Failed city inspection- must repairs be done prior to purchasing?

7 Replies

Looking to flip (or possibly BRRRR) a property in the Chicagoland suburbs, but it has failed many things on its municipal inspection (really no surprise - it's a highly distressed property). Here is my question to those who have experience in purchasing a property under these conditions - if a city performs an inspection prior to the house being listed and it fails, is an investor able to buy the property prior to repairs being performed with the understanding that these issues must be repaired so it can pass the inspection before selling it to an actual homeowner? Or do all repairs need to be corrected before any sale of the property, even to a flipper? In my case, there are major issues like roof replacement, siding, mold remediation, etc. and the house is vacant and in very poor shape, so there is no way any of these violations will be taken care by the seller.

Wouldn't City condemn the property if not repaired in due time? it will be deemed uninhabitable?

I bought one like this last year; lots of deferred maintenance. The seller had a whole pile of city violations. As the buyer, I knew fully what I was getting into and that did not affect the actual purchase. What I did was once I got it under contract I contacted the city, told them I was buying the house and gave them a list of the work I was going to complete. Seller paid fees from violations at closing and I was given a 3 month time-frame to correct the violations. After work was complete, the inspector came back through and issued me a certificate of occupancy as a rental property -all up to code! Moral of the story: find out from the local authority what needs to be done, tell them you plan on buying and fixing all of the issues with the property and then follow their instructions to the letter. Hope this helps!

@al pat the city wouldn’t necessarily condemn the property because there are violations there. Could be minor things but just a good amount of them.

We maintain some properties in Chicago land area and I believe the items need repaired before closing. For those that aren't lucky enough to experience this, some cities require an inspection before closing and will ding the property for things that you wouldn't think twice about elsewhere. Is it Cicero?
Originally posted by @Kat Malkowski :

Looking to flip (or possibly BRRRR) a property in the Chicagoland suburbs, but it has failed many things on its municipal inspection (really no surprise - it's a highly distressed property). Here is my question to those who have experience in purchasing a property under these conditions - if a city performs an inspection prior to the house being listed and it fails, is an investor able to buy the property prior to repairs being performed with the understanding that these issues must be repaired so it can pass the inspection before selling it to an actual homeowner? Or do all repairs need to be corrected before any sale of the property, even to a flipper? In my case, there are major issues like roof replacement, siding, mold remediation, etc. and the house is vacant and in very poor shape, so there is no way any of these violations will be taken care by the seller.

Depends on the municipality. Most (actually all of them I am familiar with) will allow the buyer to leave in escrow a certain amount to ensure the repairs are made. Some base the amount on the property type (like SFH has to deposit $1k or whatever), some based on the square footage, others based on a % of the cost of the work. The killer is when they want you to do something you didn't have planned, like move the electric meters off the rear enclosed porch where they've been for the past 75 years to a brick portion of the main building. So while its a PITA, the inspection actually helps you as a buyer because you know up-front exactly what the town wants you to do.

Matthew Olszak, Real Estate Agent in IL (#471019601)
847-447-6824

@Kat Malkowski I have been there toooooo many times in the Chicago area. The problem is not bringing the property up to code, the problem is actually getting the "village" that's responsible for building code to actually go to the property, tell you clearly what needs to be repaired, then show up again for another inspection. In my experiences they want everything fixed before it passes. Nightmare! Worst part is if the seller can't perform repairs someone has to before it sells... of course you're not going to do that nonsense if you don't have equitable interest in the property... so you might have to write up a master lease agreement between yourself and the seller with an option to purchase after repairs are completed on your end. Fun :)

Dealt with it with rentals in Matteson and Cal City recently and it's such a slowdown to our business that we just pulled right out of Chicago for rentals & only do them over the border on the Indiana side. You can buy a property without the village or city having to show up, and the landlord tenant laws are 100x better for landlords. Def not a great flip market b/c lower values, but cash flow is great and managing tenants is far easier.

Where exactly is this property? Is this your first time dealing with them? 

Thanks for sharing your experiences! As I probably should have done from the start, I finally called up the city to get some guidance on how they handle things. Luckily for me, she said all I need to do is pay $100 and sign a form to acknowledge I'm assuming the property with these violations and must have a clear re-inspection done prior to sale to a homeowner. She said there is a 60-day window to have the work completed upon closing, but that timeframe is pretty much meaningless because you get an additional 6 month extension every time you pull a permit. To be honest, I'd much rather purchase a property with a municipal inspection completed prior - now I know exactly what needs to be done to get the home up to code and can better estimate repairs.

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