Buy or not ? Good deal with water in the basement. Need advice!

10 Replies

Hi all,

I found this duplex in a very nice area in Westchester, NY. 

Here are the facts about the house:

- Duplex. On the market for almost 2 years. Price was $470K in January 2015 and it went down to $430K in August of this year. The house is a two story building with unfinished basement and gas furnace and water boiler. The house had a fire in August 2014, were the stairs that connect the two floors with the basement are. After the fire the insurance paid and he redid that part, the roof, the electrical system and had an inspection from the city completed. The agent says that the buyer is really motivated because he is old and he is liquidating some of his properties.

There is an additional lot that could be used for building garages and a bit more parking. The house is lower than the street level and that got me worried about water.

After the first visit I observe the following:

    ROOF:

- Owner says that the roof has been redone in 2014 and is in good shape.

BASEMENT:

- There is a drainage canal around the walls connected to a sump pump on the corner. The owner also has a dehumidifier on most of the time. I ask him if he had any problem with water in the basement and he denies completely, saying that the sump pump was only a precautionary measure.

FIRST FLOOR and SECOND FLORR:

- Wooden floor and just repainted it looks nice. Bathrooms and kitchens needs to be updated because they have a very old look and appliances. 

After this first look, we negotiate and the owner accept an offer at $388K contingent on the inspection and financing. At $388K the house is at least $50k below market.

After this, we do the professional inspection and we find the following

ROOF:

- Two of the three roofs are flat roof and there are two leaks visible from the inside. The third roof is completely fine and only gutters needs repair. Three estimates from roofer came between $5600 and $8000 to repair them.

FIRST FLOOR

- We find that in the corner under the window the wooden floor is not rigid, and there is sign that underneath of it there was a water infiltration even though it was dry in that moment.

- The bathroom shower has some tiles on the ceiling that are falling, obviously a leak for the bathroom on the second floor. Owner says that a person simply flooded the bathroom on the second floor. Not sure if is true.

BASEMENT

- The gas furnace is about 20/30 years old and it might not last long but is working properly now.

- The gas water boiler is completely rusted at the bottom and has 12 years. It could stop working any moment.

- We find a small puddle of water in the basement where the stairs are. Also some of the wood there is seriously consumed by the water.  The water is only where the stairs are, not in the rest of the basement. On the other side the owner has turned on the dehumidifier again and the basement is painted so it is not possible to evaluate if there is water in other parts. The water must come from some crack in the basement side or some or something similar, because there are not external windows or doors on that side. The fact that it has rained only for 3 days and also the presence of the drainage and dehumidifier make me think that with serious snow (as it happens here) this house might have a problem of water in the basement, also considering that the position is lower than the street.

Given the results of the inspection the owner said he would offer an additional $5500 credit for the roof, but he doesn't want to add more money saying that the water in the basement is caused by the gutters not working properly and dripping water close to the house. With that credit the price would be $382,500 while in the neighborhood houses like this go for about $450k  $430k . Also he is now putting more pressure saying that if I do not decide by this week he will put it on the market at a lower price and he had already refused an offer for $395K. I do not like the fact that he has been  hiding all this issues and also the pressure that he is trying to exert right now that I found out. 

I know that dealing with water in the basement can be very expensive. I am not sure if I should get it and deal with the water issue in the basement, try to get more seller credit or even give up the deal at all. 

Any advice would be very welcome!!

Thanks,

Alessandro

Hey @Alessandro M.

If you want to PM me the address I'll see what I can pull up for history for you.

Thank you Mike. Any idea on how to proceed in this case?

@Alessandro M.

Besides the roof estimates, have you got other estimates to bring the property up to par? 

You mentioned that the bathrooms and kitchen have to be updated, so that's at least $8K-10K of work on 1 side, You need a new furnace, probably a new condenser so that's about $5K. And new water boiler, maybe 2 since it's a duplex. Using that $8K roof estimate, you're looking at approximately $20-$25K of work without addressing the rest of the issues.

You might want to call the city as well to inquire about this property if there were permits pulled - to protect yourself. 

Make sure this is not a flood zone as well. 

what's your exit strategy? 

If you're trying to flip and/or wholesale, there is not enough meat on the bone. But if you plan to move in and rent out the other, it may make sense for you. Especially in an appreciating area.

In regards to the water issue, ask for more time to get more contractors to give you quotes and/or ideas. Ask him for an extension. If he keeps pressuring you, either prepare to walk away, or accept as-is and lose your EM if you want to walk away later.

Chris, thanks for the answers. My plan is to rent it and live in one apartment.

I considered those expenses and I would be fine with a 5k cost to repair the water in the basement. If it turns out to be a 15k/20k cost than I start to suffer a bit.

Hey, I am from the area. What town is it in? (If you don't mind me asking)

Sounds like it could payoff in the long run, if you have the money to make the repairs. And since you're living there, and it isn't JUST an investment it might make sense to pay a little more. Westchester real estate should continue to appreciate if the location is decent enough... And you may get lucky and the gutters could solve the water issue.

But, you have to get the property for the price YOU want it for. If he isn't willing to come down and the numbers don't work for you, then pass on it . Winter is coming soon so i'm sure he wants to move it, if you think he's bluffing about having other offers then push for a little more $

@Alessandro M. , based on what you have shared, I think you are not getting as good a deal as you think you are.

The basement clearly has water in it, and my take on this is that the owner is clearly lying to you about it. What else is he lying about?

John, in fact it seems a good deal even if I have to spend more to repair it. The owner says that it is about the gutters not being properly attached. And one gutter looked to be a bit loose from the pipe in fact. But I do not believe that 100%. I am having some waterproofing contractors come over to look at the issue. I think that if I had to spend an additional 20k to waterproof the basement then I would get just a fair deal but not a great one. The house is selling for about 50K below market I think.

But if the basement waterproofing cost is about 5k then it would still be worth it.

Mindy, regarding the fact that he is lying I agree completely. If someone has interest I take what he says with very low confidence.

There is always a risk in this business right?

Sounds like a money pit that will nickel and dime you to death, unless you got the cash to fix these major times.   Furnace and boiler are shot for sure.  If the channel around the basement is in new concrete then you can figure it has water issues.  You should be able to see white calcium staining on the walls or in the channels for sure.  I would use a Zypex cementitious waterproofing on the inside if the walls are masonry or concrete.  Go visit this place right after it rains or during.  Then you will see all the problems first hand.  I would figure out what your are will spend on rehabbing this.  If this has been on the market for 2 yrs now either he wont budge on price, asking way to much, needs a lot work or problems or all of the above.  Know your limit and when to walk away. 

Originally posted by @Alessandro M. :

John, in fact it seems a good deal even if I have to spend more to repair it. The owner says that it is about the gutters not being properly attached. And one gutter looked to be a bit loose from the pipe in fact. But I do not believe that 100%. I am having some waterproofing contractors come over to look at the issue. I think that if I had to spend an additional 20k to waterproof the basement then I would get just a fair deal but not a great one. The house is selling for about 50K below market I think.

But if the basement waterproofing cost is about 5k then it would still be worth it.

Mindy, regarding the fact that he is lying I agree completely. If someone has interest I take what he says with very low confidence.

There is always a risk in this business right?

 Yeah man, that's part of the business! Sounds like you found a good deal. And if you're going to live there, rent and hold, then I think you're ok paying a little more, where in a flip scenario you need to be more careful. If you still come out on top in the worst-case scenario then it sounds like a good deal!

That being said, I would definitely try to get an inspector/ contractor to take a look.....Is the property a foreclosure? Did the seller sign a disclosure agreement?

John, it is not a foreclosure. And I did not sign a disclosure agreement.

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