Don't mess with building inspectors
In another thread I mentioned one of my hard money loans was going to default. It did, and my business partner and I have now taken back the house deed-in-lieu.
The place has some cosmetic issues. Its total white inside, the yard is a mess and the decks need some attention. But the big issue is the lack of permits. The borrower did get permits for a roof and siding, but nothing else. He did pretty complete remodels in the kitchen and baths and put in new windows. Needless to say the inspector noticed the new windows. Then he started looking around and noticed the remodel. We met with the inspectors (main, electrical, plumbing and mechanical) last week and got some input on what they wanted done. The plumbing inspector was insistent on opening up the walls and floors so he could have a look. He said he looked at the property, and no permits had every been pulled since it was built in 1940. So, everything is now our problem.
In particular, he pointed out this in the floor of the laundry room:
Its a little tough to see in that picture, but a cut was clearly made in the concrete for that drain pipe. Now, who knows how long ago this was done. It was not done by our borrower. That pipe leads under some nice new tile into the bathroom:
Well, it was nice new tile. This is what it looks like today:
Sigh!
Still wanting for the full bid from the GC on what its going to take to fix this mess.
Bienes, I'm not sure about the "ethics", but if I suspect something's not kosher on a prospective property I don't hesitate to call either the building department or the planning & zoning commission. I don't want someone else' problem to suddenly be my problem.
The GC who did the work on this property (my work, not the rehabber's) also does fix and flips. He says that right after he buys the property but before starting work he has the city come in and have a look and tell him anything that needs to be done. That seems a little risky to me, since he waits until he owns it. I assume he has a pretty good idea of what's wrong and factors that into his purchases. He has his own crew, too, which seems to me the only want to make fix and flips work.
I had posted some links on a building near my local area earlier; there has been an arrest in connection with that building:
http://www.timesherald.com/articles/2010/10/13/news/doc4cb5cc9c3c80b057327446.txt
An update to the fiasco I mentioned previously:
http://www.timesherald.com/articles/2010/12/06/news/doc4cfc7becdc426675474149.txt?viewmode=fullstory
Originally posted by Jon Holdman:
He says that right after he buys the property but before starting work he has the city come in and have a look and tell him anything that needs to be done.
We just finished rehabbing a property that was 8 feet under water a year ago. It was torn down to the studs, some electrical and plumbing was cut, there were no visible signs of mold but certainly it was a risk etc.
Before starting work, we decided to have a city inspector come to the property to tell us *exactly* what needed to be done to pass inspections, just so there wouldn't be any surprises.
Well, the one surprise was that the inspector told us a whole bunch of stuff we didn't have to do, as there were specific renovation requirements for flood properties in this neighborhood that were looser than typical flood renovations. Overall, not having to do all the work that's typically needed on a flood house saved us about $6000.
So, in this case, having the city inspector come in *saved* us a lot of money...
Probably not a typical ending to this type of situation, but a good example of how it can sometimes work in your favor...
Jason,
Smart move! I've always had good luck bringing the inspector on board first. In general, they like being consulted and giving advice. I've never seen requirements over what I had expected. If inspectors feel you are working together with them they will work with you. On the other hand.....get caught trying to put one over on them and you may pay dearly!
Bill
I should update everyone on this property. We do have it under contract, and hopefully will close this week. We're at $172,500 with 3% in concessions. We do have to put in a new sewer line, which will happen as soon as the loan conditions are met. That's another five grand out of pocket, bringing our total spend on this one, between what we loaned the rehabber and what we've spent since repo-ing the place to $175K. Needless to say, this one's not going to turn a profit, even considering the interest we did collect before the borrower defaulted. Live and learn.
It's good to hear that at least you have it under contract. At the very least, it is a situation where your headache is almost over.
I'm sure you'll be glad to put an end to this chapter and move on.
I purchased a home in Durham, Ct.
Rehabbed and flipped it.
Took it down to the studs, and then called in the Building Dept Inspector, and told him our plans.
He agreed with everything that we wanted to do.
As the work progressed, we had him come over to take a look, and he said, everything that we had done, was exactly the way he would have done it.
We had to build a fire wall in the basement, because the garage was part of the basement.
We thought that we had to put in a solid metal door, and he told us, that a solid wood door is legal. Saved us a few $$$.
Ray in Ct.