Help! First Inspection on Multifamily

10 Replies

I am closing on my first property and received some valuable information from the general home inspector. I am looking for feedback on whether any of these key issues are serious enough to get out of the contract. I have basement waterproofers, HVAC, tree removal and a garage builder coming to take a look this week. 

1. Substandard step flashing around dormers

2. Deteriorated garage structure, sill plate and substandard floor

3. Very old windows with heavy peeling paint (probably lead)

4. Deteriorated sections of front porch framing and decking

5. No water proof membrane on 2nd fl proch floor

6. Several leaning or diseased trees in yard

7. Shortage of outlets in kitchens-no gfci’s

8. Water entry into basement

9. Mold in basement and garage

10. No main shut offs in main electrical boxes

11. Aging furnaces with asbestos insulation on ducts

12. Improper splicing in several areas of basement

13. Leaking toilet bend 1sr fl into basement

Thanks!

Originally posted by @Jake Baron :

I am closing on my first property and received some valuable information from the general home inspector. I am looking for feedback on whether any of these key issues are serious enough to get out of the contract. I have basement waterproofers, HVAC, tree removal and a garage builder coming to take a look this week. 

1. Substandard step flashing around dormers

2. Deteriorated garage structure, sill plate and substandard floor

3. Very old windows with heavy peeling paint (probably lead)

4. Deteriorated sections of front porch framing and decking

5. No water proof membrane on 2nd fl proch floor

6. Several leaning or diseased trees in yard

7. Shortage of outlets in kitchens-no gfci’s

8. Water entry into basement

9. Mold in basement and garage

10. No main shut offs in main electrical boxes

11. Aging furnaces with asbestos insulation on ducts

12. Improper splicing in several areas of basement

13. Leaking toilet bend 1sr fl into basement

Thanks!

All these issues can be solved. Even asbestos and lead paint.

It all depends on your budget though. How much is your renovation budget? Are any of these totally unexpected?

How many units are we talking about (2 or 20)?

Wow, this one has some issues, both some big ones and a lot of potentially expensive ones.  Talk to local professionals on your risks for large future expenditures.  

Here is the order I would put them in from terrible to "meh"

11. Aging furnaces with asbestos insulation on ducts  (Your bank may kill this one.  You don't want to have to move that stuff)

8. Water entry into basement

2. Deteriorated garage structure, sill plate and substandard floor

10. No main shut offs in main electrical boxes

9. Mold in basement and garage

1. Substandard step flashing around dormers

4. Deteriorated sections of front porch framing and decking

3. Very old windows with heavy peeling paint (probably lead)

5. No water proof membrane on 2nd fl proch floor

6. Several leaning or diseased trees in yard

13. Leaking toilet bend 1sr fl into basement

12. Improper splicing in several areas of basement

7. Shortage of outlets in kitchens-no gfci’s

@Jake Baron , it depends on the cost of the repairs and the ultimate price you pay. That being said, a lot of the issues are water related. Water is the #1 enemy of a house. I fear you may have extensive rot and/or mold in a lot of places you can't see.

I'm something of a rookie, but I can say the inspection is eye-opening. Take in the tremendous feedback, measure the caution according to your own feelings. I trusted others on my first flip and was blessed that I didn't have the list you have (but I found a way to make it a challenge anyway). DUE DILIGENCE is key and you sound like enough of a veteran to be doing that. Evaluate your time and the effort you want to put into it go from there brother.  

@Michael Ealy  It is a 3-unit multifamily. The units look pretty good, I did not expect the issues with the water damage and garage teardown. However, the city in Cleveland where the property is located requires a city inspection which will address most of the minor issues and several of the major. The city inspection will require the seller to put money in escrow, however, it will not require full replacements of the garage or furnace. I was hoping to negotiate some of these costs with the seller either by them crediting at close or with a reduced purchase price. I would hope not to spend more than $10,000 out of pocket. (whether this is feasible or not, I will find out soon enough!)

@Jake Baron sounds like an expensive property to rehab because as others have mentioned due to the water intrusion you will likely encounter rot whenever you open a wall, repair a porch, stairs, roof etc. Unless your budget and ARV justifies many tens possible hundreds of thousands in repairs I'd probably walk. Assume there are additional issues you have not encountered yet. Also don't under-estimate the cost of tree work, that gets expensive and it's possible roots have grown into the sewer line or foundation. Regarding your question regarding whether any of these issues are major enough to justify backing out based on inspection results: that depends on your contract but most state-approved contracts are written in a way that the buyer can terminate the agreement based on their subjective opinion of the inspection results. So as long as your deadline hasn't passed you can likely terminate and get earnest money back in full without even giving a specific reason, just "based on inspection findings". You may want to exercise that right in this case, as the property obviously has significant issues going beyond what the seller will be able to fix within a reasonable timeframe. You could ask for a price reduction but you're dealing with some very big ticket items so the price reduction might need to be more than the total contract price for the deal to make sense. I don't recommend asking seller to make repairs, they'll probably just band-aid everything as cheaply as possible. To complicate things further it's hard to put a price tag on many of these repairs, whenever there is long term water intrusion you run the risk of "mission creep" i.e. replacing some rotten siding leads to replacing some rotten sheathing leads to realizing the studs are also rotten leads to realizing the foundation looks crappy too now you're rebuilding everything. So definitely a risky building to take on, especially with asbestos and lead involved, it will come down to how deep your pockets are and how bad you want it. If the building is potentially worth a lot once all fixed up, your purchase price is a small fraction of that and you have the rehab budget as well as the time and energy to take on a major project, then ask for the appropriate price reduction and if seller agrees go for it. Otherwise just terminate based on inspection results and move on to a property with less risk.