I was negotiating repair items on a deal last week. I represent the buyer. The property inspection revealed, among other things, that both A/C systems in the home were showing splits that were out of compliance with normal readings.
A “split” is the difference in temperature between the air that is drawn into the system through the intake and the temperature of the air as measured from the output grills.The difference should be between 15-20 degrees on a properly operating air conditioning system. So, if you measured the air at your air filter grill, where it is drawn into the system, and it is 78 degrees, then you measure the air temperature of the output grill, where the cold air blows out, the output air temperature should be somewhere between 58 and 63 degrees, representing a 15 to 20 degree “split”.
On this particular home, the splits were 9 degrees on one unit and 30 degrees on the other unit. That means a problem exists with both units. A high split means there may possibly be air flow restrictions caused by a dirty/clogged air filter, dirty/clogged coils, or perhaps a freon charge issue. Low splits indicate, among other possibilities, possible low charge on freon, which could mean a leak or a bad coil.
The only way to know for sure what the problem is is to have the unit checked out by an A/C company. Due to time limitations, and the Option Period near its end, we wrote into a proposed amendment that “Seller to have licensed HVAC company evaluate, service and repair both HVAC systems and document that units are operating as designed”. We didn’t have sufficient data to guess an amount to ask for, so we just wanted the systems fixed. Usually, I prefer to break everything down into dollar amounts and just ask for money to offset important repair issues, but it’s not always possible
What happened next was that the listing agent violated the Realtor Code of Ethics in multiple ways.
She told me, in response to the Amendment request, that the owner was not willing to repair the A/C systems because, she stated, “the Home Warranty coverage being paid for by the seller will cover the repairs after closing”.
“That’s not true” I said. “Pre-existing known items, especially items listed on the inspection report, are excluded from Home Warranty coverage. The Home Warranty Company will ask to see the inspection report and my buyer will be stuck with a potentially expensive repair. The unit must be operating properly on the closing date in order to be covered, period.”
The other agent then told me, “well, if your buyer waits 30 days after closing, it will be covered”. I responded with, “That’s not true either. Are you serious? We want the seller to repair the HVAC systems per the amendment. It’s not covered by the Home Warranty and if your seller thinks otherwise, you need to inform him that you were mistaken. Ask the seller again and let him know that it’s very important to the buyer that the home he is buys has HVAC systems that are in good working order. That’s not an unreasonable request, now is it?”.
The seller eventually agreed. And my buyer got what he wanted. I’ll advise the buyer that it would be a good idea if we do go ahead and have my A/C Company evaluate the system after the seller tells us it’s been fixed, just to verify it was done properly and that there were no band aid fixes done to the unit.
The agent was in violation of the Realtor Code of Ethics first for being incompetent. It is incompetent for a Realtor to not understand and be aware of something as materially important as how Home Warranties operate. It is incompetent to advise a seller improperly with incorrect information. If it wasn’t incompetence, then it was dishonestly, which is also a violation of the Realtor Code of Ethics.
Second, the agent was in violation of the Realtor Code of Ethics by not treating all parties fairly. The agent knew or should have know that she was, through misrepresentations of fact, trying to get my buyer to agree to accept a home with defects that would not be covered by the Home Warranty. That is not what a Realtor is suppose to be doing.
So, had my buyer been represent by an agent equally as incompetent or dishonest as this listing agent was, and had that buyer agent believed or bought into the line of crap the other agent tried to feed us, then the buyer would have very likely suffered harm as a result, and would rightfully have wanted to hold someone accountable for the cost of repairing two malfunctioning A/C systems. Then, had resolution been difficult to obtain, the story would undoubtedly have been spread to friends and relatives about how “bad” Realtors are in Austin and how we don’t know what the hell we’re doing and only care about closing deals. When that happens, especially to a first time buyer, it hurt us all.
It’s encounters like these that make me ashamed of our industry and the high degree of incompetence and dishonesty that can be found within. All I can say is, be careful who you hire to represent you when buying or selling a home. Contrary to what you read or might believe, we Realtors are not all the same.
But back to the issue of pre-existing conditions. Angie Hyndman of HWA Home Warranty of America sent this overview to me and said I can share it here with you:
Hi, Everyone! There seems to be a recurring misconception of what “Unknown Pre-Existing” covers and how it works. So PLEASE, for your own protection, read the material below so you can properly educate your clients!
Most home warranty companies now have coverage for “pre-existing” conditions. What many do not advertise is that for defects to be eligible for “pre-existing” coverage, they must be UNKNOWN to all parties at closing.
What is a “Pre-Existing” condition?
An item that was NOT in proper working condition on the START DATE of the policy, which is day of closing.
The general rule is that item must work properly for your clients on the day of closing. If they turn something on for the FIRST time and it does NOT work, that is a red flag that the defect could be “pre-existing”…
How will the HW company know if it is Pre-Existing?
In the situation mentioned above, the HW company will ask for the inspection to see if the inspector had FOUND that defect. If it DOES show up on the inspection it is NOT a covered item because it is a KNOWN defect (unless repaired by a licensed tech and there is paperwork to prove.)
Most likely the company will send out a vendor to diagnose the problem with guarantee of coverage. If the problem can be found by doing SIMPLE VISUAL or MECHANICAL test it will not be covered. Basically something that could have been detected by the buyer by doing a simple inspection (ie. looking at it or turning it on) of the item in question. So if the vendor has to get in there with gauges and tools to identify the problem, that is not a simple test and should be eligible for coverage.
If there was no inspection the “SIMPLE” test will be the deciding factor.
Not all instances are black and white. Every situation is different and must be evaluated at that time.
I hope this was clear. If you have any questions please don’t hesitate to reply this email or call with any questions you may have! Additionally, you may have your clients call or email me as well! I look forward to earning your business and working hard for you and your clients!
Additionally, HWA has a pretty good video on YouTube that explains home warranty coverage and how it works. It’s about 9 minutes long worth watching if you don’t fully understand Home Warranty coverage. It’s below, just click to watch.