I bought a &quot;lemon&quot;

OP

Escrow Officer · Denver, CO · Member since 2016 · 64 posts · 27 votes

10y

1 month exactly.

Benjamin Timmins

Landlord · Utica, MI · Member since 2015 · 190 posts · 99 votes

10y

I would first figure out just exactly how much it would cost to get it to where you expected to be, then compare your profit you would expect to get should you sell it then. Maybe get it appraised as is now and see what you could get for it now, and go for which ever option turns out to be better for you.

This isn't experienced advice, I don't do flips, just what id do in that situation.

2 Reply

Dan MackinBusiness Member

Real Estate Agent · Erie, CO · Member since 2014 · 1k+ posts · 512 votes

10y

I had the same problem with the first home I purchased which was also a flip. On the surface it was great, but then we started finding out what was underneath. Every night I would come home dreading what I was going to have to work on next. Is your warranty actually covering any of the issues that have come up? Sadly, inspectors can only see so much. On our first home our inspector really wasn't thorough and I even had to point things out to him. Thankfully I've found much better ones since then.

Personally for my property we held it for two years and were able to get out due to market increases, but your situation may be a bit different.

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Jeff B.

Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes

10y

"for my own use as an owner occupant" vs "when I sell". Just how long did you intend to occupy?

Travis Sperr

Lender · Denver, CO · Member since 2009 · 1k+ posts · 597 votes

10y

@Elena JobsonI hate to read this post. Nothing worse than getting a house and finding that it is not what you expected. Without knowing the specific issues it is hard to give too much insight. But I would begin with raising a stink with your agent and the sellers agent to get the items they agreed to fix taken care of. At the same time I would mention the issues you are currently having. I believe that most flippers do not intend to deliver a house that will fall apart in 30 days. There is a chance they may help you make some of the items correct.

With selling fees it would be very difficult for you to not lose money on the house only a month later. I think you can get it in working order for far less than you could lose by reselling. If you need any help please feel free to reach out.

2 Reply

OP

Escrow Officer · Denver, CO · Member since 2016 · 64 posts · 27 votes

10y

J Beard I intended to keep it for 2 years at least to avoid any capital gains taxes. I was going to buy more of a fixer upper but I opted not to because I just didn't want to have to do a ton of work to make it what I wanted. In retrospect I wish I had, because there's not a lot of sweat equity to be added at this point.

OP

Escrow Officer · Denver, CO · Member since 2016 · 64 posts · 27 votes

10y

Travis Sperr Dan Mackin I am thinking maybe put as much work into it with as little cost meaning I would have to do most of it myself, bleed the home warranty dry as much as possible, try to sell it in 1 to 2 years, hoping and praying that the market continues to go up in the mean time. At this point I would surely lose money, even if I sold it for more than I bought it for considering commissions and closing costs.

Jean BolgerPro Member

Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes

10y

@Elena Jobson What sort of things are going wrong? Big things (furnaces?) small things (cabinet knobs?)

It may be hard to get the inspection items taken care of after closing, but if the seller is a decent person (not guaranteed) they should try to do what they said. It may require leaning on them and being persistent. I would definitely look in to what you can get taken care of by the home warranty.

Whether you could get out of it soon without taking a loss really depends on where it is and the price you paid. Prices are rising, so if you got a decent price to begin with it might not be as bad as you think. If you want me to look into that I can run some comps for you and (depending on whether it's an area I know, of course) tell you what I see as the prospects.

On another note- moving is super stressful. If this is one of your first property purchases, that adds a lot of stress too. It's going to feel chaotic no matter what. So give yourself a bit of time to relax and adjust before you make any big decisions about it.

Dewey Jurich

Glen Mills, PA · Member since 2016 · 18 posts · 2 votes

10y

Home warranties often cover very specific items/components (HVAC, hot water heater, etc), not structural, built-in systems (wiring/plumbing/ductwork) or aesthetic items. They do vary greatly. Do you have any responsibility for the warranty (deductibles, labor charges, misc. material/parts charges)? Those can also add even more cost to repairs through warranty work. Be ware.

Can you list the items you are having issues with and the warranty coverage?

As travis stated, most flippers do not intentionally hide things only to make for issues later. Its bad business. How would they build a strong reputation? In-person meetings are always best to hash things out. I'd talk to all parties, explain your extreme displeasure, and demand an onsite meeting with everyone. Explain how you expect them as honorable business people to stand behind their product. If it gets nasty, you can ask for copies of all the permits pulled for the job and get the city/municipality involved to review the work.

OP

Escrow Officer · Denver, CO · Member since 2016 · 64 posts · 27 votes

10y

My home warranty covers plumbing, electrical, swamp cooler, most appliances, it also covers faulty work and things like that. It costs me $65 every time I call someone out there so that's going to add up over time, yes. I think it was intentional to be honest, the seller was a real slime ball. I should have listened to my gut on that one. I paid a lot for this house, Despite the seller's promise that I could sell it today for 20K more than I paid for that, I highly doubt that to be true. Some people are just bad people, it is what it is. For starters, the inspector noticed a leak in the washer, I asked them to fix this in the inspection objection, they agreed. They said it was fixed but it was not. So here I am, in my "new" house with my brand new may tag washer... That doesn't work. The seller says oh it just needs a new hose.... Ok so I get the new hose, I go to install it, pull out the washer, there is VISIBLE water damage, clearly it has been painted over but you can still see it. I pull the drywall out with barely any effort because it is so damaged, it comes right out. And what do you suppose I find? You guessed it! Black mold. I had to kill the mold and redo all the plumbing to the washer, get new valves, the whole nine basically. Last night I'm talking to the neighbor, they ran the gutters off my roof straight into her yard, just this morning I am loading the dishwasher and I see there about 3 inches of standing water in there. It's like they put a bunch of brand new shiny appliances in there and didn't bother to hook them up properly. Everything "looks" nice but internally just doesn't function properly. I could go on, it's one thing after the other.

OP

Escrow Officer · Denver, CO · Member since 2016 · 64 posts · 27 votes

10y

Side note: the seller is supposedly coming over tonight as he said he would help me pay for this plumbing issue. He is supposed a "man of his word" should I ask my agent to come? I know he is going to ask me about the house and I am going to tell him everything that is wrong, just feels like it won't do much good. I feel like I got totally ripped off and screwed. It's been a month and it's already become a money pit!

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Gino BarbaroPro Member

Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes

10y

@Elena Jobson

Hi Elena

there is no horrible mistake. The only mistake is not trying. I can attest that the first time you do something it usually doesn't work out. There is a learning curve to everything. The fact that you took action is a great thing

You have to decide what you want to do. The market there is hot right now, so how much would you "lose" if you sold. You may have chosen the wrong niche in real estate, fix and flip, especially if you are a full time employee with a family. Maybe you should look into buying and holding for cash flow.

Don't let one deal stop you. We wouldn't have a lightbulb if Edison quit, and he tried thousands of times.

Gino

4 Reply

OP

Escrow Officer · Denver, CO · Member since 2016 · 64 posts · 27 votes

10y

Thanks for the encouragement. Denver is hard market to buy and hold in Bc the home prices are so high, and even though the rents are high too, the margins are small. Flipping seems to be a better strategy in my market than holding. I am not sure where I go from here. Now I have a lot of money tied up in the property. It's going to work out one way another and I am not going to let this stop me from achieving my dreams.

Lynn McGeein

Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes

10y

You say you closed without seller completing items specified in the contract, but it sounds like you did not escrow any money to insure completion of repairs or get anything in writing that confirms they are still responsible for the repairs? I'd definitely use the home warranty as much as possible, but also contact the closing attorney to see if you have any recourse if you've found so many things wrong, especially if the sellers actually covered up existing problems in order to flip it without properly fixing it. Take pictures of any damages before you fix them so you have good records in case you need them. Yes, an older home should have some unexpected issues, but I don't think flippers are allowed to just cosmetically cover everything up and sell you bad plumbing, wiring, etc., without recourse, especially if it's evident immediately upon moving in.

Bill Hamilton

Denver, CO · Member since 2015 · 251 posts · 123 votes

10y

I would have your RE agent show up. I would see about having the inspector show up also, then go through the list of things you have found wrong so far and see what can be worked out.

@Lynn McGeeinwe don't really have closing attorneys out here. Although I think all title companies are owned by an attorney but the title company wouldn't really be involved in this. Their responsibility is make sure that title is clean and insured. Nothing else really, plus Elena works for a title company already so...... Your only other recourse would be to go after the seller for "failure to disclose". Hopefully the flipper comes through and things turn out well. Involving an attorney can get very contentious and very expensive in a hurry.

2 Reply

Mike F.

Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes

10y

I'm kind of confused, you bought this as a real estate investment? Wasn't the investment and profit to be made, made by the flipper?

I'm in the construction business and I have to say, flippers make us soooooo much money in Denver, every homeowner we work for that has bought a flipped house has the same attitude that they bought a lipstick covered pig. As someone who's business is based on high prices charged for quality work, we see the reality of flipping in Denver without trying to paint with a broad brush, but the facts are that too many flippers make their profits off the backs of their help, they do so much under the table, with the cheapest, unlicensed labor they can find to do something good enough for it to last long enough to get sold. Sometimes we see stuff that just makes you think all flippers should be tossed in jail. Very sad and we have homeowners crying about this stuff all the time.

Eventually you'll throw enough money at this house to reach some level of equilibrium with the problems, there of course will likely remain major underlying issues that you will never resolve, so the question just becomes are you willing to keep throwing money at it and how much enough is going to be enough? Keep in mind some things won't show themselves for awhile, a house usually gives up most of it's ghosts in a 1 year cycle, this allows it to go through the seasonal changes of moisture, expansion and contraction and tear itself apart where it needs to, tile floors will show cracked grout within a year, letting you know they weren't installed with proper underlayments, drywall will crack at doors and windows showing the house movement do to soil getting wet and drying out where it shouldn't, the basement will get wet showing you where the freeze thaw is effecting it, paint in bathrooms will show mold in a year showing you that the flipper didn't vent exhaust fans properly and the list will go on and on...

So you have to figure out just how much is remaining to show itself and how much and how willing are you to spend now what the flipper should have spent during his renovation?

What if the market cools over the next year? How will that effect your ability to get out of the house compared to now? So many questions and problems, wish I could be of more help, but this is what goes on out here all the time, no real easy answers without some idea of really how much for will you be facing? Is it worth it long term?

Mike F.

Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes

10y

One thing you might want to look into is a failure to disclose un-permited, un-inspected work, you could query the building dept, get a list of permits that were pulled and closed and compare that to work the seller admits has been done. You'd have leverage at that point if you can find work he did without passing inspections and hold that over him for whatever it's worth. Did he sign any documents swearing that no work was done on the house without permits? Something to look into.

Garry C.

Rental Property Investor · Littleton, CO · Member since 2015 · 252 posts · 164 votes

10y

I agree with Bill above. Definitely have your RE agent and inspector join you if they can. They are a part of your team, and as such should have your back and help you out through this.

Brandon Battle

Real Estate Agent · Buena Park, CA · Member since 2016 · 743 posts · 424 votes

10y

You need a lawyer to get involved now.You need to determine your rights or lack of in this case.The seller needs to feel the branches creek underneath them and only a lawyer can do that.

OP

Escrow Officer · Denver, CO · Member since 2016 · 64 posts · 27 votes

10y

Mike F. No I bought it to live in not as an investment property. I don't see the market cooling in the next year in fact it's just getting crazier every single day as far as I can see. I was in a pinch and I had to find somewhere to live very quickly. I thought I was doing my due diligence by having it inspected etc but the guy missed stuff and there's only so much that they can see. I am less concerned with "making" money on this property and more concerned with not losing money if that makes sense. I appreciate your advice very much.

Crystal SmithPro Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes

10y

@Elena JobsonMy advice:

My opinion- I know many people consider the house you live in an investment & technically it is, but from a business prospective until that asset throws off or produces cash we don't really consider it an investment. So don't loose sleep about loosing money on the property.
Take maximum advantage of the home owners warranty as it applies to all the mechanical systems & appliances. If the appliance are new they should come w/ warranties over & above the homeowners warranty. (E.g. A brand new Maytag Washer should be under a Maytag Warranty)
I note in the thread that you're doing some of the fixes yourself. Get on speed dial w/ a handyman & get it all done @ once. That's what we do. Put together a punch list for our own property when we move in & have the handyman live w/ us for a couple of days.
I see from the thread that the seller has also agreed to take care of some of the costs. Not sure what good it would do for your agent to meet w/ you & the seller.

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Alan K Auman

Investor · Terre Haute, IN · Member since 2015 · 55 posts · 8 votes

10y

@Elena Jobson

If this is the first home you've ever bought just try to take a step back and breathe. You said you've only been in the house for a month. Obviously nobody wants to move into a house and have to get busy fixing things right away especially if everything in the house is "new". Absolutely try to get the seller to fix anything that should be fixed but don't go full freak out and think the house is a full blown money pit just yet. Most the things you've mentioned so far have been minor stuff that isn't gonna make or break you. Appliances not hooked up right, guttering not ran correctly...these things are frustrating but hardly a reason to close up shop and sell. The fact you have a warranty definitely helps even if it's $65 a pop to have people out. Long story short...try to relax. Do your best to get the seller to make things right, fix the the stuff that needs fixing as it comes up and before you know it you'll have a perfectly functioning house that you know inside and out in one of the top 5 hottest markets in the country. The only way I would let this stress me out for real is if you start to find major problems like roof issues or foundation issues. Those two things are the only things that really "scare" me when it comes to houses. Everything else is just a headache. Best of luck.

Matthew Paul

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

10y

Its called buyers remorse . The house was a flip . Sounds like you bought with emotion . A leaky washing machine hose is nothing , Just basic home ownership . Its a house , things will break and go wrong . The guy that redid the house , he did what was necessary to sell at a profit . Plain and simple . I have seen brand new houses with problems , some small and some major . Its a house its going to cost you money .

OP

Escrow Officer · Denver, CO · Member since 2016 · 64 posts · 27 votes

10y

@Matthew Paulit wasn't a hose it was faulty plumbing and black mold and a whole mess. I realize you don't think all the little things are a big deal but they all add up and they all cost me money. Yes a house needs to me maintained, I just didn't anticipate that it would be SO much work and SO much money on a home that was literally gutted and entirely rehabbed with brand new everything. I don't think that painting over water damage and is doing what you need to do to make a profit, I think it's unethical. If that is how you make a profit, good for you, but it's not good business. If you were selling house and you signed a inspection objections saying you would fix something, would you fix it? Or would you not fix it and say you did? I am entirely at fault for closing and I get that.