Is this home worth purchasing given concerning inspections?

[Joanna P.]

Hi All!

Newbie over here! I'm looking to house-hack in Chicago and have been looking at multi units for a while.. 

Finally found one in Humboldt park that's been around for a while with price decreases, made an offer, and am currently under contract!

However...Just got my inspection summary back and now I'm really worried if this might be a money dump.. Agent is saying the property would need around $60K of work, but I'm not so sure. It seems like someone has been fixing this property on their own and it's not great.
Somehow (i have no idea how) this property passed FHA appraisal.

Main concerning things about this 3 unit:

- It's actually legally zoned as 2 unit, but seller didn't disclose that

- Back deck is literally falling apart. Bad enough that I did not even attempt to walk up the staircase

- Carbon monoxide present in the basement (I want to create another unit in the basement..)

- Mold/moisture present in the basement / fungal growth 

- Exposed wires / wire defects all over the place

- Major foundation cracking in the basement

I don't know much about construction so I would be paying someone to fix all of this. Am I walking into a potential disaster? Or am I freaking out over the above needlessly? Listing price was $450K, so it's a hefty sum for me already.. I want to avoid a financial disaster.

Any help would be greatly appreciated! Posting major hazard notes from the inspection below.

[Malcomb Stapel]

@Joanna P.  so it's a little hard to see the pictures, but I did try to go through them. Just my thoughts, from what I could see. Your inspector did exactly what you paid them to do, find stuff. They aren't going to come to you with nothing and ask for payment. A lot of what they are finding is the typical stuff, caulking, outlet's not wired properly or not grounded, mold, etc. A lot of it was little stuff that a good handyman could take that list around and use it as a check sheet for repairs. 

The wiring and foundation issues are the two I would be most curious about. For starters it was hard to see with those pictures, so I can't tell you why they think the wiring is non-professional install. Also, we can't really tell much by that foundation photo. Lot's of foundations move, crack, leak water. Many can be stable like that for decades. I look for things like exterior walls sitting over or inside of the foundation because it has moved so much. Those usually become a no for me. 

[Chris Seveney]

@Joanna P.

Never believe your agent on what it will cost. Get a contractor to price the work

[Bruce Woodruff]

Just off the top of my head, this is way more than $60k....that would be the low end, IMO....

The deck rebuild (to code) is $15k+. Major foundation cracks = $10-20+. Getting rid of the moisture problem - who knows....? CO2? This sounds really iffy...

You need to give that report to a good GC and have him give you a quick, rough price. Or else just walk. Let someone with a lot of experience and a GC license tackle this....

[Malcomb Stapel]

Quote from @Chris Seveney:

@Joanna P.

Never believe your agent on what it will cost. Get a contractor to price the work

 Oh yeah, and that ^ 

Many agent's are average to terrible at their jobs. Unless this one has some actual experience in construction, rehab, brrrr, take their word with a grain of salt. 

[Eliott Elias]

Use all these things as leverage to bring your price down even more. I love finding un expected things that can give me a Hefty discount 

[Brie Schmidt]

@Joanna P. - I have seen that property and know exactly what you are talking about.  Everything was very DIY in terms of the upkeep and renovation.  

I would guess the porch needs to be redone, if you want it open you are talking $30k and to enclose it like it is now it will be $35k

Please understand that you can't just make a basement unit.  If your numbers only work with the basement unit then it is a no go for me.  I am trying to remember but I don't think the basement was 7 feet?  If not you need to dig and are talking $30k-$50k just for that not including any finishing or zoning

[John Warren]

@Joanna P. FHA appraisals are funny. On really nice properties they will create all kinds of issues, and then on marginal properties they will be no issue at all.

Your inspector appears to be very thorough, but a lot of these photos are things that don't bother me personally like reverse polarity outlets, etc. With that said, porches are no joke in Chicago. If your porch is end of life, that is not something you can get a handyman to fix. The pricing is all over the place, but the low end is 15k that I have seen, and the high end is 45-50k. I think a smaller one like this is probably in the middle, but if you are doing FHA then I doubt you have that sitting around.

The mold/fungal growth thing is in every house in these areas. Unless it is pervasive, you can fix it by fixing the water leak and then cleaning and painting with oil based kilz. We run into mold literally every week remodeling these old apartments in the base kitchen cabinets or in basements. 

The foundation cracking is an interesting one. Without actually seeing it this could go either way. If these are smaller cracks, then you can have them injected with epoxy for a few hundred bucks. If they are structural then that is a different story. This property is not a brick and masonry building so you are more likely to have issues than the masonry buildings. 

[Michael Evans]

Quote from @John Warren:

@Joanna P. FHA appraisals are funny. On really nice properties they will create all kinds of issues, and then on marginal properties they will be no issue at all.

Your inspector appears to be very thorough, but a lot of these photos are things that don't bother me personally like reverse polarity outlets, etc. With that said, porches are no joke in Chicago. If your porch is end of life, that is not something you can get a handyman to fix. The pricing is all over the place, but the low end is 15k that I have seen, and the high end is 45-50k. I think a smaller one like this is probably in the middle, but if you are doing FHA then I doubt you have that sitting around.

The mold/fungal growth thing is in every house in these areas. Unless it is pervasive, you can fix it by fixing the water leak and then cleaning and painting with oil based kilz. We run into mold literally every week remodeling these old apartments in the base kitchen cabinets or in basements. 

The foundation cracking is an interesting one. Without actually seeing it this could go either way. If these are smaller cracks, then you can have them injected with epoxy for a few hundred bucks. If they are structural then that is a different story. This property is not a brick and masonry building so you are more likely to have issues than the masonry buildings. 

[Michael Evans]

Good job getting the inspection report done. However, it is not enough. Look at how many times he recommends a "licensed professional" to evaluate it. Get three bids for each item and be there to meet and walk the property with them. Also, keep in mind the electrical is VERY important. Not a place you want to cut corners.

Good luck!

[Michael Evans]

Good job getting the inspection report done. However, it is not enough. Look at how many times he recommends a "licensed professional" to evaluate it. Get three bids for each item and be there to meet and walk the property with them. Also, keep in mind the electrical is VERY important. Not a place you want to cut corners.

Good luck!

[Nate Sanow]

The first time you see an inspection report it can be scary. As time goes on it’s less scary to see one of these. Everything has a finite cost and if anything take this as a learning opportunity to break down the major items into a categories and you will get a chance to develop a “scope of work” which is important to get.

[Jonathan Klemm]

Hey @Joanna P. - Welcome to the Chicago BP forums.  You received a ton of great advice above.  First pointed question, who is your agent and are they an investor?

Off the cuff, this looks like a lot of work, but you really need someone to dive deeper into the property.  More importantly, if you are buying something that was not properly done there are only going to be more surprises as time goes on unless you intend to gut the place (Which I'd encourage!)  We'd be happy to help in any way we can.

[Mark Ainley]

@Joanna P. first red flag is "It has been around for a while".  When I see a property on the market I quickly assume many people smarter then me have already passed on it.  If you send a picture of the porch to Frank at Mr Porch he can give you a quick price on the deck rebuild.  As @Brie Schmidt said this price will be 30k+ possibly so that one number can make this decision easy for you.  

[Mark Ainley]

@Joanna P. Also make sure you are pulling up the info on the city of Chicago building violations/inspection records to ensure no open court cases or red flags there. I will DM you a link to a recent podcast we did on ADU ordinance and adding additional units in Chicago and the current pilot program.

[Carlos Ptriawan]

Quote from @Joanna P.:

Hi All!

Newbie over here! I'm looking to house-hack in Chicago and have been looking at multi units for a while.. 

Finally found one in Humboldt park that's been around for a while with price decreases, made an offer, and am currently under contract!

However...Just got my inspection summary back and now I'm really worried if this might be a money dump.. Agent is saying the property would need around $60K of work, but I'm not so sure. It seems like someone has been fixing this property on their own and it's not great.
Somehow (i have no idea how) this property passed FHA appraisal.

Main concerning things about this 3 unit:

- It's actually legally zoned as 2 unit, but seller didn't disclose that

- Back deck is literally falling apart. Bad enough that I did not even attempt to walk up the staircase

- Carbon monoxide present in the basement (I want to create another unit in the basement..)

- Mold/moisture present in the basement / fungal growth 

- Exposed wires / wire defects all over the place

- Major foundation cracking in the basement

I don't know much about construction so I would be paying someone to fix all of this. Am I walking into a potential disaster? Or am I freaking out over the above needlessly? Listing price was $450K, so it's a hefty sum for me already.. I want to avoid a financial disaster.

Any help would be greatly appreciated! Posting major hazard notes from the inspection below.

  just skipped it buddy, since you're new bie, first good experience is a must

[Mark F.]

The major red flag to me is you said its actually a legal duplex but you expected a 3 unit. That is not an issue for a newbie. What else did they not clear with the town like permits and work? That's a deal breaker IMO. You can fix all the issues yet the town can tell you nope, its only a 2 unit. Plus foundation and extensive electrical issues again are too much for a first timer without construction experience. I dont see one reason to continue with this purchase. And ditto on it costing only 60k.

[Jeremy H.]

For a proper renovation that looks closer to 85k-100k to me - especially if the deck costs 30-35k. 

There are so many variables with this one - you need to use this inspection report for negotiation. Do NOT be afraid to hear them tell you "no" - if that's the case you have ran your numbers at a price that works for you and if they don't come to your price it's not a good deal. There will ALWAYS be another one. 

This is a major reno that will take time to complete imo. Lots of small problems sprinkled in with some big ones - the foundation is a big one, it's a 2 unit property so run your numbers as a 2 unit property, the CO2 is indicative of a leak, expect about 75% of anything water/gas related to be leaking on a house that needs a rehab

May be a good one but it needs to be gotten for CHEAP!

[Karen Margrave]

On the foundation, electrical and decking, get actual bids from licensed contractors. I don't know what the licensing requirements are in Chicago, but in CA inspectors aren't licensed contractors, and that's why you see the notations to contact a licensed professional. In CA we also have a standard 17 day inspection period at the end of which we have to have Request for Repairs in. Sellers don't have to respond to them, but usually will agree to doing the Section 1 pest work. It's also when you negotiate a lower price if the work warrants it, etc. 

As to the basement, as the agent above indicated, there has to be 7" height from finished floor to finished ceiling in order to meet FHA guidelines.

[Jennie Berger]

I'm with @Carlos Ptriawan on this one. If this is your first rehab, it might be best to take on a more cosmetic project. Albeit, I know that's very difficult to find in Chicago, with all of the old buildings. 

If you underwrote this deal very conservatively, and have $100k+ extra dollars in your budget (that includes a contingency for all of the unknowns, possible continued inflation, a surge in materials & labor pricing, longer hold times, etc.), then it could work by hiring a well qualified GC to handle EVERYTHING, like @Jonathan Klemm & Quality Builders, for example. 

Don't even consider hiring a 'so-so' GC for this. ESPECIALLY because you are not a GC, and most likely have little to no construction experience. So you cannot baby sit them to ensure they're doing everything 100% correct and getting all of the necessary permit(s) and inspections along the way. 

A lot of people do hire GCs that claim they can do it for this "great price". Bear in mind--with all due respect to the brilliant, diligent, and talented GCs here-- General Contractors in Chicago are a dime a dozen. And the majority of them will NOT tend to repairs properly. Which will end up leaving you with higher repair and capex expenses, and God knows what else, down the road.

Jennie Berger

Property People 

[Mitchell Roadruck]

Hey @Joanna P., 

That foundation work looks expensive. It is difficult to see what exactly is happening from the small photos but it looks like wall is failing. I used to be in that line of work. I would recommend calling a foundation repair company out to take a look and give you a quote. 

[Eudith Vacio]

Hey @Joanna P. - thank you for sharing all of this useful information. You've definitely received some great advice already. I would recommend that IF you decide to still work with this deal, get a general contractor to go out there and give you bids on the how costly these items are - the deck most likely will be very expensive and then if there is foundational issues, that's going to add up fast. 

If you are looking to do a rehab, I would recommend a 203k loan. I have done these in the past and the bank will give you the money for the rehab rather than it coming out of your own pocket. 

Regardless, please let us know what you decide on doing! 

[Bruce Woodruff]

I agree with @Jennie Berger here. This is going to require a really good GC!

A really good GC is going to cost a lot of money. Meaning you had better have a strong budget for this project. Investors always underbid their repair budget and then want the Contractor to make up for that. Not gonna work on this one.