Failed Property Inspection

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Failed Property Inspection

Nghi Le
Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes

I just received notice from my realtor that my buyers from my first flip in Burien, Washington (SW Seattle area) pulled out of the contract because it failed inspection.

Two reasons:
- Roof needs to be completely removed and install new roof. The issue is the top newer layer was installed on top of two existing layers. This creates a problem with weight and is unsafe.
- The electrical is nob and tube and needs to be completely redone.

The inspector said the costs of these two items could be some between $15,000-$20,000. The Buyers are not willing to make that upgrade on their own.

Multiple contractors have told me that you can have up to 3 layers on a roof, but this one failed at 3. Before my (general) contractor started the rehab work, he said he only saw one layer on there, so right now there should be only two. He's going to the property to inspect the roof tomorrow.

My contractor also said he's sold many homes with nob and tube electrical.

So my question to any local contractors, inspectors, or persons of knowledge out there: Should these things have failed the inspection?

I really liked my buyers too. They offered full price the day after the property was listed with 20% down conventional financing and less than 30 days close, I countered with twice as much earnest money and less days for inspection, and they accepted the counter the following day. Any chance I can get them back? I believe they may be first-time home-buyers and scare easily.

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Account Closed
Contractor · Raleigh, NC · Member since 2014 · 651 posts · 510 votes
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@Nghi Le 

I agree with Colleen.  Find another contractor; his advice seems dubious.  

In my opinion, a professionally rehabbed house should have its systems modernized, it's structural issues corrected and its finishes made aesthetically beautiful. I never want to sell someone something that will be a problem for them. And then, when I then ask 'top dollar', I do so with confidence in my product.  

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  • Kyle Samuel
    Rehabber · North Haven, CT · Member since 2014 · 58 posts · 26 votes
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    I never install another layer on top of existing layer of roofing. Local building code by me says we can have up to two layers of shingles and still be ok though. So if in fact, you only have 2 layers, you should be ok code compliance wise. However, inspectors love making big deals out of things and very often don't know what they are talking about I've found. I always rip the old layer off because it adds a lot more stress on the roof and I know an inspector will make a comment if there is more than 1 layer. If you do have 3 layers, then the inspector's comment is justified and you are placing a lot of extra weight on the roof. In terms of the knob and tube wiring, were you unaware that the house had this during the rehab. This is old wiring, and though it may work fine, buyers will have a difficult time obtaining a mortgage and insurance on a house that has knob and tube in it. I always rewire a house if it has knob and tube in it.
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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    11y

    You have to tell any new buyers these issues.  I don't think two layers of roof is a big issue but it could be,  but knob and tube is going to be a problem for anyone.  This is something that should have been picked up by your contractor and recommended to be done.   (he doesn't sell houses he is a contractor he rehabs them. There is a difference if someone has knob and tube and decides to live with it in a house they own and a flip house that is expected to be updated and sell on the current market).

    During the rehab knob and tube should have been removed.  Electrical is something insurance people are picky about and it may cause an issue with insurance.  I don't think on this issue you have a choice, I would however reconsider your contractor...

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  • Account Closed
    Contractor · Raleigh, NC · Member since 2014 · 651 posts · 510 votes
    11y

    @Nghi Le 

    I agree with Colleen.  Find another contractor; his advice seems dubious.  

    In my opinion, a professionally rehabbed house should have its systems modernized, it's structural issues corrected and its finishes made aesthetically beautiful. I never want to sell someone something that will be a problem for them. And then, when I then ask 'top dollar', I do so with confidence in my product.  

    3Reply
  • Ron Drake
    Investor · San Diego, CA · Member since 2014 · 180 posts · 72 votes
    11y

    Of course you liked your Buyer, they offered full price.

    Often with the first course of shingles it will appear that there is an additional layer when there isn't, so you may very well only have 2 layers. However, I wouldn't ever install a 3rd layer even if code permits so may be a problem for your Buyer too.

    Is there any room in the deal for you to either reduce the price or do part of the repairs? If you lose this Buyer the next one will have the same issues with your house so try to get them back and get the deal done if you can.

    I have sold houses with knob and tube wiring and nobody likes it and even though it maybe 75 years old as was my case, is still considered a fire hazard.

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  • Laureen Youngblood
    Interior Designer/Real Estate Investor · Eugene, OR · Member since 2013 · 168 posts · 91 votes
    11y

    @Nghi Le

     All sound information above.  I will third the caution about your contractor.  If he is good at what he is doing then you can probably keep using him for your rehabs.  However, if he missed the layers on the roof and is missing major items like that that can affect the sale you might reconsider.

    I would try to remember, though, that he is a contractor, not a realtor or bank.  Final decisions like those should be made by you or someone in your area that is familiar with issues that will be detrimental to your resell.  Just because you can "get away" with something in a rehab doesn't make it right, nor does it mean that you won't have problems like the ones you are having with this project.  Go with your instincts and get second opinions.

    Good luck.

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  • Account Closed
    Investor · Meridian, ID · Member since 2013 · 133 posts · 50 votes
    11y

    Unfortunately, a contractor's license means nothing. Sounds like it's time for your contractor to file an insurance and share in this misfortune with you. I once purchased a house with a sag in the roof. The roof had 3 layers. Each layer adds 800 lbs per 100 sq. ft. I had one contractor tell me there was only one layer and he could go right over it. I knew there were three layers but was testing his knowledge. 

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  • Account Closed
    Investor · Meridian, ID · Member since 2013 · 133 posts · 50 votes
    11y

    Correction, each square runs about 350 lbs. but still at 3 layers your are just over 1,000 lbs per 100 sf. ft.

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  • Steven Zagaris
    Real Estate Agent · Modesto, CA · Member since 2013 · 33 posts · 8 votes
    11y
    I wouldn't buy a property like that as a first time buyer. 3 layers of roofing tells me the previous owner was cheap and didn't want to get the job done right the first time. What else might they have been cheap about? The electrical is also a pretty big issue. a home inspection can't "fail". It just means the buyers didn't like the result and if they are people who don't have a lot of cash in the bank, understandably they hit the road.
    2Reply
  • Aaron McGinnis
    Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
    11y

    The buyer is well-advised to avoid this house. A three layer roof and knob and tube wiring are both major health and safety concerns, and indicate the the house was either not professionally renovated or inadequately renovated.

    1Reply
  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    11y

    Contractor is not a real estate agent. You should use your contractor for his strengths (rehabbing house) and not for real estate advice. That you should have consulted with your real estate agent.

    3 layers of roof plus know and tube wiring are both red flags.

    That's why I love working with licensed, insured and bonded subs. I bring them out to my projects; they point out any code issues and any other issues that might come up during a home inspection.

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  • Michele FischerPro Member
    Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
    11y

    I would fix the nob and tube and disclose the roof.  I'm guessing the roof has more years of use before needing to be replaced, it will just be a more expensive replacement.  Our first purchase had multiple layers of roofing.  It came out at inspection, we decided we were getting enough of a discount to move forward.  We put the roof replacement into our future maintenance plan and replaced it last year.  Unfortunately, there were more layers than expected and the final price was double what we were expecting from inspection.  Would we take that risk again?  Yes.

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  • Nghi Le
    OP
    Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes
    11y

    Wow, so many great responses!  I'm getting the impression that the knob and tube wiring is a bigger problem than the roof?  Either way, my contractor is having an electrician come out today to check it out, and my contractor will also be checking out the roof because he still believes it only had 1 layer before.  The other contractors I had bidding on the house also saw 1 layer.

    How much of a problem is the roof?  I feel like it would be a bigger issue on a larger home, but mine is a 1-story 880 sqft home.  Here is the listing:

    https://www.redfin.com/WA/Seattle/242-SW-122nd-St-...

    I had 4-5 contractors bid on this house, and I ultimately went with mine due to the fact that they were recommended from two other investors I know; they're licensed, bonded, and insured; and they're a big company with a lot of experience (currently doing 22 deals at the moment).  They were also accommodating my budget. I was on a strict budget because this is my parents' house and they still owed a lot of money on the property; I'm just trying to break even with this house and get my money back to do the next deal.

    I'll provide an update once I hear back from my contractor.  I also have a couple other people coming to look at the house too.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    11y

    Unfortunately what you owe on a house and what you need to spend fixing it up isn't relevant to the value.  Sorry but is sounds like your strict budget results in a suboptimal rehab.  

    Your contractor can look at it and tell you its ok all that want.  Buyers just won't care.  Buyer's are going to have your disclosure and their inspections and will adjust the price accordingly.  

    Did you put on the third layer of roofing or what that already there.  If you put it on was it permitted?  If you put it on and it passed with the city inspectors I would push back on that.  Inspectors often point out things that might be problems and spook buyers.  But if it was done with permits just point that out.

    Inspections don't fail, as @Steven Zagaris points out.  They're really a basis for renegotiation.  You might be able to get these buyers back with an offer of a price reduction.  Possibly splitting the cost of fixing these items.

    1Reply
  • Dell Schlabach
    Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
    11y

    Nice remodel.... 

    as someone previously mentioned its possible the inspector looked along the bottom and saw a starter strip/upside down shingle  and confused it with an extra layer. Once you have a definitive answer you can make a proper decision. We always tear off before we install new, but we inherit a two layer occassionally, although the inspectors typically note it on home inspection reports, it has  never nixed a sale for us. 

    If you have a licensed electrician evaluating your property, knob and tube still passes code in many areas, In our area I see a lot of houses where they upgraded the panel box and ran new wire to the kitchens and bath, installed gfcis and the rest of the house is still on knob and tube. Locally it passes code as long as ungrounded has two prong receptacles, and not three. 

    Recently got flagged by a home inspector for having a copper water pipe running across the top of an electric panel box, there were five different flags for electrical items that all made it onto the high level potential hazard section of the report, the buyer walked. Send the report to my electrician, he reviewed the items and said there isnt one that is a code violation for existing homes, this was was a 20 year old house,  we had not done any of the electrical work, except swap out some lights. Sold the house the next weekend, next home inspector did not flag any of the electrical items. 

    always interesting

    2Reply
  • Bryan R.
    Tacoma, WA · Member since 2010 · 203 posts · 93 votes
    11y

    @Nghi Le 

    I'll go over one existing layer (so 2 layers total). 3 layers is too many. Looking at your listing that should be a really easy and relatively cheap fix. Maybe offer to replace yourself. Or offer price reduction based on possible need to replace in future.

    As for knob and tube. I've dealt with it a ton. Sure new wiring is preferable, but knob and tube shouldn't be a deal breaker. I've sold plenty of houses with knob and tube. Forget your contractor. Bring in a couple electricians yourself. Get one who will evaluate the knob and tube condition, make any necessary repairs, and then give you the all clear.

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    11y
    Originally posted by @Nghi Le:

    I'm getting the impression that the knob and tube wiring is a bigger problem than the roof? 

    I've bought houses in the past that had only two layers and still had cracked roof joists/trusses -- the extra weight of the second/third layer of shingles is certainly not optimal.  And in the areas where I rehab, three layers is NOT allowed.

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  • Nghi Le
    OP
    Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes
    11y

    @J Scott @Dell Schlabach 

    I'm definitely learning a lot about rehabbing... thank you you two and everyone else!

    @Jon Holdman 

    I think I actually over-rehabbed the house.  It's in a low-income area, and it's priced higher than all of its comps; everything is either bigger and/or costs less.  I got a full-price offer a day after listing, so I felt that I either priced it just right or a little bit low, which was fine by me because I was very motivated to get this thing sold before Thanksgiving and the dead month of December.  I really didn't expect the issues with the roof and the wiring, but if it really is up to code (but still not "preferable" as many have mentioned), I was hoping they would take into consideration the neighborhood they're buying in and how old the house was before the rehab.

    The only permit done on the house was for the electrical panel.  Does the roof also need a permit, even though it was simply adding another layer?

    I'm thinking of re-contacting the buyer and explaining the situation, but I think I will need to also show them proof that everything is up to code.  It's definitely not a broken house, and I'm willing to drop the price $5,000 to get it back under contract before Thanksgiving.  Do you guys think this is a good way to go?  Or is spending money to fix these things more of a necessity?

    @Bryan R. 

    Since you are local to the area, would you be able to point me to something in Washington state law that says knob and tube wiring, as well as 3 layers of roof, is up to code (or that it shouldn't fail an inspection)?

    Do you really think the roofing and electrical work is pretty cheap and not the estimated $15k-$20k the inspector suggested?

    I'm going to give my contractor a couple of days to clarify and/or resolve these issues, mainly because it shouldn't cost me anything and because I know he cares about his reputation and our long-term business relationship.  He asked me to give him until Monday.

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  • Nghi Le
    OP
    Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes
    11y

    Ahhh, this tagging thing is a little bit buggy; I apologize :-(

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    11y

    Sorry, but from the sound of it you rehabbed the wrong things.

    I supposes its possible your city allows re-roof (and remodelling) without permits.  But I doubt it.  I'd be amazed if you're allowed to do roofs without permits.  For one thing, you may not be allowed to "simply" add another layer.  Folks have pointed out why not.  In my city, there are many older houses there were decked with 1x8 boards.  Cities require that if there are any spaces over 1/2" between those boards, the entire house must get new decking.  That's because hail is a very big problem here.  Yes, the city can make you rip off your brand new roof and put on a new one.

    Any remodelling project requires a permit and cities often make you address a few specific items.  Hardwired, interlinked smoke and CO detectors.  GFCIs where required, arc-faults where required.  Hard to guess what might be hot buttons in your area.

    Here are a couple of pictures of what can happen when city inspectors want proof things are up to code. This is an actual fix and flip where the rehabber was caught doing work without permits. This rehab had been completed, was under contract, had inspections issues, and the city got involved because some work was permitted and some wasn't. But turns out this city has a program to have a look at new MLS listings, look for rehabbing, and then compare the property to the permit records.

    Basement

    Kitchen.  That's the bathroom on the other side of the wall.

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  • Account Closed
    Contractor · Raleigh, NC · Member since 2014 · 651 posts · 510 votes
    11y

    One thing is that your listing says, "Updated electrical panel", which gives the impression that the electrical system has been upgraded and modernized. That may be one reason why your buyers reneged when they learned it had knob & tube wiring. It's a bit misleading. 

    Also, work done  'To Code' is a minimum standard and generally nothing to tout. Restaurants around here get inspected and rated by city every year.  70% is a passing grade but nobody wants to eat there. 

    0Reply
  • Bryan R.
    Tacoma, WA · Member since 2010 · 203 posts · 93 votes
    11y

    Permitting issues and building code vary by local jurisdiction somewhat, but by and large in Washington most places substantively adopt the IRC (and related codes) with some minor changes in their local building code. For the state it is the 2012 IRC (http://app.leg.wa.gov/wac/default.aspx?cite=51).

    See also state amendments: https://fortress.wa.gov/ga/apps/SBCC/

    Reading the IRC can be daunting. It is enormous and abstruse and hard to search and very poorly written. When you just need simple stuff and not in depth technical requirements there is a great little book called Code Check. My version is based on older version of IRC, but probably still the same for vast majority of stuff. Anyways when I turn to reroofing section of Code Check it tells me that up to 2 layers is acceptable, anymore will require a tearoff (with some limited exceptions). That has been code for years and years, for your contractor to not know that would be a significant red flag. And of course as Jon mentioned also subject to roof decking, structure, ventilation, etc...being adequate.

    For further clarification then you can then check Burien Building Code for any amendments they may have adopted to the IRC. Or just call the planning department.

    http://www.burienwa.gov/index.aspx?nid=667

    Reroof permit in Burien is $106. Ask you contractor for copies of this permit, and all permits he pulled for the project. And while you're at it go on L&I and verify his license and workers comp status. When you can, be there for permit inspections - you'll learn a lot.

    For the size of that house a tearoff and reroof should be cheap. Less than 5k. Another option would be to get a roof cert. Though I think they are kind of a scam.

    K&T wiring is allowed. I'm not sure I know where to point you that says "K&T is allowed!", I can't point you to anywhere it says it is not allowed either. Main thing is get an electrician to check it out an give you the all clear. An easy check for you regarding your contractor - check the receptacles. Ungrounded receptacles need to be 2 prong or if GFCI receptacle need to have a little sticker on them saying "ungrounded". 

    Electrical rewire cost is hard to say without seeing the property. Sounds like from your post you already have an updated panel which is good. Rewiring after completing the rehab is generally going to be a bit of a nightmare just because usually it also entails drywall repair, paint, etc.. so I would avoid it if at all possible. Next buyer might not be so sensitive. Also arcfaults, if they aren't already required in Burien will be very soon.

    @Nghi Le

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  • Flavia Brown
    Redondo Beach, CA · Member since 2014 · 25 posts · 10 votes
    11y

    To get the buyer back, consider offering to pay for some or all of the buyer's non-recurring closing costs. 

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  • John Whittle
    Vendor · Cincinnati, OH · Member since 2014 · 144 posts · 58 votes
    11y

    I wouldn't worry about the knob and tube.  Its not the knob and tube thats bad, its that it was designed for very light electrical use.  Being that enough of it wasn't ran for todays uses.  Homeowners over loaded it and uped the fuse size.  Giving it a bad reputation.  As long as its on the right breaker it should be fine.  Sorry sweetheart you can't vacuum and blow dry your hair at the same time. Home inspectors write up every little thing to give their job meaning.  I wouldn't worry about it.

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  • Account Closed
    Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes
    11y
    Nob and tube is a fire hazard and falls apart over time. Over time the casing tends to disintegrate and wires touch, causing the electric to a, cease to work and or catch fire. Should've upgraded it. The roof is potentially a problem also, depending on weight specifications. Keep in mind that the home inspector is not trying to ruin the purchase, more to alert the buyer of all the problems.
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  • Nghi Le
    OP
    Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes
    11y

    Just an update...

    My general contractor went out to the property yesterday to check out the roof.  He saw that in certain areas of the roof, there were multiple layers.  He apologized for missing that on his initial inspection, and will be completely removing all of the layers and putting on a brand new roof, free of charge.  Should be done within a couple of days.

    From what you guys are saying, it sounds like the K&T wiring isn't a big deal, especially in the low-income and old neighborhood that this house is in.  The GC mentioned that his electrician had already inspected the wiring and approved it, and we did already replace the biggest problem, which was the panel.

    As for the buyers, my realtor told me that when he recently talked to the buyer's agent, he was given the impression that they had two houses in consideration and ultimately decided to go with the other, using the wiring and roof as an easy way to get out of the contract.  If they really wanted this house, they would have tried to renegotiate something.

    As stressful as this first project was, it has been a great learning lesson.

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