Realtor · Pawtucket, RI · Member since 2016 · 166 posts · 47 votes
Hello BP Family,
I just got a home inspection for a 3 family property and found a few items that I want your advice on a property I just had a home inspection on in Woonsocket, RI.
1.) The seller was told that there is knob and tubing wiring and it is 99% inactive. Come to find out, the inspector stated that the knob and tube wiring throughout the property is 99% if not 100% active and needs a junction box and fix some of the splicing.
2.) The 1st floor bathroom has significant water damage to the drywall in which I will need to put in a new bath fitter and repair any and all moisture damaged areas.
3.) Install new gutters and downspouts around the house.
Just to add context the property is fully rented 1st unit 2 bed 2 bath rent: 895 2nd unit 3 bed 1 bath rent: 995 3rd unit 3 bed 1 bath 720. The 3rd unit needs some cosmetics repairs, nothing immediate. Other 2 units are in good condition.
@Raymond Hill the active knob and tube is probably your biggest challenge there. It might prevent the bank from being willing to do the loan, it will almost certainly cause you difficulty getting insurance, and it’s just a big liability for you in general. That alone could kill the deal right there just because of the financing & insurance impact.
Depending on your appetite for risk, if you really love the property/deal and the bank doesn’t specifically ask about knob and tube (and their appraiser doesn’t notice it), you could possibly close and then immediately (like day of/after closing) begin rewiring the entire property. But that’s still risky, and not a cheap project at all, and obviously you’d have to have enough cash to pay for that separately since you won’t be able to finance that repair :)
(And I’m not telling to do that, at all, I’m just talking generally about what you could do. Consult with your own attorney & advisors before taking advice from the Internet, of course :D)
As far as the other two items, I’d say just get quotes on the work and either negotiate with the seller if possible, or adjust your purchase price accordingly. I always recommend factoring in the more expensive solution, and rounding up, and then if you do go forward with the purchase to see if there are any cheaper (but still acceptable) ways of fixing the problems (e.g., maybe not all gutters and downspouts need to be replaced).
You do want to make sure with #2 though, that you fully understand what the source of the problem is/was so that you’ll be fixing the source of the problem and not just treating a symptom. And you also want to be sure that, depending on how long the problem has existed, that there hasn’t been mold growth far beyond the visible area of the problem. You can search for “detect mold in drywall” to get a sense of some options for investigating that.
@Isaac Hebron I am not willing to spend $30K all at once, but depending on the findings for the property whether there is all knob and tube or some here and there. (I am assuming everything is k/t wiring I should have a good idea where I stand.
We bought a 1914 house in 2001 that had KT wiring. The wall outlets had been upgraded, and the ceiling lights were still KT.
Between tenants we had the ceiling wiring redone. That was just a couple of days. While there were holes in the ceiling, we had cellulose blown in between the floors to soundproof. We did the plaster patching ourselves. It didn't cost anywhere near 30K. Just a couple of thousand.
@Raymond Hill this is just a good learning experience if you buy the property or not. I think you are doing the right thing by trying to use the knob and tube as a bargaining chip. I would Only agree with a repair credit though, money off the purchase price will not help you. You want to atleast get $5k back for the K/T. You can also do something called a escrow holdback. The seller sets aside money at closing which will be paid to you once the repairs are finished. This prevents buyer from being stuck with a higher bill then expected.
Raymond, I actually own a 3 family in Woonsocket and I'm currently in the process of changing out some old knob and tube wiring that was missed 3 years ago and my current insurance provider will not renew unless I get rid of it. So you will have issues like others mentioned in the thread. I have an electrician coming down on Thursday to repair it so if you want to stop by and talk with him just send me a PM message and I can give you the address. My electrician is licensed in MA and in RI
@Ryan Short it might be good to be careful with repair credits though. Sometimes banks will see those, especially if they're above a certain threshold (depending on the bank or loan program), and it will be a red flag for them and either mean they won't do the loan, will ask for more down payment, or will direct the appraiser to pay attention to the repair credit related items.
That's why most of the time these days, repair credits are labeled "closing cost credits" - but they obviously can't exceed the buyer's closing costs. Sometimes if repairs are small the buyers will request a check off the HUD/CD (paid outside of closing). This just happened to me (as a seller) at a closing last week.
@Raymond Hill put the money in escrow for repairs to be completed. Have bids done but qualified contractors. While knob & tube has a bad reputation here in PA it does not disqualify you from lending if it's deemed safe. For years I was under the assumption it was not allowed, a lender just did a class & spoke on this. My opinion as an agent & future investor would be, ask for an extension to get bids for your reply to Inspection, renegotiate the terms once your bids are in, I would want my own trusted contractors doing the work not the sellers so it gets done to your standards not theirs...
It can be very hard to figure out just how much active k&t you have. We bought a house once that appeared to be wired in Romex. Figured out later that the seller had spliced Romex to k&t inside the walls. Every wire you could see was Romex. Every wire buried in the walls where you could not see, was k&t. So assume the worst.
@Ryan Short one of the major issues with knob and tube is that the systems were typically spliced into over the years and this can easily cause fires (in addition to overheating from the loads that current appliances draw). The only way to make sure that knob and tube is safe is by removing it. Also, only removing it where exposed to get around insurance companies seems like fraud to me
@Parker Eberhard if the seller wants to pay for all of it to be removed than that’s great but I highly doubt it. If he wants the property that bad that might be his only choice, which is not the end of the world. One insurance company even hinted to me as long as they can’t see it then they are happy and will insure the property. Doesn’t mean it’s right but just goes to show you how much they care.
Here in St Louis City...alot of lenders are aware of the Knob and Tub in most of the properties in the city since like 99% of the properties were built in early 1900s. K &T is not bad if its not touch and in tact. The banks here in STL is concern with how safe the wires are but they will still loan on the property. Nothing wrong with eventually re-wiring the whole building overtime. Let your electrician do a thorough inspection and go from there.... Keep in mind this property has been lending on by banks for the past few decades with the knob and tube in there.....
@Raymond Hill Honestly, I wouldn't let the K&T turn me away from the deal. The house has been working and reasonably safe for 80 years... it's not going to explode tomorrow. I truly believe it's something that should be addressed, but if it takes a year or two or 4, it's not a huge deal.
There are insurance companies that will insure houses with K&T. Allstate seems to have a "don't ask, don't tell" kind of policy when it comes to internal systems. I doubt your bank will have any issue with it. Especially in older areas, it just is a fact when you buy old houses along with old plumbing, old roofs, etc etc.
Get a quote to replace, take that amount off the purchase price, and move on. Once you have the property, figure out how you want to tackle it. The likely issue with tackling one unit at a time is unless the house was originally built and wired as a 3-unit, you will probably disconnect one old circuit and it will disconnect 2 outlets in unit one, 3 lights in unit two and half a ceiling fixture in unit three. It's just odd how they used to wire houses. But it's doable, and will be much easier to sell in the future.
I purchased a triplex with knob and tube and was able to negotiate with seller to give a repair credit. The seller only agreed to pay for rewiring with surface mount wiring. I didn't have to have any walls torn up. It's not as classy as concealed wiring, but it gets the job done. Also, my insurance company (USAA) was alright with it being K and T.