What's the worst case scenario

12 Replies

Hi All,

I put a contract in on a property and have been informed by the agent that while electricity is on, the water will not be turned for the inspection, even if I offer to repay to have it turned on for inspection and off after. Need your help to determine the worst case scenario that could happen? Please include the cost of the worse case scenario if you know it. 

Originally posted by @Brandon Malone :

Hi All,

I put a contract in on a property and have been informed by the agent that while electricity is on, the water will not be turned for the inspection, even if I offer to repay to have it turned on for inspection and off after. Need your help to determine the worst case scenario that could happen? Please include the cost of the worse case scenario if you know it. 

Assuming this isn't an REO, they are obviously hiding that the entire plumbing system, sewer lateral, etc, is busted, and the seller owes a zillion dollars to the local water utility company that has liens on the property, which is why when you inquire about title insurance the listing agent will come up with some BS reason why you can't get title insurance.

(I assume you aren't entertaining the fantasy that you're getting a normal mortgage on this place?)

@Chris Mason the property is a foreclosure and the lender has stated they can do conventional financing even with the water shut off for inspection.

@Chris Mason I should mention it’s a townhouse built in 1992.

Water likely can't be turned on because there are thousands in unpaid water bills, and the bank seller refuses to go further out of pocket on the sale. 

If this gets far enough make sure you deal in the PSA with bank's responsibility for water -- turned on, functional and zero balance as of the closing date.

@Tom Gimer what you mean by PSA? And do you mean water turned after closing? They are adamant on not having it in for inspection. I will do an air pressure test but not sure how much that will show if the water is shut of from the outside by the water company.

Purchase and Sale Agreement, Sales Contract.

Lender has no knowledge of and is unwilling to investigate into latent defects, is selling as-is with some systems not working? Either make sure water is addressed in PSA or adjust offer accordingly.

I have one now where water hadn't been paid since '08. No lien recorded. Title insurance will NOT cover that.

@Tom Gimer how do you go about finding out that information? Call the water company? The agreement is already signed. Signed it to get property under contract and use inspection to back out if need be?

Originally posted by @Brandon Malone :

@Tom Gimer how do you go about finding out that information? Call the water company? The agreement is already signed. Signed it to get property under contract and use inspection to back out if need be?

 @Brandon Malone.

You state the agreement is already signed. Not sure how you plan to include backoff clauses at this juncture. Maybe we're missing something here.

@Brandon Malone

Is this definitely municipal water and not a well?

I had the exact same thing happen with the REO not wanting to turn on the water. Since it was a well I had my inspector hook up a generator and fire up the well pump to make sure it was working.

Everything worked out just fine on that one. 

@Mohamed Nagoor I still have the option to back out during the inspection.

@Frank Gucciardo that sounds like a good option. This is a municipal water so I’m not sure that would work for me. I’d love to have that kind of an option.

Originally posted by @Brandon Malone :

the lender has stated they can do conventional financing even with the water shut off for inspection.

 Lemme fix that typo for you: The lender can do conventional financing even with the water shut off for inspection is willing to let you bet your appraisal fee, your time, etc, that the appraiser will not flush a toilet, or turn on a faucet for 2 seconds, while there. 

You might win that bet, you might not. 

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