Emergency - Vandalism 1 day before closing

Buying & Selling Real Estate
11yFollow

Emergency - Vandalism 1 day before closing

Kimberly H.
Baltimore, MD · Member since 2014 · 146 posts · 63 votes

Fannie Mae house set to close tomorrow and the final walk through discovered all copper pipes have been removed. I want the house, but what do I do. 

I'm at a lost.....All utilities was on and functional during the appraisal. How should I handle this.

0Reply
49 views

Most Popular Reply

Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
11y

Did you do the walk through with you agent ? Have you agent call the listing agent so they can notify the asset manager. 

I would delay the closing until I had an estimate for the repair as these can get expensive. Ask FNMA for a reduction in price do to the damage. This is compounded a little bit since you are getting a loan instead of paying cash .  It is probably going to take a couple of weeks of so to get sorted out but I would advise against closing without getting a clearer picture 

6Reply
See this reply in the discussion

37 Replies

Jump to latestLatest
  • Mark Elliott
    Investor · west seneca, NY · Member since 2014 · 376 posts · 211 votes
    11y

    hard to say, kimberly. you could replace the entire plumbing system and of course know it will work, as it did before, and then just move on. i wouldn't recommend replacing with copper again as it just become missing again. if the numbers still work after replacing what was taken, then do it and move on. if you can do it yourself, then even better yet

    1Reply
  • Kevin M. Rooney
    Turn Key Supplier · Indianapolis, IN · Member since 2015 · 111 posts · 21 votes
    11y

    I buy houses that has happened to all the time. Not that much to replace with Pex.

    1Reply
  • Randy E.
    Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    11y

    @Kimberly H., if your budget allows, I would continue with the purchase and install new PEX plumbing.  Depending on the age of the plumbing in place, you'll end up with more dependable trouble-free plumbing that should last for fifteen or twenty years with no major repairs.

    4Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    11y

    Did you do the walk through with you agent ? Have you agent call the listing agent so they can notify the asset manager. 

    I would delay the closing until I had an estimate for the repair as these can get expensive. Ask FNMA for a reduction in price do to the damage. This is compounded a little bit since you are getting a loan instead of paying cash .  It is probably going to take a couple of weeks of so to get sorted out but I would advise against closing without getting a clearer picture 

    6Reply
  • Rich N.Pro Member
    Investor · Haverhill, MA · Member since 2015 · 761 posts · 328 votes
    11y

    I would notify them and request a price reduction based on the estimate to replace the plumbing.

    3Reply
  • Kimberly H.
    OP
    Baltimore, MD · Member since 2014 · 146 posts · 63 votes
    11y
    Originally posted by @Greg H.:

    Did you do the walk through with you agent ? Have you agent call the listing agent so they can notify the asset manager. 

    I would delay the closing until I had an estimate for the repair as these can get expensive. Ask FNMA for a reduction in price do to the damage. This is compounded a little bit since you are getting a loan instead of paying cash .  It is probably going to take a couple of weeks of so to get sorted out but I would advise against closing without getting a clearer picture 

     Yes... I did walk through with the realtor. He suggested I close and try to get money later. He's NUTS!!

    I have my contrator doing an estimate for me to bring to closing. Can I suggest a dry closing until we decide who  pays?

    Fannie Mae realtor us being unreasonable. Yelling..saying its nothing she can do. 

    I feel like I have no representation. 

    0Reply
  • Dante Pirouz
    Investor · Almont, MI · Member since 2015 · 361 posts · 302 votes
    11y

    I agree with many of the opinions above...having the copper gone is actually a good thing for your plumber who can put in a pex system without having to jerryrig into an existing system...the same situation with a HUD duplex that had all the copper ripped out cost me $1500 to have a new pex plumbing system put in...better than ever!!

    3Reply
  • Dante Pirouz
    Investor · Almont, MI · Member since 2015 · 361 posts · 302 votes
    11y

    With HUD (and I would assume with Fannie Mae and Freddie Mac) properties, you won't get them to pay for any deficiencies at closing so you'll have to be prepared to absorb the loss if you want to proceed with the closing. You should compare this cost to what you will lose if you renig on the deal at the closing...I would say this is not worth panicking about...If the analysis you did pre-bid was good (cash flow positive !!!) then go ahead with the deal (you should have built in enough of a contingency to account for these kinds of surprises)...this is actually a normal occurrence, in my experience, when buying from gov't institutions.

    3Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    11y

    @Kimberly H.

    You will have no recourse after closing.  Did you speak to the listing agent ?  They have to do a walk through for FNMA prior to closing. There should also be a field service manager who did a walk through as well. I would contact your agents broker and everyone else involved to get an extension and an idea what you are looking at before you close

    2Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    11y

    It's a changed condition, you have no obligation to pay.  FANNIE will likely repair, or give you a credit.

    4Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    11y

    @Dante Pirouz

    That is not true. With HUD and with FNMA , if damages or vandalism occur after the contact is accepted and prior to closing you have a very good case of getting compensated as I have had it happen many many times

    2Reply
  • Scott Weaner
    Rental Property Investor · Yardley, PA · Member since 2008 · 1k+ posts · 561 votes
    11y

    "Can I suggest a dry closing until we decide who pays?"

    I definitely would NOT turn the water on now. Then you will have a very WET closing! ;-)

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Kimberly H.  do you really want to own a property were this kind of theft is common.

    I see this all too often.. next thing you know once you own it ... the entire house gets stripped or vandalized

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    1Reply
  • Kimberly H.
    OP
    Baltimore, MD · Member since 2014 · 146 posts · 63 votes
    11y
    Originally posted by @Scott Weaner:

    "Can I suggest a dry closing until we decide who pays?"

    I definitely would NOT turn the water on now. Then you will have a very WET closing! ;-)

    Lol....Scott you silly. Dry closing is a settlement where money is not disbursed until the issues are settled. 

    1Reply
  • Mark Gallagher
    Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
    11y

    @Kimberly H.

    Fannie Mae won't allow a dry closing. You deserve a credit but as others have said, unless the entire house was looted, this isn't a huge repair and you shouldn't expect a large credit.

    We typically see these homes vandlized as "inside jobs" by the field service company's vendors. Usually they are not random acts. Happens in low-end neighborhoods as well as higher-end. Depends on how much money the vendor needs for dope that week I presume. 

    2Reply
  • Kimberly H.
    OP
    Baltimore, MD · Member since 2014 · 146 posts · 63 votes
    11y

    Thank you all for great advice. I really do appreciate it.  This is my first investment property and experience with this sort of thing.  I guess this will be the first of money issues I need to work through.

    @Mark GallagherI'm going to move forward with the purchase despite the vandalism.  I will ask for a credit, but I won't get my hopes up.

    The contractor that I chose for the small renovation is willing to work with me to get the job done at a reasonable cost.

    You guys are invaluable.  The numbers still look great.  Cap rate 5% 1st year because of owner occupancy and 10% thereafter.  I'm satisfied with that.

    I'll let you know if anything changes. Closing is at 3pm. :)

    1Reply
  • Mark Gallagher
    Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
    11y

    @Kimberly H.

    Don't be so excited with your first deal that you don't stick your feet in the mud and hold out for a credit. Don't be afraid to ask for it. The house isn't in the condition that you agreed to pay for it in.

    Now, if you're financing, perhaps it makes more sense to close rather than upset the apple cart in the 11th hour.

    0Reply
  • Kimberly H.
    OP
    Baltimore, MD · Member since 2014 · 146 posts · 63 votes
    11y

    @Mark Gallagher - yes I'm financing. Not only that it's one of the Healthy Neighborhood loans. 3% down, no PMI... so they won't take to kind to changes and issues at the 11th hour.

    I totally get it. I'm going to ask for a credit, but I'm not going to make a big stink over it. I thought I had tough skin.  I almost lost it.  One more check mark of experience. 

    Now, I need to get a lease together (anyone with examples feel free to let me know), tenant screening company, and create a check list of requirements for approval.

    -Kim

    0Reply
  • Kimberly H.
    OP
    Baltimore, MD · Member since 2014 · 146 posts · 63 votes
    11y

     @Jay Hinrichs - This is the market where I live.  I'm not going to shy away form it and allow other investers or newbies go through the growing pains because I'm scared.  I'm going to forge ahead!

    Thanks!

    2Reply
  • Ericka Parrott
    Residential Real Estate Agent · Atlanta, GA · Member since 2009 · 381 posts · 134 votes
    11y

    People stealing copper pipes is old news, it happens everywhere and people who think, not in this neighborhood are dreaming. Your agent could of made a quick call to the police, filed a report for vandalism. Contacted the asset manager asked for an extension of contract due to recent vandalism, have contractor estimate repairs, ask asset manager for a price reduction, and just keep moving forward with the deal.

    Sounds like you have a lazy agent. Know what your buying.

    0Reply
  • Kimberly H.
    OP
    Baltimore, MD · Member since 2014 · 146 posts · 63 votes
    11y

    @Ericka Parrott - That sounds ideal and my realtor is a bit lazy.

    My only issue with your statement is FANNIE MAE.  I was in a multiple bid situation, I had one extension already and they are known to quickly pull the house up under you and re-list. They are not consistant across the board.  Some people get credits and some people have to walk away because they won't negotiate.

    0Reply
  • Kimberly H.
    OP
    Baltimore, MD · Member since 2014 · 146 posts · 63 votes
    11y
    Originally posted by @Ericka Parrott:

     Know what your buying.

    The copper was stolen 1 day before closing.  All was well when it was viewed, inspected and appraised.

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    11y

    @Kimberly H.

    I have found the opposite in dealing with FNMA although I will say I have been doing this a long time and represent myself. FNMA would have a difficult time selling the property now as the condition rules out anyone getting a loan 

    This is another thread that illustrates the importance of having a great agent. Many on here think a great agent is defined as one who drives them around all the time and shows them all the "deals". In reality, it is one that knows how to navigate the process and protect their client in situations like these

    1Reply
  • Max Reichman
    Milpitas, CA · Member since 2015 · 15 posts · 3 votes
    11y

    I've had this happen to me before, and don't let it get you down. Try getting them to pay but also see if you are covered as well. There are times when you may overlook a previous coverage. Good luck!

    0Reply
  • Eric Peterson
    Real Estate Professional · Winston Salem, NC · Member since 2015 · 7 posts · 1 vote
    11y

    @Kimberley Harrell

    Fannie Mae listing agent here. The biggest issue is the time frame. 1 day before closing is rough. I have had the same thing happen to a listing (pipes were stolen while under contract). In that case, the sales rep went ahead and approved the repair (we had the contractor replace the stolen copper with pex and PVC for a large drain pipe). The big difference is that we were still a few weeks out till closing. The agent shouldn't be freaking out and she should immediately let the sales rep know what happened (she's also obligated to file a police report on Fannie Mae's behalf). Yes, it's a stressful situation, but that doesn't excuse what seems like unprofessional behavior to me. 

    Chances are, the closing will have to be extended in order to either do repairs or negotiate a new price, as the Fannie Mae closing process is pretty cumbersome and specific and you'll need an amendment and new HUD if you renegotiate or time to do repairs if not. Given the circumstances, any reasonable sales rep is going to work with you on this. Also, in case anyone wasn't aware, Fannie Mae no longer uses Asset Managers for their REO properties, everything is done in house. That change occurred a few years ago.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free