Living a Nightmare on first flip NEED HELP!!!

35 Replies

Hi BP community, Im living a real life real estate nightmare on my first flip. So I just recently finished my first flip with my general contractor who i know personally from him remodeling my own personal residence, so i know he does good work. The total cost of the renovation was a little over $70k. We signed the original contract for $64k but as expected there were some overages one in particular was to address a drainage issue near the foundation of the home, so i agreed per his recommendation to have new drain tile installed on that side of the house. He said we may have to do drain tile on the other side of the house but he would let me know. So after installing the new drain-tile on the one side of the house and a new sump pump system in the basement, he left the walls open in the basement to check for water entry for a week. According to him he tested both sides by continuously running a water hose on both sides and we had quite a few rainstorms that week with no water entry according to him. So he made the decision that the water issue was solved and proceed to frame the walls and completely finish the basement remodel. 

After the renovation was complete, the house passed the municipal final inspection, I gave my GC the final payment for the project and I listed the home myself because I hold a realtor license as well. I received a 98% offer off list price after my first showing, things couldn't be going any better. The buyer had their home inspection and only minor issues were uncovered which I had my GC handle quickly because the buyer was using a FHA loan and I know how anal they can be. So after the inspection repairs were made the only thing left was for the FHA appraisal. A few days before the appraisal was to be scheduled there was a bad rainstorm in the area. My G/C just so happened to go to the property the next day to tackle a quick repair and called me and told me there was some water in the basement but nothing major. When i went to inspect the property myself I noticed the water issue was more serious than expected. The entire carpet in the basement bedroom was damp and there were visible signs of water in several spots. The weather report showed that there would be more rain in the next coming days so me and my G/C decided we would see how bad the issue actually was at that point.

So needless to say, after returning to the property after the next rainstorms there was a large presence of water in the basement and it definitely is a major problem. I found out that the drain tile my contractor did install on the one side of the house probably was not done correctly and the way he handled the drainage on the other side after installing an egress window was probably done poorly as well. At this point I have to get the issue fixed and it will definitely be a major expense and potential kill the sale. When I asked my G/C how he would address the problem he only came up with quick patch up solutions which I know will not work and he is claiming there was no negligence on his part and i am responsible for it. 

Has anyone ever faced a situation like this??? What do you believe are my options. Luckily for me I kept pretty good records of the transactions with me and my GC as far as the contracts with scope of work, draw payment receipts, payment ledgers, extra work requests and lien releases. Do I have a legitimate claim against my contractors surety bond for negligence? I mean, you would expect a licensed G/C tasked with a full basement remodel to address waterproofing a basement competently. What do I do??? This deal will make or break me!!!

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sounds like a good reason to meet for a free consultation with a lawyer on the matter. all you will get here are opinions and although there are some attorneys on BP, you need to confer with one in IL which is considered an attorney state, if I'm not mistaken.  you need legal advice on how to proceed. 

Kudos,

Mary

Tough situation. I agree with Mary...talk to an attorney. You might also get some written bids, opinions on the work that was performed. I know you state you believe the work was sub par, but get other written opinions. 

No company avatar mediumJohn Thedford, John Thedford | 239‑200‑5600 | http://www.capehomebuyers.com | FL Agent # BK3098153

Thanks Mary B, I will definitely be calling my attorney on this issue tomorrow since he is also my closing attorney. We will also have to disclose the situation to the buyer and their agent and attorney and give them options to proceed. At John your 100% correct I'm getting up first thing in the morning and calling several plumbing and waterproofing companies to get quotes and opinions. 

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I would do what you are stating and then keep the buyers 100% informed of what you are doing. I think as much as it might scare them, seeing you going and doing the right things (not trying to hide a leak until after a sale) would actually make them comfortable with the end solution.

I hope so brian... I have actually met the buyers on a few occasions and they are really good people. I hope the honesty makes the feel secure.

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I'm not sure about your area, but I have spoken to multiple basement waterproofing companies (pricing in the $10-12,000 range, just FYI) and each one noted they give lifetime, transferable warranties on their work. If I were your buyer and you had a company come in, fix it, and warranty it... that would make me feel very good about the situation.

Good luck.

Not knowing all the particulars... can you keep the contract in force while you get repair estimate from a specialist company(basement repair/ waterproofing) which will likely offer a warrenty on the work. Would offering to reduce the sale price by the repair estimate amount ,work to allow the sale to continue? Or checking with buyers to see if they can wait for repairs to be done(contract extension)? Dont spend time with attorneys or fighting with your contractor now, just concentrate on how to get the deal done. I hope this works out for you

Thanks again Brian I will let you know the ranges of estimates I receive in my area as I will be getting at least 4 estimates this week! And Will you are 100%, correct priority #1 is getting the problem fixed and the deal closed. I will focus on recouping my damages for any negligence later.

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Step 1. DO WHATEVER NEEDS TO BE DONE TO CLOSE THE SALE.

Step 2. Battle/Sue accountable parties, if need be, AFTER THE SALE HAS CLOSED.

@Daniel Johnson ,

I'm 100% with @Seth S. , get it done and fixed ASAP,  sell the house.. and then go after your GC for negligence, this was his fault and you should get compensated for paying him for a bad job, and also anything it costs you to get it fixed.    Personally, I wouldn't use him to fix it,  as he's already shown he doesn't understand it.

@Linda D. I totally agree with you! Just speaking with my GC and the solutions he is coming up with I can tell drainage and waterproofing are not his strong point. After we encountered this water problem at my home he advised me that the basement in his own residence had flooded multiple times and he has three sump pumps installed. And his residence is fairly new construction (2004). I'm definitely not hirin him for the solution as @Will Grabert stated at this point I need the experts to come in and get multiple quotes and analysis of the work that was performed. This whole situation  sucks because I really consider my GC a friend but I can't take this type of loss especially with him denying any type of error on his part. 

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I work for a GC, my dad.  I can tell you water in a basement is sometimes easy to fix and then other times it's not.  I would advise you to check your gutters though. A lot of times water in the basement is cause be your gutters not working properly. If those are working check to make sure the surface water is running away from the house.  So essentially have some dirt built up around the house so the water runs away. Those are two simple fixes and in my experience have fixed a lot of our issues.  

Good luck!

@Daniel Johnson undefined Just because this issue is not his strong point would you consider this part of your Learning Tuition? I'm new here and just came into this thread and i am curious. Since the GC is good at most of the other things you need for the flips and it seems the relationship is strong will you continue to use him or move on?
I think if i were in your shoes and had solid proof he did not do good work on the one side, i'd get the final cost for water proofing and see how if he would pick up 50% or more or whatever you feel comfortable with. Sometimes with contractors you have to scratch their back and at a later time they'll scratch yours. In my past I've dealt with vendors this way that I've had strong relationships with. 

@Jason Cook I definitely would like to continue our friendship and working relationship on future projects and I totally intend on presenting a solution where we both pay towards the damages once I receive the quotes from the experts. We will see where it goes from there. But this is definitely a learning experience for the future.

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Wesley Davis is right on, I have done around 4 houses with water issues I designed the fix myself. My Experience was based on talking to basement expert many times who I am close too, my dad gave me knowledge of grunt work when buying pipe how to do it etc.…

1-Haul in dirt around foundation install window wells 2- cut back trees that are too close to the house 3-clean gutters forget gutter guards most if not all do not work for various reasons 4-increase the  size of gutters, make sure gutters discharge  10' , I buy black drain pipe burying it discharge far away from the house.

5-Sump pumps is the last thing to do. they are noisy. I have had several tenants complain about noise. Fact I am trying to sound proof a sump pump right now.

I'm sure you'll work out how you deal with the contractor part so I won't comment there.

Drainage issues: 

#1, Identify the source of the problem:

  • Gutter/solid surface water pooling near the house
  • General grading issues allowing surface water to run towards the house
  • High groundwater table
  • Underground water conduit towards the house (solid rock, old abandoned pipes, etc)

#2, Identify the solution:

  • Gutter/solid surface pooling - simple - move the water away from the house.
  • General grading issues: sometimes simple, sometimes expensive. The house should always have a swale around it, even if it sits in the bottom of a moat. If all the surrounding land runs towards your house and you cannot correct that grade, you want water pooling away from the house and then deciding how to evacuate it.
  • High groundwater table: Not much you can do with this except have a good sump pump system. That should include some perimeter drainage inside the walls in case of water filtration, leading to a pump system that will evacuate the water as far as possible. If legal to put it into the sewer system, that is ideal, if not, pumped far enough away that it surface drains far enough from the house to not be in a constant re-pumping cycle.
  • Underground water conduit: Find and remove the conduit if possible. If not, like in the case of solid rock subsurface, attempt to drain everything with a gravity footer drain elsewhere and general waterproofing of walls. If that can't be done, you are back to a sump pump.

Keep in mind that you might be able to employ an outdoor sump pump depending on conditions - they don't all have to go inside the house. But you can't get a strategy until you identify the primary source of water. Keep in mind that probably 75-90% of all drainage issues are either poor grading or poor solid surface (water, patio) drainage. Those can virtually always be solved outside the walls of the home. 

How far out do your gutter downspouts extend?  Is the roof water being taken away from the house properly @Daniel Johnson ?

Dan, I live in Chicago as well and I will say that this weekend was a straight up Monsoon. I was actually looking a properties this weekend like 3 flats with basements, even the nice newer ones had water in them too. I would actually get the water out of there and try to assess between the contractor as well. You might actually take this opportunity to remove carpet from the basement and put in a hard floor surface that will drain more effectively.

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I haven't read the other replies. I would first give the GC the opportunity to PROPERLY fix the issue on HIS dime. If he refused, I'd file a claim with the Registrar of Contractors in your state.

Note you don't need to pay for a lawyer (initially). File with the Registrar - this is what they are there for and why GC's have to be licensed.

The question for me is how much are you losing if you just pay another contractor to fix it? Do you still make a profit on the deal? If you are not taking a huge loss it may be better to just save time and move on, take it as a lesson learned and never use that guy again.

If he was properly insured he should also have coverage under his general liability policy. Did you ever get a certificate of insurance from him?

Yeah manny depending on the quotes I receive to fix the issues I may still walk away with a small profit. But I would still be seeking some form of legal remedy on the back end. @Vince Scolari I never received his insurance or bond certificate but I is registered with the municipalities building department.

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