Hey guys, I recently got my inspection report back for my first home and house hack in Raleigh, NC. Was hoping to get some of your thoughts and guidance as this is my first time going through the buying process.

It’s a brick ranch built in 1953 with a 500sqft addition. Asking 250k. Offer accepted at 255.5k. It’s kind of a half-*** flip. Updated kitchen and refinished bathrooms. Refinished hardwoods. Old windows. Cracked driveway. HVAC is 7 years old.

Main takeaways are:

- Moisture and mold in the crawl space. (No vapor barrier, damaged insulation. Some soft spots in the floor).

- Sitting water on the roof due to incorrect grading of roof membrane. Other than that, the roof is good condition.

- HVAC cooling system is causing the drain pan to fill with water because pressure is lower than it should be. Also, ductwork is ~25 years old.

- Outdated aluminum wiring and 15+ ungrounded outlets.

I’m thinking that I will have them pay for mold remediation and vapor barrier installation (assuming that is the root cause of the moisture). I’ll have them replace the roof membrane. And I’ll take cash towards close for the quoted repairs for HVAC. Not sure what to do about the electrical. May just leave it out if they agree to everything else?

What would you do?

@Evan W. I'd get a quote on the electrical rehab first to see how much it would cost to get redone. You'll definitely want to do that before selling and redoing the electric doesn't add much value to a home. Unfortunately, all the issue items you mentioned are areas that don't much value to a home if redone. What is the ARV (do you have a lot of wiggle room)?

If you're house hacking and making money the entire time then it still can definitely work. I just got done a house hack and the costs creep in on you from repairs, taxes and mortgage. We ended up doing well but not nearly as well as I thought in the beginning (and we rehabbed the house as a live-in-flip also).

if you are paying over asking price, it's safe to assume your market is pretty competitive? You may not have much leverage here. In my experience, if you want the deal to work, there's a delicate balance to be struck here. Are you working with a realtor? I hope so- that realtor should be negotiating some of these items behind the scenes before you reply in writing. Setting expectations and gauging the sellers motivation should guide you in your response. 

The mold is a material fact and it should be easy to get the seller to pay for remediation. Beyond that, many of those other items might need to be compromised on in some way and you'll have to decide if the deal still works for you if there are issues that you want to address after close. 

Best of luck!

@Benjamin Seibert Thanks for the input Ben! I will take your advice and get a quote on electrical. This is more of a buy and hold situation for me. There is not much wiggle room with the ARV unfortunately. This house is on the higher end of home values in the neighborhood and the inside has already been rehabbed. With 15k added mostly to the outside, ARV is probably 285-290. The reason I'm buying it is because it has an in-law suite attached to the garage and cashflows (20% cash on cash) far better than anything I have found on market in Raleigh - which is a hyper seller's market right now. Very low supply. Values have almost doubled in the past 5-6 years. 1% rule has become the 0.8% rule.

@Corby Goade Yes you're right, very competitive market. So competitive that it is standard to provide a 1% due diligence fee (non-refundable) to the seller. I lose out on $2k if I walk, but the seller is also forced to disclose these issues now if he wants to go back on the market without fixing them. I think I have some leverage heading into slow season as well.

Yes, I am working with an awesome realtor. She will be negotiating on my behalf before submitting anything in writing, but I wanted to get some different perspectives from experienced investors on BP. Interesting that you say the only material fact is the mold... do you mean that getting it treated is non-negotiable? What about the small ponds on the roof that have shown damage to the skylights in master bedroom? And the HVAC not working because the drain pan keeps filling up. Do you mean that these other issues are just not typically viewed as "non-negotiables" like mold presence in the crawl space/joists?

Appreciate your input!

Hey @Evan W. - here are my thoughts and the order of what I would ask for.:

1. HVAC cooling system is causing the drain pan to fill with water because pressure is lower than it should be. Also, ductwork is ~25 years old.

2. Outdated aluminum wiring and 15+ ungrounded outlets

3. Moisture and mold in the crawl space. (No vapor barrier, damaged insulation. Some soft spots in the floor).

4. Sitting water on the roof due to incorrect grading of roof membrane. Other than that, the roof is good condition.

Reasoning

1. I'd want to know if I was expecting to have to replace the HVAC (because that can be pricey). 
2. Safety concern, and electrical can get pricey, especially if things are wired in a poor manner. 

3. It sounds like the issue is clear and a pretty solid quote can be made. There shouldn't be any surprises here, so figure out the cost and factor it in.

4.  It sounds like the issue is clear and a pretty solid quote can be made. There shouldn't be any surprises here, so figure out the cost and factor it in.

Basically, my thought is you should ask for safety items or things that may be big unknowns which could translate to big $$. 

The only thing that concerns me is the aluminum wiring if it has not been remediated. 

And Ill add....its odd for a house built in 1953 to have aluminum wiring.  Its typically only found in the 60s and 70s, and even more tighter from 65-75. Ive never seen it in a 50s house. 

@Evan W. You can fix the ungrounded outlets by adding a GFCI plug at the beginning of the circuit, this all outlets after are grounded. Or you could replace the breakers with GFCI breakers in the box.

My electricians in my area run $125 an hour. A rewire will probably mean a new box too. I paid 8,000 for a 1,000 sq ft home recently. Then I had to add 1200 in GFCI breakers to seal a deal.

Just something to think about.

I would definitely ask for:

- mold remediation

- outlets grounded 

- service HVAC

@Evan W. Glad to hear you have a great Realtor!

It varies from market to market, but where I am, sellers will remediate mold 99% of the time regardless of the contract terms. As for the rest of those items, the seller SHOULD disclose them, but I've seen lots of deals where places go back on the market and the seller plays dumb or decides that they aren't big enough of a deal to disclose. Obviously unethical, probably illegal, but it is what it is. 

It's likely that your contract is written such that the seller doesn't have the right to back out based on negotiations, only you do. If that's the case, the worst thing that can happen is the seller says no, and you are back to an "as-is" purchase and you can decide if you want to move forward or keep pushing for repairs or credits. Check with your Realtor, but I think you hold the cards here- not sure how much leverage you have, but you should at least be in a position to dictate the timeline.

Best of luck- keep us posted!