Flip gone bad - need some advice

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Flip gone bad - need some advice

Jim Piety
Rental Property Investor · Austin, TX · Member since 2013 · 87 posts · 31 votes

Fellow investors!

I certainly lucked out in my first flip down in San Antonio. Purchased it through a wholesaler after doing a walkthrough with the contractor. Per wholesaling contract, I have to do all due diligence upfront and did not do a thorough inspection. Turns out this house does not have a sewer connection. My contractor says this is a first for him after 18 years of flipping homes. How often does this sort of issue happen?

Regardless, I am now facing a significantly larger plumbing bill that blows my contingency out of the water. At this point, I don't know what to do other than accept the loss, hope the market continues to climb and increase the ARV, and move on.

Is there anything else I can do at this point?

Thanks!

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
5y

Is it on septic? That poop has been going somewhere since the house was built......unless it was built on a big sinkhole and the poop is falling to the center of the earth. 

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    5y

    When you say it doesn't have a sewer connection, are you saying that the property is on septic? If so, is there any reason why you would have to connect it to public sewer and couldn't just leave it on septic when you resell?

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  • JD MartinBusiness Member
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    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    5y
    Originally posted by @J Scott:

    When you say it doesn't have a sewer connection, are you saying that the property is on septic? If so, is there any reason why you would have to connect it to public sewer and couldn't just leave it on septic when you resell?

     This was my exact thought as well. When you say "it doesn't have a sewer connection", I assume that means it is on a septic (or hopefully not a cesspool). As long as the septic system is functional, and that you don't have your lines in someone else's yard, I don't see that you have much of a problem. Some people might object on a flip to having a septic tank, but others will be glad not to pay the sewer bill. If the septic tank/field lines are failing, then I would see if there is an available sewer line to connect to and what the cost would be. If you are just sharing a connection with a neighboring house, this is not as uncommon as you would think - I see it where I am all the time.

    If you are facing some kind of mandated sewer connection - i.e. the sewer department/district has a mandate in place that is now being enforced - then you will have learned a lesson about utility verification before purchase :) . 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y

    Is it on septic? That poop has been going somewhere since the house was built......unless it was built on a big sinkhole and the poop is falling to the center of the earth. 

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  • Rick Pozos
    Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
    5y

    If you bought in one of the older neighborhoods, 1920s and before, sometimes they used to tie 2 houses together and then go to the street. It would be a matter of running your line directly instead of to the neighbors and then to the street or alley.

    That does not happen too often anymore though. Your wholesaler must have been one of the big ones in town. They are concerned with $$$ only. They dont ask too many questions. Its all up to you, or you lose your 5k deposit.

    4Reply
  • Jeffrey Evans
    Investor · San Jose Ca · Member since 2020 · 125 posts · 115 votes
    5y

    This kind of stuff is what makes me paranoid about doing a as is wholesale deal.  Kinda feels like you are rolling the dice to some degree.  Esp the way the market is these days and the good deals don't last so have to jump on them.  Always some degree of risk I suppose.  I am just trying to learn how to minimize the risk as much as possible being an out of state investor.  

    2Reply
  • Jim Piety
    OP
    Rental Property Investor · Austin, TX · Member since 2013 · 87 posts · 31 votes
    5y

    @J Scott @JD Martin @Russell Brazil @Rick Pozos 

    Not sure why I didn't get notified of your responses. But to answer your question. No septic. All of the waste was piling up underneath the pier and beam. It was pretty disgusting. My contractor ran a camera down the "existing" sewer but it strangely went BEHIND the house and stopped abruptly ~1 foot behind the house. We couldn't figure out where it went. And considering all of the other homes in the neighborhood have sewers that go to the front, we assumed it just no longer has a functional sewer. It's really strange...

    1Reply
  • Account Closed
    Investor · Santa Fe, NM · Member since 2021 · 10 posts · 13 votes
    5y

    @Jim Piety

    I just moved from Austin and had to replace my sewer line due to a collapsed “non-schedule 40” PVC sewer line. To save money, I met with my plumber and asked him exactly what he needed excavated and then hired out the labor to dig the trench. Plumber pulled the permit and did a great job. Then I hired labor to fill the trench back in and regrade. Get a couple quotes for the work. Some people may give you a deal if they have a gap to fill in their schedule.

    Hope that helps, best of luck.

    8Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    5y

    @Jim Piety that's a first that I've heard but will make for a great story in the future. Have you gotten bids to install a sewer yet? It's going to be a big job but can be done the same way they repair them.

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  • Ryan KellyBusiness Member
    Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
    5y

    @Jim Piety there is a chance the home used to have cast iron sewer lines and they simply corroded and collapsed. This would explain the sewage buildup under the home. You can have a sewer line installed. Not cheap, but you have no choice if you want this to be a functional home. Sorry for the headache!

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  • Michael Gessner
    Pomona, NY · Member since 2016 · 375 posts · 217 votes
    5y

    @Jim Piety I'd get your contractor to camera that line again, measure the distance and dig it up see if theirs a break in the pipe. I find it hard to believe the line just ends. There would be significant flooding and you'd smell it. Next time do your do diligence and contact your local municipalities to see if the house is on septic or city sewer. I'm in contract on a flip where I had doubts the property was ever connected to city sewer, yet could not find any evidence of aseptic, a quick call to the sewer dept they cam out a few days later dumped die down the sink and sure enough confirmed its connected. If it's not listed anywhere, either for sewer, gas or septic a quick phone call can give all your answers.

    4Reply
  • Michael Gessner
    Pomona, NY · Member since 2016 · 375 posts · 217 votes
    5y

    @Jim Piety also to add, I cant seem to understand why you would not of asked weather its municipal sewer or septic, these are very important questions to be asking when u purchase a property. Septic systems can run 15k +++++ I've seen some run 30k for a 4 bed 2.5 bath. Questions you need to be asking moving foward, city water ? Well water ? When was the line connected to city water ? Depending on age, could very well be a lead pipe and need replacing, on city sewer ? When was it connected, could be sdr, could be clay pipe, could be cast iron etc depending on age, is it on septic, has anything be done to the septic, when was the system installed etc. Most of these questions can be again answered by your local municipalities

    2Reply
  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    5y

    I once bought a house at a tax sale in Brownsville TX that had the sewer line emptying out in a vacant lot next door. But that was Brownsville.....

    5Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Michael Gessner:

    @Jim Piety also to add, I cant seem to understand why you would not of asked weather its municipal sewer or septic, these are very important questions to be asking when u purchase a property. Septic systems can run 15k +++++ I've seen some run 30k for a 4 bed 2.5 bath. Questions you need to be asking moving foward, city water ? Well water ? When was the line connected to city water ? Depending on age, could very well be a lead pipe and need replacing, on city sewer ? When was it connected, could be sdr, could be clay pipe, could be cast iron etc depending on age, is it on septic, has anything be done to the septic, when was the system installed etc. Most of these questions can be again answered by your local municipalities

    out here on the left coast every RE agent will order a sewer scope as part of the home inspection period end of story.

    in parts of the Bay area to transfer title if the sewer line is of a certain age it must be replaced.  My brother in law makes bank doing this with his pipe burst machinery.   Also I built some homes in PDX and the one i tore down had the communal sewer line so have seen those. 

    Wholesalers selling property you have to know they could give a rip about you.. and they have no on going responsibility.. especially the bigger players in Texas those guys well don't get me started.. bad news from my view point.

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  • Michael Gessner
    Pomona, NY · Member since 2016 · 375 posts · 217 votes
    5y

    @Jay Hinrichs I could not agree more with you about wholesalers, we have a few by me right now that are getting properties into contract by use of HML pof, even before they have contract are listing them on fb. Amazing what these people are trying to do. Just had one I reached out to on fb, I show up a bit early to the showing, this dude has the ordasaity to tell his agent I'm his partner. I look at the agent was like I dont know the what your talking about, all in all i let the dude have an ear full. My agent nor his agent had a clue what was going on, called him out on all his bs. Should of contacted the state, it's a felony to be doing what there doing in ny 🤬🤬🤬

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Michael Gessner:

    @Jay Hinrichs I could not agree more with you about wholesalers, we have a few by me right now that are getting properties into contract by use of HML pof, even before they have contract are listing them on fb. Amazing what these people are trying to do. Just had one I reached out to on fb, I show up a bit early to the showing, this dude has the ordasaity to tell his agent I'm his partner. I look at the agent was like I dont know the what your talking about, all in all i let the dude have an ear full. My agent nor his agent had a clue what was going on, called him out on all his bs. Should of contacted the state, it's a felony to be doing what there doing in ny 🤬🤬🤬

    YUP about 1000 wholesalers threads on BP..  guys break the law and say they dont.. tell white lies and say they are helping people.

    Agents that have half a clue will ferret them out though .. in that situation I would have told the agent and then put a back up offer in period end of discussion.  plus file a complaint with the state if indeed you feel what was going on was not legal.

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  • Michael Gessner
    Pomona, NY · Member since 2016 · 375 posts · 217 votes
    5y

    @Jay Hinrichs was clear as day 100 perc ilegal, 1 to sign contract with the intent not to close. Marketing a property without a nys real estate license. Marketing a property that does not belong to you, nor with a fully executed contract to make assignable. The best was hos agent felt bad for him. And gave him credit for trying to hustle. 🤮

    2Reply
  • Matt Ziegler
    Rental Property Investor · Colorado Springs, CO · Member since 2020 · 433 posts · 284 votes
    5y

    @Jim Piety

    Jim, sewer, or septic system connection is not optional. You need to get it done absorb the cost and hope you can make it back overtime with positive cash flow. This is a great lesson learned, although little bit costly. Critical to have a sewer scope done on every property before closing. Best of luck, cheers

    2Reply
  • Tim Hall
    Flipper/Rehabber · Tallahassee, FL · Member since 2014 · 462 posts · 237 votes
    5y

    @Jim Piety sorry you’re going through this mate. I take it the house is not new, right. So they had a connection at one point, right. So some one capped it off for some reason, whatever that reason was, possibly it was easier to do than fix the problem. I would call a locator company and get them to locate all the utilities, septics pipes and everything else. I just went through this and found that my sewer line had a cap on it. ( my house was abandoned for 20 years) also its a pipe, not a rocket ship to mars get some more quotes. Plumbers are like ‘ ooo it’s gonna cost ya’ because they know you can’t do with out it. It was there once, go find it.

    2Reply
  • Matt Groth
    Contractor · Grand Marais, MN · Member since 2016 · 249 posts · 417 votes
    5y

    @Jim Piety most municipalities have pretty good records about where the connections are. My guess, as others have said, is a collapsed line.

    1Reply
  • Chris Szepessy
    Catskill, NY · Member since 2018 · 636 posts · 668 votes
    5y

    I don't know if you've gotten estimates or not, but at one of my rentals, they (town) were putting in town water/sewer and requiring all owners to hook up to the new connections. It cost us $2500, which is a lot of money, but it may be less than what you think it will cost. That $2500 also included removal of the septic tank. 

    1Reply
  • Danny Webber
    Real Estate Broker · Austin, TX · Member since 2016 · 834 posts · 449 votes
    5y

    i would bet there is a septic or sewer line somewhere on the property

    1Reply
  • Randall E Collins
    Specialist · Member since 2021 · 266 posts · 113 votes
    5y

    Ok guys, now I get it, why wholesalers have a bad rap sheet, mostly because of people like you blaming a bad investment on a wholesaler. The wholesaler on this one cannot be at fault. If neither the contractor nor Mr. Piety detected the sewage problem prior to purchase. How was the wholesaler supposed to be able to detect it? Even if you're buying FSBO or from a realtor. Any intelligent investor and/or buyer on any type of investment should always perform their own due diligence and research on that investment prospect prior to sinking money into it. Really stupid not too I think. And if you fail to do this and get stuck with a bad investment (gamble), you can't blame any one but yourself. You are all correct, wholesaler are in business to make money. But why are you in business if not for the money?

    2Reply
  • Brett Tvenge
    Flipper/Rehabber · Phoenix, AZ · Member since 2018 · 268 posts · 152 votes
    5y
    Originally posted by @Jim Piety:

    Fellow investors!

    I certainly lucked out in my first flip down in San Antonio. Purchased it through a wholesaler after doing a walkthrough with the contractor. Per wholesaling contract, I have to do all due diligence upfront and did not do a thorough inspection. Turns out this house does not have a sewer connection. My contractor says this is a first for him after 18 years of flipping homes. How often does this sort of issue happen?

    Regardless, I am now facing a significantly larger plumbing bill that blows my contingency out of the water. At this point, I don't know what to do other than accept the loss, hope the market continues to climb and increase the ARV, and move on.

    Is there anything else I can do at this point?

    Thanks!

     Any update Jim?

    0Reply
  • Jim Piety
    OP
    Rental Property Investor · Austin, TX · Member since 2013 · 87 posts · 31 votes
    5y

    @Brett Tvenge @Jay Hinrichs @Michael Gessner @Ryan Kelly @Jordan Moorhead @Matt Ziegler @Tim Hall @Matt Groth @Chris Szepessy @Danny Webber

    UPDATE: Sorry for the delay. The rain in San Antonio has been making it difficult to dig and delayed this project. There definitely is no septic on this property and the city has no records of the original sewer line. All of the other properties have sewer going to the front. This one had an old cast iron pipe that went to the back and ended abruptly. Even if it was the correct sewer line, it had the entire backyard and the lot behind it to go through before reaching city sewer. In the end, we had the city locate the existing tap-in (which was never used) and the contractor was able to get the total price of trenching, permits, and installation for $6,640.

    39' trenching: $4,000

    Plumber Install: $1,670

    Sand & delivery: $735

    Permit & inspection: $235

    True, I did not inspect the sewer. I had an inspection of the property but nothing indicated a non-functional sewer. You couldn't even smell it. Did not think to order a sewer inspection. My contractor and other RE investors have never heard of a missing sewer so I guess luck of the draw? Expensive learning lesson but now I know. 

    I don't blame the wholesaler @Randall E Collins. I'm not sure he even knew. And there's no point to going after the original homeowner because it's near impossible to prove they knew about it. 

    Fortunately, I had buffer in this project and the market is still going up. I'm not sure it's enough but we'll see. 

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y

    thats a very good price for after the fact sewer line replace.

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