Purchased a condemned property (without knowing it). Next steps?
Member since 2021 · 8 posts · 8 votes
Purchased a condemned property (without knowing it). Next steps?
Most Popular Reply
Quote from @Veena Vaidyanathan:
Hi All, Noob out of state investor and this is my first investment property.
I recently closed on a duplex in OH. Both units were being rented. However Renter 1 stopped paying rent during the ownership transition.
Property management tried to register the property with the city to start the eviction process.
Shocker: When they attempted to register, the city responded back saying this property is condemned.
It appears seller purchased this condemned property, renovated it however didn't get the necessary city approvals and permit. None of this was surfaced prior to the purchase.
PM is saying we'll need to evacuate both renters and run a complete city inspection which is going to take several months if not a year.
Looking for help here.
Question 1) At what point should this have been caught? Can I go behind the seller or real estate agent with a legal action?
Question 2) Should i evacuate the tenants and proceed with city inspection. Any prior experience dealing with this situation. Both time and money?
Question 3) What should my priority be in terms of next steps here?
This is why you never purchase a property without a team in place. However, this is a simple fix. Just call the city, explain to them what happen. All the city cares about it making money, They will want permits pulled. They will come to inspect. If all repairs are done correctly no worries. If not rectify it
I am closing on a condemned property next week, all they care about is permits and doing it right
BTW I know most if not all " players " in the Cleveland markets, who did you buy from? Also which title company, I know them all
78 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
"Caveat Emptor" = buyer beware
You should inspect the property to know what you're buying. This includes reviewing permits for renovations.
The DIY Landlord Book4.7247 Reviews - 3yDavid TerbeekPro MemberProperty Manager · Cleveland, OH · Member since 2016 · 260 posts · 162 votes
On 1-4 family sales, a title company is required to obtain a Certificate of Disclosure from the city of Cleveland. The city answers whether there are violations or condemnation and the buyer signs that they receive it before closing. Was this form completed? Was a condemnation disclosed? Very interested because I was just working on a similar case for a client on Friday.
Here is a link to the form: https://www.clevelandohio.gov/...
Quote from @David S.:
Quote from @Bob S.:
Quote from @Veena Vaidyanathan:
I had a real estate agent represent me however they did nothing to uncover this.
That was the 1st mistake using an agent. I never have or will.
Please elaborate on this perspective Bob. If you’re not using an agent, how are you buying? Thanks
Hello, off market properties from various sources. I do not know anyone in my market using a realtor
- 3yKenneth GarrettPro MemberInvestor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
@Bob Stevens
Hi Bob, sorry to hear about your situation. Condemnation only means the house is unfit for occupancy. It doesn’t mean anything more than that. I disagree the city only cares about revenue. It is there obligation to ensure the unit’s are compliant with building codes. Fees are just a means to get compliance.
During due diligence, I always fill out a FOIA request (Freedom of Information Act) through the city. I ask for any code violations on the property, history of permits, outstanding permits, outstanding water bills, zoning district and compliance and litigation that might be ongoing. The information is free and takes about a week to receive the information or less. That would have avoided this unfortunate situation.
Contact the city and work with them on what needs to be done. I think it’s unnecessary to move tenants out for them to inspect. This is going to be sensitive with the city. Just because a property is condemned does not mean it’s recorded. A title search will not necessary reveal this.
You may need to hire an attorney if it becomes ugly with the city. I was a building and zoning official for over 30 years feel free to dm me.
Quote from @Kenneth Garrett:
@Bob Stevens
Hi Bob, sorry to hear about your situation. Condemnation only means the house is unfit for occupancy. It doesn’t mean anything more than that. I disagree the city only cares about revenue. It is there obligation to ensure the unit’s are compliant with building codes. Fees are just a means to get compliance.
During due diligence, I always fill out a FOIA request (Freedom of Information Act) through the city. I ask for any code violations on the property, history of permits, outstanding permits, outstanding water bills, zoning district and compliance and litigation that might be ongoing. The information is free and takes about a week to receive the information or less. That would have avoided this unfortunate situation.
Contact the city and work with them on what needs to be done. I think it’s unnecessary to move tenants out for them to inspect. This is going to be sensitive with the city. Just because a property is condemned does not mean it’s recorded. A title search will not necessary reveal this.
You may need to hire an attorney if it becomes ugly with the city. I was a building and zoning official for over 30 years feel free to dm me.
You are misreading this post, its not my issue, I was responding :)
- 3yKenneth GarrettPro MemberInvestor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
Sorry.
- Member since 2022 · 25 posts · 11 votes3y
@Veena Vaidyanathan You asked when should it have been caught - During the title search process. Any competent lender will not finance a purchase without title search and title insurance. Title search has county and municipal search exactly for these kind of things.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Bjorn Ahlblad:
@Veena Vaidyanathan How did you get into this situation? Did you have a Real Estate agent represent you? Did the lender not discover this prior to close?
Why would the agent and or the lender know while the actual buyer didn't?
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Scott Mac:
How could this be missed on the title, and not insured?
Unless a Notice was recorded in the public records a title search would not have found any record of the condemnation and in generally the matter would not be covered under a title policy.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Raj Sakthi:
@Veena Vaidyanathan You asked when should it have been caught - During the title search process. Any competent lender will not finance a purchase without title search and title insurance. Title search has county and municipal search exactly for these kind of things.
I think you're conflating the settlement process with the title process.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Scott Esmail:
This should have been caught at the title company doing the closing. They are supposed to do all checks and check with city too for anything and this should have popped up. I would think your title policy should cover this ? But maybe you can even go after the title company who did the closing and the insurance they hold.
Unless there is a Notice of the condemnation in the public records the title search would not have found it and in general it won't be covered under the policy.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Bob S.:
Quote from @Veena Vaidyanathan:
Hi All, Noob out of state investor and this is my first investment property.
I recently closed on a duplex in OH. Both units were being rented. However Renter 1 stopped paying rent during the ownership transition.Property management tried to register the property with the city to start the eviction process.
Shocker: When they attempted to register, the city responded back saying this property is condemned.It appears seller purchased this condemned property, renovated it however didn't get the necessary city approvals and permit. None of this was surfaced prior to the purchase.
PM is saying we'll need to evacuate both renters and run a complete city inspection which is going to take several months if not a year.Looking for help here.
Question 1) At what point should this have been caught? Can I go behind the seller or real estate agent with a legal action?
Question 2) Should i evacuate the tenants and proceed with city inspection. Any prior experience dealing with this situation. Both time and money?
Question 3) What should my priority be in terms of next steps here?
This is why you never purchase a property without a team in place. However, this is a simple fix. Just call the city, explain to them what happen. All the city cares about it making money, They will want permits pulled. They will come to inspect. If all repairs are done correctly no worries. If not rectify it
I am closing on a condemned property next week, all they care about is permits and doing it right
BTW I know most if not all " players " in the Cleveland markets, who did you buy from? Also which title company, I know them all
Unfortunately many of the repairs may be behind drywall; a/c, electrical, plumbing.
- Member since 2022 · 25 posts · 11 votes3y
Quote from @Peter Walther:
Quote from @Raj Sakthi:
@Veena Vaidyanathan You asked when should it have been caught - During the title search process. Any competent lender will not finance a purchase without title search and title insurance. Title search has county and municipal search exactly for these kind of things.
I think you're conflating the settlement process with the title process.
No. In NY, due-diligence title search has county and municipal searches which includes open permits, CoO and any outstanding county tax liens
- Member since 2022 · 25 posts · 11 votes3y
Quote from @Peter Walther:
Quote from @Scott Esmail:
This should have been caught at the title company doing the closing. They are supposed to do all checks and check with city too for anything and this should have popped up. I would think your title policy should cover this ? But maybe you can even go after the title company who did the closing and the insurance they hold.
Unless there is a Notice of the condemnation in the public records the title search would not have found it and in general it won't be covered under the policy.
Perhaps in Florida this is true not everywhere. For example, in NY, default searches include county & municipal - open permits, Cert of Occupancy, outstanding tax payments and any tax related liens. And it is covered under insurance
Quote from @Peter Walther:
Quote from @Bob S.:
Quote from @Veena Vaidyanathan:
Hi All, Noob out of state investor and this is my first investment property.
I recently closed on a duplex in OH. Both units were being rented. However Renter 1 stopped paying rent during the ownership transition.Property management tried to register the property with the city to start the eviction process.
Shocker: When they attempted to register, the city responded back saying this property is condemned.It appears seller purchased this condemned property, renovated it however didn't get the necessary city approvals and permit. None of this was surfaced prior to the purchase.
PM is saying we'll need to evacuate both renters and run a complete city inspection which is going to take several months if not a year.Looking for help here.
Question 1) At what point should this have been caught? Can I go behind the seller or real estate agent with a legal action?
Question 2) Should i evacuate the tenants and proceed with city inspection. Any prior experience dealing with this situation. Both time and money?
Question 3) What should my priority be in terms of next steps here?
This is why you never purchase a property without a team in place. However, this is a simple fix. Just call the city, explain to them what happen. All the city cares about it making money, They will want permits pulled. They will come to inspect. If all repairs are done correctly no worries. If not rectify it
I am closing on a condemned property next week, all they care about is permits and doing it right
BTW I know most if not all " players " in the Cleveland markets, who did you buy from? Also which title company, I know them all
Unfortunately many of the repairs may be behind drywall; a/c, electrical, plumbing.
Irrelevant if you know how to navigate the Cleveland markets/ inspectors
- 3yKenneth GarrettPro MemberInvestor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
Quote from @Veena Vaidyanathan:
Hi All, Noob out of state investor and this is my first investment property.
I recently closed on a duplex in OH. Both units were being rented. However Renter 1 stopped paying rent during the ownership transition.Property management tried to register the property with the city to start the eviction process.
Shocker: When they attempted to register, the city responded back saying this property is condemned.It appears seller purchased this condemned property, renovated it however didn't get the necessary city approvals and permit. None of this was surfaced prior to the purchase.
PM is saying we'll need to evacuate both renters and run a complete city inspection which is going to take several months if not a year.Looking for help here.
Question 1) At what point should this have been caught? Can I go behind the seller or real estate agent with a legal action?
Question 2) Should i evacuate the tenants and proceed with city inspection. Any prior experience dealing with this situation. Both time and money?
Question 3) What should my priority be in terms of next steps here?
Sorry to hear about your situation. Condemnation only means the house is unfit for occupancy. It doesn’t mean anything more than that. I disagree the city only cares about revenue. It is there obligation to ensure the unit’s are compliant with building codes. Fees are just a means to get compliance.
During due diligence, I always fill out a FOIA request (Freedom of Information Act) through the city. I ask for any code violations on the property, history of permits, outstanding permits, outstanding water bills, zoning district and compliance and litigation that might be ongoing. The information is free and takes about a week to receive the information or less. That would have avoided this unfortunate situation.
Contact the city and work with them on what needs to be done. I think it’s unnecessary to move tenants out for them to inspect. This is going to be sensitive with the city. Just because a property is condemned does not mean it’s recorded. A title search will not necessary reveal this.
You may need to hire an attorney if it becomes ugly with the city. I was a building and zoning official for over 30 years feel free to dm me.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Sue your title company
- 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
@Veena Vaidyanathan the seller, your agent, and the title company are all liable on this if true.
As others have pointed out, more likely this is rental certification issue, not a condemnation.
Even if condemnation, which we've been through a few times, city rarely forces tenants to move out during their inspection process.
NOTE: doesn't sound like your PMC is on top of things. So, you may want to connect here with @Bob S. and @James Wise to explore better service.
Even if someone give you a referral, what meets their expectations, may not meet yours.
In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.
It's often a case of not doing enough research, as they don't know what they don't know!
Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.
So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.
EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!
This also leads owners to ASSUME simpler is better when it comes to management contracts.
The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!
We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.
We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:
We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.
EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!
P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊
Logical Property Management4.9460 Reviews Quote from @Veena Vaidyanathan:
Quote from @Leo R.:
@Veena Vaidyanathan as others have mentioned, this sounds like the title company screwed up--and they might be liable to you, and to your lender (the lender presumably lends under the contingency that the property title is clear and the property is not condemned--and it's typically the title company's responsibility to confirm those things).
At this point, it's probably advisable to get an attorney, and have your attorney contact the title company for you (or at least advise you on how you should contact the title company).
Given that you presumably have zero experience negotiating with a title company, you'll probably want an attorney to help you on that. Moreover, contacting the title company yourself with no experience, and no real knowledge of what you're trying to accomplish, could backfire--all the more reason to get the guidance of a lawyer. Specifically, you'll want a lawyer with real estate law and real estate title experience.
Good luck out there!
Thanks. Any recommendations on how to look for a good real estate lawyer?
Appreciate any recs based on prior experiences.
Google, ask colleagues for references, ask your agent for references (if you still trust them), and make a lot of phone calls to attorney offices. Typically, an attorney's website will list their practice areas, and if they are experienced with RE law, they'll list that.
You could also call up title companies (obviously, not the title company that screwed up on your deal), and ask them for references to the attorneys they use.
- Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes3y
Hire an attorney and sue the h*** out of the seller.
- Real Estate Broker · Fort Lauderdale, FL · Member since 2018 · 196 posts · 191 votes3y
@Veena Vaidyanathan I think priority 1 should be evacuate the tenants, especially since they were already set to be evicted. It seems like a major safety concern and the city should back you up in the evacuation given it’s condemned status.
I’d wonder why the title company didn’t catch this second and I’d talk to them next. Hope this helps. I’m curious to see how this unfolds. Keep us updated.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Raj Sakthi:
Quote from @Peter Walther:
Quote from @Raj Sakthi:
@Veena Vaidyanathan You asked when should it have been caught - During the title search process. Any competent lender will not finance a purchase without title search and title insurance. Title search has county and municipal search exactly for these kind of things.
I think you're conflating the settlement process with the title process.
No. In NY, due-diligence title search has county and municipal searches which includes open permits, CoO and any outstanding county tax liens
I think if you read the Conditions section of a title policy you'll find coverage is only for matters recorded in the public records which is probably defined in the Definition section of the policy as those records intended to impart construction knowledge to third parties. I suspect records in the permit department are not included in that definition. I also suspect the municipal records search is done because of area custom and is not required for the issuance of the policy. As I wrote, a settlement procedure not a title search. Permits don't have anything to do with the title to the property. The Insured has good title, the problem is with the improvements. Now if the insured received an extended form policy my opinion might change.
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Raj Sakthi:
Quote from @Peter Walther:
Please see my opinion in your previous response.Quote from @Scott Esmail:
This should have been caught at the title company doing the closing. They are supposed to do all checks and check with city too for anything and this should have popped up. I would think your title policy should cover this ? But maybe you can even go after the title company who did the closing and the insurance they hold.
Unless there is a Notice of the condemnation in the public records the title search would not have found it and in general it won't be covered under the policy.
Perhaps in Florida this is true not everywhere. For example, in NY, default searches include county & municipal - open permits, Cert of Occupancy, outstanding tax payments and any tax related liens. And it is covered under insurance
- Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes3y
Quote from @Steve K.:
Title company should have caught this so this will likely be a title insurance claim. Contact your title company.
I don't know if you mean the settlement company, the title agent or the title insurer but why is it automatically the "title company's" fault. Why doesn't a buyer have the responsibility to do his/her own due diligence?
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