This is my original post: Please see update below:
I bought a single-family house (SFH) in the Dallas Fort Worth (DFW) area from New Western Acquisitions in June of 2019, and my experience has been bad and horrible. I'm still working on the house right now. I seek your advice.
These are the financial details of the house:
Purchase Price: $140,000
Estimated repairs: $40,000 (We’re currently at $53,000, I estimate an extra $7000 to complete the house, making repairs cost totaling $60,000).
Hard money loans: $125,000 for acquisition. I am using my cash for repairs.
Estimated profit after closing cost, sales commissions, hard money interest was supposed to be about $20,000. Right now, I am at a loss.
The house is a 3 bed 1 Bath house, about 1400 sqft. I estimated a repair period of one month before I noticed a lot of issues with the house.
We applied for permit at the city, and we were told that there was no construction permit or plans for the house with the city. In other words, the structure was a cabin by the lake, and additional rooms were added, all without permits.
The building department of the city referred us to the city board to get exception to continue the renovation of the “non-conforming” structure. I have to wait another 2 months to appear before the city to determine if I can go ahead with the structure or not.
I have title insurance and owner’s insurance. I was told by the city that I should seek legal redress as that structure should not have passed a title search.
I don’t know what to do at this moment. Can I seek any legal redress against the seller as the whole structure was not permitted?
I would love your advice at this point.
Update: I had a meeting with the board today, and I was denied permit to continue renovating the house. I was told I have to tear down the house and rebuild a conforming structure. I don't know what to do now? I have a $125k hard money loan on the house, and $67k of my money in repairs. I need advice. Thanks
Time to find a good attorney.
Get an attorney and talk to your title company. As the city said, the title company should have picked up on this.
@Nathan G, Thanks for the swift response. What would be my case? Not really sure what I'll be telling the attorney in terms of what my recourse is.
@Femi Ibrahim Let your attorney decide what the case is for. But I would get the attorney involved now. One that sepcializes in real estate and has good experience. Too many attorneys are worth crap. I suspect there is an attorney that has gone after that wholesaler before.
Sorry you're going through this brother. However Here in New Jersey this would not be covered by a title search. Title searches typically cover liens and encumbrances against the seller and the property. Almost nothing at all to do with additions on a house unless they somehow affect title.
Here we have to obtain what's called a temporary certificate of occupancy if we're going to buy a house as is. Once applied for the city will do its research and tell us whether there are any open permits or any illegal additions to the house. Keep in mind that obtaining the temporary Co is generally the responsibility of the buyer in an as-is sale. Once you have a temporary certificate of occupancy, you can then close on purchase of the house. The temporary Co is also the municipality's way of saying that they are legally obligated Grant you permits in order to make sure the house conforms providing you givr them the proper paperwork when applying for the permits. In other words once you have a temporary Co in your hand with a list of the violations they found during the co inspection, you should have no problems getting permits to make everything right.
I've seen a couple of investors Crash and Burn behind skipping the CO process. In fact I just came across a property I have under contract where some investors purchased the vacant lot next door thinking they were purchasing the house I'm buying. Even went so far as to break into the property and started renovating before I guess they realize what happened. I figured they must have spent $85,000 on the house and put at least another $30,000 into the renovation before realizing they only purchased a lot worth no more than $10,000. However had theh gotten a certificate of occupancy from the city PRIOR to purchase, they would have known right off the bat that they were buying a vacant lot and not a single-family house.
Does your Town require that you obtain a certificate of occupancy prior to purchase?