AC’s, Water Heaters, and Disclosures

Mike Rowe should have come over to my place once to film his “Dirty Jobs” show.  Not only during a “3 week period of time” was it dirty but it was dangerous.  See, for whatever reason, the builder of our home installed the air conditioning return on the staircase wall.  So, I had to literally open up the grate (sometimes it was stuck solid) and reach over to pull out the filter.  I’d either get a great stretch or pull a muscle. Then getting the filter back in and closing it up most of the way was also a chore.

Thankfully one day the handler went capooey!  I had three people come out for bids.  Our “friend acquaintance” came in the highest at $10,500 for both the handler and compressor.  2 others were in the $5700-$6100 range.  All for the same product.  The friend acquaintance quickly became someone we were unacquainted with. Talk about unfriending. But the silver lining is that the new guy we went with, figured out a way to rebuild the AC so the filter return was underneath the AC.  No more reaching over and risking life and pulled muscles.

Three weeks later, the water heater fried. Just like the AC, there was also an expensive silver lining. For over a decade, our son Sam would get lost in the shower.  We had a gas water heater, and Sam was an expert at using up all the hot water with his long 45-minute showers. We would yell, “Sam – Sam -Sam”. No answer and the lukewarm water would become cold.  Sam’s endless showers led to my endless aggravation. So, when the water heater broke, we opted to get a tankless water heater. Sam could now take a hot shower 24/7 and it would make no difference.

All of this begs a ‘what if’ question. What if we had just purchased the house? Who would have been responsible for paying for the water heater and AC if both broke down three weeks after closing?

The answer to that question is the buyer would be out of luck with two caveats. Parts, appliances, and products have a given life span.  My Air Conditioning unit and water heater might have passed inspection with flying colors a month before inspection. However, once the deal closes, it’s the buyer’s responsibility.  My two major appliances breaking were just coincidence other than that they were older, and that part was somewhat predictable. Buyers just need to be aware of lifespan along with the knowledge that anything can break at any time.

Now in this hypothetical if the two items broke after passing inspection and before the closing, then the Seller is 100% on the hook to fix the items. And if it’s not fixable, then it needs to be replaced.

Paragraph 11 in the AS-IS Florida contract requires seller to maintain the property in its condition at time of offer acceptance and paragraph 9 deals with the procedure to hold back funds (125%)at closing if seller is not able to make the repairs under paragraph 11 by closing.   

And yes, paragraph 11 extends to items agreed to be fixed as well as that would be considered maintenance of the property.

The other caveat is the seller’s disclosure.  In Florida, a Sellers disclosure is not required.  However, if a Seller is aware of something like an incoming special assessment or an active leak, it’s the seller’s responsibility to make the Buyers aware of it.  The argument against filling out a seller’s disclosure from a Sellers point of view is that if you forgot to put something in there, then the Buyer can go after you for that. However, I do encourage my Sellers to fill out a Sellers disclosure. Reveal Reveal Reveal. If you don’t know the answer, just write,  “I Dunno”.  Buyers have no problem if an item is fixed. It actually builds trust as well and it’s the right way to do business. I’ve never had a problem in 25 years. One other item of note is that if the Seller has passed away, and the kids or a third party is selling the house, its not always possible to gather the past history.

Sellers can obtain, if there are any liens on the property or any permits that are not closed out. Sellers would be smart to do so prior to listing as a deal can fall apart later on whereas the issue could have been taken care of before it became a problem. Buyers also should make sure and ask for permits to be closed out in the AS-IS contract.

If you are a Buyer, insist on receiving a Sellers Disclosure.  Request for explanations on how something was repaired. Ask for receipts.  Make sure repairs were handled by a licensed contractor. See if any warranties are still available and transferable on anything that’s been fixed.

And if a house doesn’t have a tankless water heater, pray that it breaks before closing!

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About the author

Jeff Lichtenstein, originally from Chicago, got his start in the home furnishings textile business where he traveled over 35 weeks a year selling fabrics. After the family business was sold, Jeff moved to Florida and became a real estate agent. Today he is the owner and broker of Echo Fine Properties, a luxury residential brokerage voted best brokerage of the year. Jeff manages a non-traditional model of real estate that mimics a traditional business model. Echo has 100 agents, an average of one million dollars per transaction and over 500 million in annual sales. Between traveling for work and annual family trips to national parks with his wife and 2 now adult children, Jeff has visited 49 states. He is also one of the few Chicago White Sox fans you’ll ever meet. Some publications he has been quoted in.

Author of business & leadership book How Making a Sandwich Can Change Your World – The Amazing Success of the PB&J Strategy – Available to Buy Now!

Feel free to ask him a question directly at [email protected] including a complementary valuation of your home.

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