Out of State Turnkey: Shocking Home Inspection report?

Grandville, MI · Member since 2015 · 79 posts · 17 votes

In the process of purchasing my first turnkey property out of state. Just got the home inspection report, and it sounds like a disaster. Water damage on the ceilings, wood rot, old HVAC, questionable roof, dead mice, thick vegetation near the slab, broken outlets, dripping drainage pipes, etc.

I'm a little surprised since I expected a turnkey to be relatively "fixed up" and not to have what I consider major issues.

I'm planning to pull out of the deal and ask for my earnest money back, but the seller is insisting these problems can be fixed. My take is that these issues should have been addressed *before* presenting the property as a turnkey!

Thoughts?

https://www.scribd.com/doc/263860047/Disaster

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Account Closed

Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes

11y

Run

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Rob Beland
Investor · Leominster, MA · Member since 2011 · 1k+ posts · 589 votes
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Tell the Seller you will close subject to verification that all issues are resolved to your satisfaction.
1 Reply
Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
11y
It sounds like you want to cancel the deal. If this is how it was presented to you, how do you know the "fixes" will actually fix anything and not just be band-aids or cover-ups good enough for photos?
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5 Reply
Rocky V.
Rental Property Investor · Arlington, TX · Member since 2012 · 788 posts · 640 votes
11y
@Account Closed
Most of these issues should have been addressed during initial rehab. It is obvious that the seller is trying to get by with the least amount of work. I would get out of this contract and not pursue any more deals from this "turnkey" company.
3 Reply
Account Closed
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
11y
Run
11 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
Good thing you were able to locate a knowledgeable inspector that gave you the straight scoop! Imagine if he/she was in the 'pocket' of the seller or realtor. Beware this 'turnkey' out of area completely passive income riches forever phenom. Not saying there aren't some good companies out there, but I would invest in your backyard if at all possible! I do, even though it's tough sometimes. Thanks for sharing @Account Closed !
4 Reply
Jeremiah B.
Investor · Portland, OR · Member since 2012 · 266 posts · 128 votes
11y
All inspection reports look bad, and will list a lot of items. This includes inspections on newly rehabbed, or even new houses.
Still, in this situation, I would walk. Here is my biggest concern, from the report:
"Although apparently a "new" AC unit was installed the day of inspection, the unit was actually older than the home itself. This unit was well past it's design life and had many flaws."
Yikes. I don't mind having an old AC unit, but having a 15+ year old AC unit being packaged to me the buyer as a "new" unit is a huge red flag. Forget about the house or the rehab - that speaks to the type of seller you're working with.
Combined with all other factors, I would walk and not work with that seller again.
5 Reply
Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
11y
Why not tell everyone here who the TK company is so you can warn others from making the same mistake!
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
11y
Originally posted by @Account Closed:

@Dawn Anastasi
Without being able to fly out and see the property, I'm at their mercy.
Exactly!
2 Reply
Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
11y
Originally posted by @Account Closed:

Originally posted by @Account Closed:
@Dawn Anastasi
Without being able to fly out and see the property, I'm at their mercy.
Exactly!
Why can't you go look at what you are going to buy, Peter?
0 Reply
Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
11y
Look at it this way, you will learn a whole lot more than about just the house you look at, you will learn about the turnkey company, the neighborhood, the market, etc.
4 Reply
William Hochstedler
Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
11y
Did the "turnkey" company do anything?
You don't need a turnkey company to buy a distressed property off the MLS and hire a property manager to put a tenant in it. Where's their value-add?
We have inspections done on all our rehabs prior to listing and don't market them until they're ready.
These guys are wasting your time. The good news is you saved some airfare.
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James DeRoest
Investor · Century, FL · Member since 2015 · 950 posts · 603 votes
11y
Having read through all of that, I would run, not walk.
Things of major concern - half the electrics in the house seem to be down. That's not good. For some reason, I do not like misbehaving electrics.
I don't care much for the description of the AC unit as the inspector is just scaring up business for a new AC unit. Does it work? As that's the real question. So many people go on about how old AC units need replacing, but seriously - if it's working, then it's fine. They go bad when there are too many leaks. However, the noisy flame isn't good.
Personally speaking, I don't like the house as it's gas. We rip gas out when we see it, replace with electric. (Water heaters are free, huge discounts on new electric central AC units.)
For a number of reasons, 1) gas is another utility that tenants have to get in their name 2) gas needs detectors etc and they have to be checked 3) tenants occasionally don't wake up in the morning because of a gas leak. (Happened to a PM near us, he went bankrupt over the ensuing case). 4) repairing gas lines now is expensive - no one wants to repair a line - they want to replace all the lines in the house if there is a single problem.
Another thing to consider is that with broken screens - you are now in violation on tenancy laws in Florida, think $1500 fine if anyone reports you.
* Replace missing cover on AC unit disconnect on exterior. Exposed wiring.
^ I like that bit - WHO THE HELL IS THE PM OF THIS HOUSE??? This is incredibly dangerous - one child one finger one question Kappoow. Lawsuit time.
Seriously, who is preparing this house? I've bought better houses for rehabbing.
1 Reply
Larry Fried
Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
11y
@Account Closed
I agree with other posters on this thread, that you should walk away from this deal and this seller. In addition, as a cautionary tale, I suggest you post who the seller is here and also write a review of your experience on www.turnkey-reviews.com
0 Reply
Steve Perkins
Investor · Denver, CO · Member since 2014 · 71 posts · 44 votes
11y
Man! What TK company did you use? Did they do any rehab at all? Did you get to see a scope of work? Or is this one where you buy and pay for the rehab? If this is the finished turnkey they want to sell you, I would run.
0 Reply
Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
11y
Even when buying turnkey you MUST inspect the property in person. Period.
3 Reply
James DeRoest
Investor · Century, FL · Member since 2015 · 950 posts · 603 votes
11y
Originally posted by @Jon Holdman:

Even when buying turnkey you MUST inspect the property in person. Period.
But isn't that the issue - it's meant to be turnkey and not require you to do anything? lol
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
11y
Originally posted by @Account Closed:

Run
lol
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Account Closed
Kalamazoo, MI · Member since 2014 · 224 posts · 129 votes
11y
Every project I sell, the inspectors nearly kill the deal. Some of the "major" issues they have scared buyers with include a 39 cent cap, a 4 dollar wax ring that did not set (was called major plumbing problems), a 8 dollar gfi that wAa new but defective was called major electrical problems, etc. I have determined that it is a mindset and that many of these professionals do not like people who fix up properties. They seem to think that rehabbers are not honest. They will rubberstamp old houses where somebody is living in it but go through like new owns with a fine tooth comb.
1 Reply
William Hochstedler
Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
11y
Originally posted by @Account Closed:

Every project I sell, the inspectors nearly kill the deal. Some of the "major" issues they have scared buyers with include a 39 cent cap, a 4 dollar wax ring that did not set (was called major plumbing problems), a 8 dollar gfi that wAa new but defective was called major electrical problems, etc. I have determined that it is a mindset and that many of these professionals do not like people who fix up properties. They seem to think that rehabbers are not honest. They will rubberstamp old houses where somebody is living in it but go through like new owns with a fine tooth comb.
I agree that home inspections require a lot of client prepping for all the little things that come up, but the problems are more systemic here. Did the operators not get an inspection when they purchased the place? Why didn't they address issues that were very obvious? Why did they even buy this property with 30 years of deferred maintenance if they weren't going to take care of it?
A decent property management company wouldn't put a tenant in this house before some 101 problems are fixed including:
- CO detectors
- Exposed live wires
- Broken garbage disposal
- Non-functioning garage door sensors
That's at least $500 before you can rent it and doesn't even address all the deferred maintenance. Carpet and paint (if they even did that) is not a rehab, it's a turnover.
How long will it take for a tenant to call and complain about a non-working garbage disposal? This could have easily been removed entirely and no one would be the wiser.
Just shows some sloppy sloppy work by the operator.
1 Reply
Account Closed
Kalamazoo, MI · Member since 2014 · 224 posts · 129 votes
11y
I agree I posted that before I read the link because I was using my phone not the desktop.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Account Closed
as many have stated you need to have an open mind about home inspections.. I build and sell new construction ( brand new 350 to 750k homes) and buyers still get home inspections and the inspectors come up with laundry lists of stuff that look scary and are totally taken out of context.. And we will have a final punch list.
So for a 15 year old house no matter how its rehabbed ANY home inspections will come up with items to correct or suggestions on on going maintenance...
When you buy turn key your buying rehabbed not Brand new... from the pics of this house I don't think this was Turn key at all.. it looked like it was lived in.. and your buying an existing rental with whatever hair comes on it.
Many of the items mentioned are just basic items that need to be done to any house over time ... A few of them needed corrections.. The condenser unit being just delivered and being old is a red flag... not many rentals in that class have garbage disposals I would remove that.
My thought is you need to be there during the inspection ( just like people do when they buy their personal resi's and walk around with the inspector and see whats a major item and what is minor and just basic up keep... like the pictures of the plants around the house that's ridiculous just cut them back etc etc.
Its how your seller deals with this is what one would want to know. But based on the report your personal inexperience and so forth I can see you not going forward with the deal and would not blame you ... If you choose to buy a rental whether out of state and I assume this was a mid west property somewhere.. or in the central valley of CA were you can drive to it... just attend the home inspection with a open mind... then you can make a decision.
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6 Reply
Chuck B.
Investor · Louisville, KY · Member since 2011 · 296 posts · 248 votes
11y
Completely anecdotal here, but the handful of turnkey deals I've looked at in Louisville KY and a few in surrounding states have all been grossly bad deals. I mean, just incredibly poor investments priced at the top of the market. I cant help but feel sorry for the folks buying these things.
1 Reply
Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
Originally posted by @Account Closed:

@Jay Hinrichs
Thanks for your insight and for everyone's comments.
I'm still weighing whether any of these are deal breakers, and the seller seems genuinely interested in "fixing everything on the inspection report." I won't identify him because I think that would ruin his business for what could be a one time "just me" incident. I am inexperienced and I have to temper my expectations.
Appreciate the BP community!
Peter -
I do not know you or the company you are dealing with since you have not identified them, but after having spent years in this particular niche, I can assure you with a high level of confidence that this is not a "one time just me incident". It is most likely indicative of a bigger problem and that is the size of the company you are working with. Ask yourself one question:
What would have happened had I not ordered an inspection?
Forget about the fact the property is turnkey and just focus on quality renovations. There is a process and there are steps that have to be followed on all renovations. Details are absolutely important and the things you listed go to the very heart of what makes a property quality. IF the TK company does not have the people or the mentality to focus in on details like dead rodents and over-grown vegetation next to a property, then they most likely are not paying attention to the bigger issues or simply covering them up.
Lastly, you have mentioned on here that you did not think you needed to visit the property (and I assume you have not visited the company in person or their offices) because the point of turnkey is to not have to do that. The point is that you trust that it is all done for you.
That is a very dangerous understanding of turnkey.
You absolutely must make sure that your interests are being watched over closely by the partner company you choose. Often times that requires you to visit the city, the company and sometimes the actual property itself in person. Turnkey does not mean that they literally do everything for you and a check arrives in the mail. Investors who invest that way usually end up losing money and blaming the TK company when they could have avoided the loss by simply visiting in person. You can tell a lot when you visit in person.
Best of luck as you move forward but hopefully you choose carefully before moving forward with this particular company.
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Mark Shaffar
Real Estate Agent · Madison, WI · Member since 2015 · 328 posts · 88 votes
11y
Originally posted by @Jay Hinrichs:

@Account Closed
as many have stated you need to have an open mind about home inspections.. I build and sell new construction ( brand new 350 to 750k homes) and buyers still get home inspections and the inspectors come up with laundry lists of stuff that look scary and are totally taken out of context.. And we will have a final punch list.
So for a 15 year old house no matter how its rehabbed ANY home inspections will come up with items to correct or suggestions on on going maintenance...
When you buy turn key your buying rehabbed not Brand new... from the pics of this house I don't think this was Turn key at all.. it looked like it was lived in.. and your buying an existing rental with whatever hair comes on it.
Many of the items mentioned are just basic items that need to be done to any house over time ... A few of them needed corrections.. The condenser unit being just delivered and being old is a red flag... not many rentals in that class have garbage disposals I would remove that.
My thought is you need to be there during the inspection ( just like people do when they buy their personal resi's and walk around with the inspector and see whats a major item and what is minor and just basic up keep... like the pictures of the plants around the house that's ridiculous just cut them back etc etc.
Its how your seller deals with this is what one would want to know. But based on the report your personal inexperience and so forth I can see you not going forward with the deal and would not blame you ... If you choose to buy a rental whether out of state and I assume this was a mid west property somewhere.. or in the central valley of CA were you can drive to it... just attend the home inspection with a open mind... then you can make a decision.
I agree with Jay, Miscommunications and glitches happen on rehabs. home inspections can be brutal. The key is whether or not the items get fixed to satisfaction. It's hard to know from one tough inspection if the turnkey provider is good or bad. It's more of an issue of how they handle the setbacks. That's why I like the idea of turnkey reviews- you can see if this is a pattern or not.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Mark Shaffar
A few of my turn key clients I have dealt with over the years, will actually do a home inspection themselves then use that as a guideline on the rehab.. thereby prempting these kinds of things. But yes as stated you can take a brand new construction and find 20 things to mark down on a home inspection report.. what is good is a Home inspector that will clearly talk about what is on going maintenance and what ACTUALLY needs to be fixed now for health and safety.
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