Depressing Home Inspection

11 Replies

I haven't been in the REI game too long, so please hold the "you should have seen that during your showing" comments. The purpose of this post is mostly because I want to vent to the BP community, but general thoughts and comments are appreciated.

I own a two unit house that I purchased solely for investment, and my fiance and I are now looking for a multifamily for us to live in.  We found a house we love, made an offer, got it accepted, and this past Friday we had the inspection.  Full disclosure, this house is a flip.

During the showing we noticed there was a little water in the basement, but the sump pump wasn't running as the power had been shut off on the first floor.  By the time of the inspection the sellers had ran an extension cord to the sump pump and that water was now gone.  The furnace and water tanks had some rust toward the bottom of the units...a decent amount of rust.  I thought it was just because the air was so moist from the little bit of water that was sitting near the sump pump.  Nope!  The inspector noticed that there was a definitive water line all the way around the basement and on everything down there, about 14" off the floor, so there was about 14" of standing water down there at one time.  So the furnace and water tanks have been compromised; they estimate $6-7k for replacement.  They also recommended we have a basement company come in and really seal up the basement, and this would include digging around the house to install pipes to help water flow away from the house; $10-15k.

They also found a small amount of mold in the basement, and a good amount of mold in the attic; approximately $4,500 to remove.

To top it all off, they noticed that there had been a fire in the basement; the subfloor above is black/charred.  They said it is strictly cosmetic and that the necessary repairs had been made, but I had to start laughing when they said that just because it was one thing after another.

So at the end of the day we are looking at $20k-$27k.  We have to ask the seller if they are willing to do anything since the bank will not lend on a house in this condition.  At this point we are expecting to lose this house, which really bums us out, but of course we are happy that we had the inspection done.  We're guessing that the sellers will let the contract expire, do the repairs as cheaply as possible, then attempt to sell the house for more to try to recoup some of the repair costs, even though these repairs don't actually increase the value of the house (assuming they originally priced the house unaware of all of these things).

What. A. Bummer.

"Full disclosure, this house is a flip."

Do you mean that this house will be a flip for you?

It sounds like this house is in such bad shape that it should be wholesale rather than retail.

I'm a newbie myself, but my advice? Make the lower offer.  If they don't accept, oh well, there will be other houses out there.  Have faith and be patient.

The house was flipped by the seller.  The reason I made that known was to point out that they apparently did a lot of work on the house, but missed some big ticket items that could keep the house from selling at all.  Most of the house is actually in great shape.  We got word from the listing agent today that the seller is willing to make the repairs.  They are even paying for my inspector to come back and point out and discuss all of the problems.  This is a relatively small town and they don't want their reputation to be tainted, so it sounds like they want to make it right.  If they actually come through and the work is done correctly they'll really earn my respect for taking care of all the issues, but I'm not getting my hopes up quite yet.

Sounds like the rehabber dealt with cosmetic issues but not some more fundamental issues.   That would leave me concerned as to how well they did the cosmetic work.   I would examine the permits and be sure the right permits were pulled for the work done.

I would be present when they and the inspector meet and would be sure the right work is done.  You don't want them to twist the inspectors arm into accepting an poor fix.  For that matter, if you can swing it, I would simply ask for a discount on the price by the amount of the work and do it after closing.

I will say we had a flood and had four feet of water in our basement.  Lots of stuff was replaced, but not the water heater.  It was examined by a plumber, left to dry out a couple of days and has been fine for four years.

People sometimes wonder why basement footage is worth so little.  This is why.

I would take the adjustment and make the repairs myself. I would not allow sellers to make repairs. That is a formula for having them done as cheaply as possible. So if you have reliable estimates of $27k to make repairs, I would look for that number in a lower price, or, as an alternative, that money placed into escrow to fully fund repairs made by the contractor of your choosing. 

Thank you for your input @Jon Holdman .  Unfortunately we would not be able to do the work after closing; the bank will not lend on the property if the repairs are not made before closing.

I don't believe the contractor will try to twist the inspector's arm.  The inspector is going there BEFORE the repairs are made to show them what needs to be done, so the inspector is not looking at any repairs at this point.

Also, I think the only thing they may have needed a permit for is window replacement.  Most of the other work they did was flooring and painting.  But yes, I do agree with you that it appears they did a lot of cosmetic work.

@JD Martin unfortunately I can't go that route since the bank won't lend on it the way it sits.

Originally posted by @Mark Smith :

@Jd Martin unfortunately I can't go that route since the bank won't lend on it the way it sits.

 I would see if the bank will allow that money to be placed in escrow, IE you are borrowing 200k for a house that costs 240 and putting 40k down, seller reduces price to 215 to allow for repairs, bank loans you the same 200k but puts 25k of that into escrow to pay for repairs, you show up at closing with your same 40k plus 175k from the bank = 215 new purchase price. 

@Mark Smith the inspector may have saved you more than you think. If the stuff that is visible is that bad, who knows what is behind the walls that is covered up with lipstick. I would also question the quality of the rehab if they didn't bother to address such obvious flaws. You may haves dodged a bullet on this one.

Seller  repairs tend to be done wrong ,cheaply ,fill in the blank.

Originally posted by @JD Martin :
Originally posted by @Mark Smith:

@Jd Martin unfortunately I can't go that route since the bank won't lend on it the way it sits.

 I would see if the bank will allow that money to be placed in escrow, IE you are borrowing 200k for a house that costs 240 and putting 40k down, seller reduces price to 215 to allow for repairs, bank loans you the same 200k but puts 25k of that into escrow to pay for repairs, you show up at closing with your same 40k plus 175k from the bank = 215 new purchase price. 

If I could vote for this post twice, I would.

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