How to handle issue with Flip project POST SALE

51 Replies

I doubt it’s the HVAC. Instead I bet there is a crimp on your new pex that didn’t make a complete seal. The slow leak is dripping on your duct and traveling along or through it until it is showing up wherever it is. Turn off everything that makes noise and then try and find the leak by turning off each shutoff valve in the water manifold one at a time.
I bought a house from a flipper and had two leaks the first year. First one was from a broken tile on the bench in the master shower. I guess it really is just for shaving legs.... I fixed the tile. Second one was when the kids dumped about a gallon of water on the floor in their bathroom. It probably should have been caulk and not grout at the seam between the tile and tub but there probably shouldn't have been a gallon of water on the floor either. I still need to chip out the broken grout and caulk it but the kids haven't repeated mount splashmore again either. In a different house there was a separate AC unit for the upstairs and that was a different story. The condensate drain found four different methods to leak all of which were the fault of the installer... I assume this house doesn't have a separate upstairs AC?
@Sara C. I don’t have much to contribute here except that yes, that “warranty” is very vague. Be sure to have you SOW/Itimized invoice on hand Incase you need to prove what you components of the home were rehabed. Hopefully it doesn’t come to this, but that would be a valuable document if this ever goes to court to define what was done during the rehab. Good luck!

Hmm...I vote for telling them you will come out to determine the problem. That puts you in control of the situation. I see no reason why you could not charge them for that if you determine it is not your fault.

Some states have laws surrounding how warranties are to be worded and offered. I would make sure you did that right as a state could fine you if you didn't. If you find you did not word the warranty right, it might be cheaper/less risk to just fix whatever problem it is, even if it was not your fault! Depends on the amount of the fines.

Next figure out if it is code or if it is typical to insulate interior duct work. If code or typical and you had the drywall open and did not do this, you may be at fault. If not code or not typical or you did not have the ducts exposed, then it's not your fault, assuming the wording of the warranty in your favor.

Last, but really first, you simply need to know the source of the leak. It could be anything. I have a hard time believing the condensation on the duct work is so severe it is causing a leak as opposed to simply making the drywall wet on the inside, but I suppose it is possible and maybe in GA that is more common than I would think. I would suspect a constant leak from the plumbing. Get your drywall tools ready. 

@Sara C. I would be pissed. Beyond pissed. What’s the next level up from pissed? Super DUPER pissed, right!! Simply chalk this up as a huge listen learned. Thanks for sharing as this story has taught me something.

It's not your responsibility because 1) you didn't install the HVAC system. 2) you didn't know about the missing insulation.

However, the buyer may want to have this matter decided by a mediator, who charges $1000-$400 per hour.  You would need to split the mediator fee with the buyer.  So if the repair cost is small, I would just pay for it and have the buyer sign a agreement to drop all present and future claims known or unknown.

Originally posted by @Doug Wang :

So if the repair cost is small, I would just pay for it and have the buyer sign a agreement to drop all present and future claims known or unknown.

 Why would the buyer sign such an agreement when he has one year warranty on their hands?!? They will be looking forward for some problems whole year till May 2019!

This summer had pretty hot days and couple of first floor ceilings were leaking in my rental townhouses.

The HVAC guy said it's because Tenants blocked cold return with their furniture and the pipes between ceiling and floor start sweating.

Since you didn't replace any ductwork I'd say it's not your problem.

I think it's a great wording you're stealing

Can't wait to see how it's working

It's a fine line here.  There isn't a right answer to this.  Knowing the exact cause and solution would go a long way because if it's a guessing game, the buyer could make this into something it is not.

@Andy R. thanks for the information about code! I'm very interested in learning more about this and finding documentation (just in case). Do you know of a resource that states the building code for this particular case?

And yes, there's more in the contractor's warranty than I shared, but I agree it's loose language and not nearly specific enough. Take it as a learning experience everyone! Don't do what I did and trust your gut :)

I'll share an update once I get our contractor over there for a service call. 

So grateful for all the feedback. Thank you. 

When you have the 1st & 2nd floor exterior walls insulated you need insulation between them in the floor joist area only along the perimeter and it only has to come in as far as the thickness of the framed walls. So the outside shell of the home is insulated properly.  You can insulate floors, bathroom & bed room walls for noise but its not required.

IRC - International building code for one and two family dwellings. I find that different townships are not all using the same year so some will go by 2012 irc code or 2009 irc code etc.. Here is a section from the 2018 irc code. 

N1102.2.8 (R402.2.8) Floors

Floor framing-cavity insulation shall be installed to maintain permanent contact with the underside of the subfloor decking.

Exception: The floor framing-cavity insulation shall be permitted to be in contact with the topside of sheathing or continuous insulation installed on the bottom side of floor framing where combined with insulation that meets or exceeds the minimum wood frame wall R-value in Table 1102.1.2 and that extends from the bottom to the top of all perimeter floor framing members.

Hopefully Jason Scott at 123flip can chime in.

There is another aspect to this. If this is a one off flip it may be different but if you plan on creating a long term business doing that your reputation could take a big hit justified or not.

With court there is the time you spend on filings,attorneys,preparing for a case, going to court,etc. Then there is the money component. You not only lose emotional time but monetary time as well. Now there will be a filing of a court case in the records and anyone in the future looking at one of your houses for sale can research you.  

Make sure the contractor is very experienced and not the average (joe blow) where you are trying to save money. That could cost more in the end when they give incorrect findings or can't find the cause. Most court filings attorneys will mention usually are settled out of court due to time and expenses.

No legal advice given.

@Sara C. A standard home warranty is worthless, no way a generic watrenty Is goIng tO Indemnify your work On a flip, so I don’t blame them for that. I’m guessing your real estate agent wants the problem to go away with as little time and effort on their part as possIblr and they don’t care about your costs. In fact they are now in the situation of being the buyers advocate not yours. I would just work towards a cheap solution by getting a few different contractors to analyze the issue tellIng them to make It easy and cheap If possible. Neither the buyer nor your realator has any incentive to save you money

Ductwork within a conditions space should not sweat that much unless its super humid.  If its ductwork dripping then you would have a wet line that follows the ductwork which should be "several feet" long not one small wet spot.  A wet spot is from a drip so figure out what plumbing is over that spot.  Open the ceiling at the wet spot to look around.

I like what @Mike Cumbie stated.  I would add if they choose a different contractor to find the problem you will need to see the issue first hand.   I would also look at the wording of the warrant you written to see what was specifically included and excluded.

Originally posted by @Steve B. :
@Steven Picker a home warranty would do sh*t. Just reference page 37 paragraph 3 clause 2

My point is that I never heard of giving a personal guarantee on a home that you flipped if your not a contractor   Home warranties are not the best but I rather pay $500 and let a national company assume the liability  

@Sara C. you are responsible for this repair. If you hired a licensed and insured GC then you could take it up with them. But if you chose to GC this project yourself then you are the GC and therefore responsible. 

Yes it is unethical not to address this repair. 

@Andy R. HVAC codes are supplemental to the IRC. What you do in NJ has no bearing on what is required in GA. 

@Mike H. going to court is probably the worst possible outcome. Sara will almost certainly loose. 

Look at from the consumer's point of view: 

Consumer does not want to buy a flip because most flippers do shoddy work and have no idea what they are doing. Consumer demands Flipper guarantee their work for an extremely limited amount of time. Flipper agrees to this condition. Flipper's work turns out to be defective and Consumer activates guarantee. Forget the what you touched vs. did not touch. If you went to the studs you touched everything. 

Also the downside of getting into the nitty gritty of this could be severe. Does the permit pulled reflect the actual SOW? How did you calculate the 50% rule? Is that methodology standard in your municipality? If it's different there is a good chance you invalidate you Permit and open yourself up to fraud charges.  

@Sara C. I am not trying to pick on you. I am developer and a GC. I have been where you are and really feel for you. But, you built a product and put your name on it and in under 12 months the product you built is leaking. That's unacceptable and you should take responsibility. 

I'm no attorney but if I were in your position I'd fix my work before I sought advice of counsel. 

The other thing to consider is your brand.  If you fight this, you should expect this owner (rightly in my opinion) to trash your reputation.

100s and 1000s homes here were flipped and sold back. Most are sold as-is here with no flip warranty the roof won't fall on the picky buyers.  95% were sold with no warranty what so ever. We are in earth quake country, earth movements, foundation and termites, piping stress risers. 

My suspicion is it is from a water pipe not A/C condensation. Cut a hole repair and put it back. A good texture guy can make it transparent. In here, that is a buyers problem.

I will refer them to a good plumber and texture guy and will disengage as much as the contract states. 

I would try to see what the actual problem is and try to come to a resolution as a group (i.e. The buyer, their agent, your second opinion GC, and you). That way, their is a better chance of an unbiased determination of the problem. Once you guys agree what the problem is, ask your attorney, and local building inspector to see what their opinion of your actually liability is. Then determine best course of action. Even if you have zero liability, with this, a little help in repairing may buy you some more goodwill for the rest of the duration of the warranty. I'm sure at the end of this ordeal, you would still like to sleep with a clear conscience. You can do everything right and still get sued, which is unavoidable sometimes, but it's better to be unknowingly negligent than knowingly fraudulent. Good luck.


@Mike Cumbie finally have an update! The situation has become more dysfunctional unfortunately. The homeowner canceled on my contractor on 3 separate occasions, but let us know an HVAC tech had determined the issue to be a dryer vent leak. This doesn't surprise me as it has a very long run across the townhome. We have offered to fix it, or provide funds to do so (mind you - I have not seen any documentation of the issue, only verbal). Homeowner would like to move the vent to a new location, as they don't like the current design (which was original to the house... not something we changed. I do agree it's not great). I see this as a new project, and offered that they could put my funds of the repair toward that. They were very upset by this suggestion. 

The toughest part of this is how the communication has been handled. I've tried to be very business-like but kind and upbeat. The homeowner will not communicate with me directly, only through the realtor that did the deal. So it's all been by phone via the realtor or email directly to the homeowner. The realtor has become increasingly unprofessional and yesterday accused me of concealing the issue, and "of faulty workmanship and or lack of proper building practices and the renovator should be responsible and cover the cost of this repair, whatever the solution is."

Phew, I've been pretty upset about it. I just want to fix the darn issue and they won't give us access or communicate with me directly. I realize I might have a blind spot here, but I really do want to fix it and move on. 

Thanks for listening!

@Sara C. if you didn't have a warranty my opinion would be much different. Having that warranty puts you in a tough place. The truth is I would put and keep all communication in writing with the realtor and the homeowner copied. It sounds like it is going to go south, and unless you give in to their demands, there isn't much to do to "save face" here. I had an after sale issue but no warranty so it made things easier for me.

Thanks @Brian Pulaski . Yes, honestly I'm ready to give into their demands. I don't want this to blow up, I want it resolved. 

The only thing is working through this realtor anymore has become a "hard no" for me. One thing I didn't mention is this is MY realtor too. He sold this townhome for me, and brought this buyer. Of course, the real estate transaction has been completed, so his involvement does not seem appropriate at this time.  I would appreciate the homeowner to spend a moment on the phone with me to form a basic connection, and also provide documentation of the dryer leak before I write a check (since our contractor was unable to get an eye on it). 

A huge thanks to everyone for all your responses. They've all been very helpful and I really appreciate this sounding board.