How to handle issue with Flip project POST SALE

51 Replies

Having an issue with a past buyer that's making my blood pressure go up. Would love any feedback.

We flipped a house that was a full gut renovation (hoarder, cat house) and sold it last May (pics here). The buyer was nervous about purchasing from a flipper so requested a "contractor warranty" that warrants the improvements we made (not wear and tear; only failure or things not working as they should). Even though I did not want to continue my relationship with this buyer, we agreed to get the deal done. 

Flash forward to now. They have a very slow leak in their downstairs ceiling and can't identify the source (it's a 2 story townhome). Our realtor team is acting as the mediator between us and he believes it's condensation from the ductwork, which is in-between floors. The HVAC was newer and was one of the few things we didn't replace during this renovation (we did have it inspected). Both my realtor and the buyer (now homeowner) are telling me we "SHOULD" have insulated the ductwork during the renovation. 

I was not aware of that, and it could very well be true, but because this was not something we altered during the renovation, I don't feel it's our responsibility to address it now, after the home is sold. We were never asked about the ductwork prior to sale. 

I certainly don't want to get into a big project of tearing out the ceiling drywall and insulating it now. I also don't feel that we should be held responsible for identifying the source of the leak. If it turns out to be indeed an issue with the work we performed, I would pay to fix it.

Thoughts, ideas, etc? Feels like such a sticky situation to me, but maybe I'm overreacting. 

Any advice is appreciated here. 

Sara

usually when a home is sold the seller offers a home warranty for about$500 from national companies that handle those issues. I never heard of a contractors warranty, is that an insurance policy or something you personally guaranteed? 

@Sara C. How long did you provide the warranty for? It’s been over a year so , Is it like 5 year warranty or something? You didn’t touch what is likely the issue, so I would be inclined not to fix it and not provide contractor warranties going forward

@Steven Picker yes, they didn't want a home warranty, they wanted us to personally guarantee our work. And yes, I'm regretting that :) Not because we don't stand behind it, but I worried about issues just like this. Now I wish I had pushed for a standard home warranty. 

Originally posted by @Sara C. :

@Caleb Heimsoth it's for a year, so May 2019. 

My mistake I took “last May” to mean may of last year.  

That aside, I would still not fix it as you didn’t renovate what’s likely causing the issue.

The other option (I would do this personally) is get then to sign something that negates the original warranty and for them doing this, you pay them a fee.  Let’s say 1-2k.  Then just be done with it.  

Then next time just do standard home warranty.  The headache of this for another year would drive me nuts personally. 

then @Caleb Heimsoth question is most important how long is the warranty for? and how do you distinguish between the work your guaranteed and the hvac condensation? I would say over a year without problems would be on the new owner but I am not a lawyer Good luck

Originally posted by @Sara C. :

@Caleb Heimsoth it's for a year, so May 2019. 

 well to me if that component was not on your original scope of work and you never touched it  .. this should have been caught at home inspection.  new construction there is a mandatory 1 year warranty by the builder by code in most states.

then we buy the 2 10 as a parting gift.. home warrenties that you buy after market I suspect would not cover this.. 

regardless I would push back on this issue.. 

Thanks everyone. Do you think it's somehow unethical or wrong of our team not to replace or insulate the ductwork? It's between floors so it didn't occur to me. Their defense is they couldn't see it on inspection (although... they actually didn't do a home inspection), so there's no way they could have known. Also, please note this hasn't actually been determined as the cause of their leak. Only a suspicion.

If they waived the home inspection, that could help you as a full HVAC inspection possibly could show issues if there were any.

In the warranty you gave, was there anything that listed the specific renovation work that was completed prior to the buyer purchasing? If so, and HVAC and ductwork clearly is not listed, then I don't think they have much of a say. Typically, original ductwork SHOULD hold up and not condensate (it would've been noticed soon as the AC went on, not in August).

Yep, if it wasn’t part of your work then you have no warranty against it....period. 

The whole “you should have....” is totally irrelevant. If the main sewer pipe to the street later broke/failed, is it your responsibility because you “should have just replaced it”?

I would tell them it is not covered and not give it another thought until they can show the leak IS from something you did incorrectly. 

I personally don’t have issue with standing behind your/my work for a year....not if you did it right. 

What's the contract say? I'm assuming this is in writing.... and then you can fall back to "as per your request...." and mention how you're only covering work YOU performed and then notify them this is out of scope. 

This is all great feedback - thank you. @Wayne Brooks appreciate your example about the sewer line. Makes total sense! And @Matt K. , just reviewed the contract... there's a lot there but I think the content below covers it.... 

I will say, this is a huge learning exercise for me and I definitely wouldn't do it again in this way. I did not list the specific scope of our remodel in the warranty... regretting that FOR SURE.

(Contractor) hereby warrants that the construction work performed at {address here} is free from defects and incorporated into this Limited Warranty for a period of 1 year from the date of substantial completion, date of commencement of use, or date of notice of completion, whichever occurs first.

I think the argument can be made that since you did the inspection and work around the item... You'd have responsibility of it.

But if you wanted to play hardball I guess you could claim it's outside the scope, but I think if it went to court you'd lose based on inspection and other work items..

You could always try to ask what kind of resolution the tenant is seeking and then maybe come to a compromise.

Well, that guarantee is worded a little loose, it doesn’t specifically exclude anything not addressed/repaired.....but I’d still stand on it just being the work you Actually did.

@Sara C. If it’s in between floors how do they know it’s not insulated? Even if you put new ductwork in and it is insulated it’s not waterproof so there is a chance it couldndo the same thing. I find it hard to believe there is that much condensation that it is leaking through the ceiling. Are there multiple leaks? Is there only one run of ductwork in the ceiling? How much do the Ac vents sweat?

Dear Mr Smith,

CC: Mr Jones happy Vally REALTY

I will be happy to send one of our contractors over to identify the cause of the leak you are experiencing in your home. Our standard rate is $89 an hour which will be waived if it is determined that the issue is with construction that we performed on the residence. Once the issue is identified we can proceed from there. If it is determined to be an issue with the materials or quality of our work, we will gladly cover all costs associated with making it right. If it is determined to be an issue with a system not addressed during our renovation you will be free to choose any contractor you would like to re-mediate it at your expense. Is Thursday at 11:00 AM an acceptable time for John to come over and look at the issue? 

Thank you 

@Mike Cumbie now this is GOOD. Stealing this with your permission! :)

@Gary Siver this duct sweating issue is a HUNCH my realtor has (he used to be an inspector). He asked if the ducts were uninsulated and I said yes, and he's passed that on to the homeowner. So this is all speculation (b/c they can't identify any other cause), but I'm worried the homeowner is going to ask for the duct replacement as they believe it should have been done during reno. 

My actual contractor has volunteered to go over there tomorrow to get to the bottom of this. 

"Stealing this with your permission! :)"

Steal away!

Good luck and let us know how it works out. Might just save someone else who reads your results before they go that route!

Another reason to deny them the claim is any mold or other issues the water caused. They might hold you to that too. I'd simply reply that the duct work isn't covered because you didn't touch it. Let them threaten legal action. 

@Sara C. Not sure how I feel about this one since you guys sealed up the leaking HVAC or whatever it is when you put the ceiling back in. The issue could have potentially been found/fixed before the ceiling went in. It sounds like people here who have a lot more experience doing deals than me are saying to push back and since you didn't work on it your good. There have even been some good suggestions for meeting them in the middle. Please update us with what you end up doing.

@Matt P.  yep definitely will fill you all in! We didn't drywall over any leaking ducts. But I understand how it could seem that way to the homeowner perhaps (if this in fact is the leak source). There were no water issues during reno. 

@Mike H. true about mold. Good point. 

Sara, 

Its not code to insulate between the floors (excluding along the ends, the outside shell has to be insulated). I only do it for noise when requested. I am working on a project that had water running down the wall on one section of the house. The moisture could have been coming from a few different things so I opened up the ceiling and it was condensation on the hvac pipe. The owner keeps the temp very cool and the guys had the doors / windows open because there were in and out all day long. Long story short its not your fault. 

A good inspector should have a moisture meter and a thermal imaging meter. This can help to detect where moisture issues are coming from.

A leak could be from anywhere and a hundred different things.

@Sara C. One of the things I always stipulate in my flips is if I touch something or repair/replace something that’s what is covered under my contractor warranty. (My GC provides a 1 year usually on my side). For your case I would have stated we didn’t do anything pertaining to hvac work. I would recommend to file the complaint with the inspector since we were not made aware of the issue and we didn’t repair/replace that item in our renovation. I had a flip a few years ago I did a contractor warranty. Luckily the issue they brought to me was in fact something we worked on and it was easy to work with them on the process.

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