Flip gone bad - need some advice

Rehabbing & House Flipping
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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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  • Bennie Leija
    Developer · Houston area · Member since 2020 · 56 posts · 26 votes
    5y

    Five tips

    1-Never trust a wholesaler 

    2-Never trust a realtor

    3-Invest in hiring a solid inspector 

    4-Create a scope of work document 

    5-Take 2-3 contractors to site visit 

    This is a business and your money 

    Bennie 

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

    @Jay Hinrichs I agree. I’ve seen this project to replace cast iron upwards of $20-30k depending on length and scope. More expensive if it’s a slab foundation versus pier and beam.

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

    @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. 

     You handled it well and I feel like you got a pretty solid price on the scope of work. Do you feel your going to start paying for sewer inspections? I sure don't. 

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

    @Brett Tvenge

    I'll definitely be more cautious about it and do more research/due diligence. Being new to the biz, I just didn't expect their to just not be a sewer. Typically, you're warned of roof, HVAC, electrical, foundation and plumbing issues. We checked for everything short of opening up the walls.

    0Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    5y

    @Jim Piety  not sure why the town was not all over that. They usually base sewer bill on water bill and if you have sewer available in most places you can't keep your septic. 

    0Reply
  • Philip Coiro
    Flipper/Rehabber · Member since 2018 · 87 posts · 67 votes
    5y

    @Jim Piety

    How much was the estimate to fix the issue that you’re now taking a loss?

    0Reply
  • Randall E Collins
    Specialist · Member since 2021 · 266 posts · 113 votes
    5y

    Ok 

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    5y

    Very rare to do a sewer line inspection in Texas on a purchase.  Personally, I have never done one in 30+ years in the business.  $6K or so is about the max I would expect in Texas as we do not have water/sewer lines set as deep underground as would be expected in the north.  This seems like a problem that could have existed for decades.  I cannot imagine that the smell during the 100+ degree summer heat would be tolerable.  A basic home inspection includes at a minimum looking inside the crawl space of a pier and beam house.  Just seems impossible to miss this unless the property had been vacant a long time and the water was not on but a short period for inspections

    1Reply
  • Mike ReynoldsPro Member
    construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
    5y

    Been building in this state since '83. There is one constant. Expect the unexpected. Especially the unexpected sewer problem. 

    I think you paid a little much for the trenching. Did the plumber not have his own mini X to dig with? I just rented a D5 for 1500 dollars for a weekend. It's big enough to knock down medium size trees. If they used a Ditch Witch you got robbed. 39' is not far. 

    All in all you didn't come out too bad though. I'm with @Greg H, this should have been seen by the inspector when (or if) he went under the house. At least he should have smelled it and noted that much. 

    2Reply
  • Lucia Rushton
    Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
    5y

    @Jeffrey Evans are you a new investor ? Sadly this is a prime example as to why I do not recommend first time investors buy through a wholesaler - because the person has no experience so they don’t know what to look for, cannot have an inspection or an option period, your earnest money goes hard to the wholesaler day one ( not the seller ) and it’s an all cash deal.

    Please hear me, I know investors who have lucked out and not had any problems on their first deal and others with scary stories. Id also say ‘most’ not all wholesale deals are not too far off on-market pricing these days.

    I wish this investor in Texas all the best on his situation.

    0Reply
  • Craig Janet
    Member since 2019 · 223 posts · 261 votes
    5y

    I agree with the poster above. You got robbed on the trenching. In Louisiana I found a guy on facebook with a mini excavator to trench out 100 foot about 4 foot deep for $300. It took him about 20 minutes. You can rent the mini excavators for about $250 per day.   

    2Reply
  • Victor S.
    WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    5y
    Originally posted by @Mike Reynolds:

    Been building in this state since '83. There is one constant. Expect the unexpected. Especially the unexpected sewer problem. 

    I think you paid a little much for the trenching. Did the plumber not have his own mini X to dig with? I just rented a D5 for 1500 dollars for a weekend. It's big enough to knock down medium size trees. If they used a Ditch Witch you got robbed. 39' is not far. 

    All in all you didn't come out too bad though. I'm with @Greg H, this should have been seen by the inspector when (or if) he went under the house. At least he should have smelled it and noted that much. 

    +100 Comes out to over $100/ft. Would be interesting to know what method they use and the time it will take them to do this.

    Jim, how many quotes have you gotten or this? Is finding another contractor out of the question?

    A s****y situation, indeed. 

    1Reply
  • Jeffrey Evans
    Investor · San Jose Ca · Member since 2020 · 125 posts · 115 votes
    5y

    @Lucia Rushton I am a new investor.  Closed in Jan on a new build in New Baunfels.  Just trying to figure out a way to find deals ect to do more of a brrrr type approach so it hopefully doesn't tie up so much capitol.  Just hard to do from out of state.   Def a bit sketched out with going the wholesaler route.   I have noticed that the wholesale prices I get emailed aren't that far off reg mls prices.  Just so competitive to get a place.  I am sure having a good investor swavy real estate agent would be a safer approach.  

    1Reply
  • Tim Hall
    Flipper/Rehabber · Tallahassee, FL · Member since 2014 · 462 posts · 237 votes
    5y

    @Jim Piety wow, mind blown. Sounds like you’ve got it all handled. I appreciate your post. Just the other day I was looking around a house and there was signs of a toilet, shower and tub having been backed up and I thought of this post. Thanks

    1Reply
  • Steven Skinner
    Flipper/Rehabber · Rome, GA · Member since 2015 · 46 posts · 25 votes
    5y

    @Jim Piety Bit late here, but I hope you didn't end up paying that much for the trenching. As much as your contractor might seem like your "friend," or as much as you might believe he's really had your back on this one, that's a blatant money grab on his part. Straight out of your pocket despite knowing this caught you off-guard and put you in a poor financial situation related to the property. At the end of the day, he's only looking out for himself, so you've got to remember to do the same. Best of luck.

    1Reply
  • Fred Herschelman
    Member since 2018 · 6 posts · 0 votes
    5y

    I contract out a lot of my work and then when situations like this come up, I just do it myself. 

    0Reply
  • Jillian KemmererPro Member
    Real Estate Agent · Scranton, PA · Member since 2021 · 55 posts · 25 votes
    5y

    Several companies now do sewer line scopin as an optional add-on to home inspections. They run a camera through the line to make sure there are no broken/collapsed pipes, tree roots, good flow, etc. 
    I have never done this, but I totally plan on starting to definitely suggest it for all of my home inspections. 

    I am so sorry you went through this, but it does seem like you figured it out quickly and relatively cheaply! Good work, and keep going! 

    0Reply
  • Kareem Thomas
    Flipper/Rehabber · Bethlehem, PA · Member since 2009 · 17 posts · 18 votes
    5y

    @Michael Gessner as mad as you are at the idea of them wholesaling, the verbiage that’s used in contracts make it completely legal! No complaints against them will work

    0Reply
  • Michael Gessner
    Pomona, NY · Member since 2016 · 375 posts · 217 votes
    5y

    @Kareem Thomas I think you should take up a few classes in law school to better understand law. Wholesaling is not legal. As with anything, they're are ways around the law.

    0Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    5y
    Originally posted by @Jim Piety:

    @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...

     What I wonder is how you missed the "His & Hers" in the back yard

    3Reply
  • Jim Piety
    OP
    Rental Property Investor · Austin, TX · Member since 2013 · 87 posts · 31 votes
    5y

    Originally posted by @Account Closed

     What I wonder is how you missed the "His & Hers" in the back yard

     LMAOOOOOO

    0Reply
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