are often very similar to structural issues, and they often overlap each other.
The problem is that once they are called out, lenders won’t lend against a property until the health and safety issue is addressed.
Appraisers are the ones who call them out most often, either overtly or unintentionally, with their photos. They also surface in comments in contracts, MLS, and escrow instructions.
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Health and safety issues include:
We even had a “squeaky pipe” called out recently. But, it turns out that squeaky pipes are not an issue as long as they are not leaking something besides squeaks.
Appraisers generally turn a blind eye to most small stuff, but they have to call out major items; otherwise they can lose their licenses and/or get sued.
The risk of losing a license or getting sued is why others have to call out health and safety issues as well.
And, as mentioned above, when health and safety issues do get called out, they have to be repaired and certified as repaired before we can close a transaction – which almost always causes delays.
Hence, we always encourage agents to try to address the issues BEFORE the appraiser inspects the property.
And finally, we really did have someone pour kitty litter on some standing water. And then we had to have someone go out and actually fix the problem.
The Problem With Condos
The problems with health and safety issues with condos are severalfold: (1) we often have to get the HOA to fix them, and it can be very difficult and time-consuming; (2) even if the health and safety issue does not impact the subject unit, it can still delay a deal because it puts the HOA at risk; and (3) if health and safety issues surface via an inspection that is filed with the state, it can render the entire complex “non-warrantable” (or ineligible for Fannie, Freddie or FHA financing).
If the issues are not public record and not major, it is often just easier to get a contractor outside of the HOA to fix them. But, if they are major and public, prepare for delays or the need for much more expensive alternative financing.