I have a contract on a 12-unit apartment. Both buildings show evidence of dead termites. One of the buildings shows evidence of treatment for termites. The other shows evidence of damage to a partition wall in the lower level. It is REO and the price reflects the current 40% vacancy rate. Without tearing into walls I won't be sure of the extent of damage. I did look into the attic and utility spaces on each floor without seeing visible damage.
We are still inside the window to add a clause to the purchase agreement and I am trying to weigh my options.
Now for my question: What would/have you done in a similar situation? I believe my choices are ask for cash at closing or ask for seller to pay for cost of repairs. In either case, I will also ask for $1,500 for termite treatment in both buildings.
Thanks for sharing your thoughts.
I agree with your solution. Ask the seller to pay for termite treatment and continue on. If it was a good buy before the termites, it still is once it is treated. All buildings will have termites as some point or the other.
You might think about getting someone from a termite remediation company to have a look. On one hand, if the buildings have already been treated there may be nothing else that needs done -- at least for a while, as I understand it termite treatments last a long time if done right. On the other hand, if the situation hasn't been properly addressed it would be nice to have a professional estimate of the cost to back up your claim for credit at closing
Jean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com
@Neil Aggarwal & @Jean Bolger thanks for the advice. Just to follow up, I have had three contractors come and give estimates to fix the damage. Estimates include removing drywall, repairing wood, replacing and painting. They are all around the $30k mark. I plan to add in a contingency and ask the seller to put in escrow to facilitate these repairs. Any thoughts?
If it's an REO it's doubtful they would pay for such repairs. They would just reduce the price to compensate and let you take on whatever risk you find behind the walls.
It's what you can't see that is the problem with the possible extent of damage. Plan for the worst and hope for the best.
I really hesitate to ask the seller to repair. Even if they do, they usually use the cheapest person they can find. You don't want that.
Someone above recommended getting a termite company to inspect. You said you had 3 contractors check it out, did you mean 3 termite contractors or 3 GCs? If termite companies, then disregard. If GCs, get a termite specialist out there.
Before asking the bank to take anything off the sale, make sure you know how you feel if they say no. Are you going to walk away from this deal if they won't budge?
@Mindy Jensen Great thoughts, thank you for sharing. I will give some serious thoughts to what I will do if they say no...
The first was GC, the second a rather large local contracting firm capable of the job (still awaiting their quote). The third was the contractor who does insurance follow up work for the termite company. He actually added in repairs for the north wall, which by his estimate was where the termites were entering the building. My current thought is to ask the seller (bank) to put 125% of the middle bid into Escrow which will (hopefully) cover all termite repairs. The contractors would work for me and get paid from the escrow. There will be several walls opened up to inspect and repairing any studs and joists with damage. Any funds not used in escrow would go back to the bank and any overrun would come out of my pocket.
That is a much better plan than letting the bank have the repairs done. I am going to take that solution and tailor it to any clients who need repairs. So many of them just want the seller to do the work so they don't have to live through it.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!