Lessons Learned

[Brad Williams]

Even though I have been doing this a few years, I still consider myself a newbie. I just had a deal fall through and learned a new lesson. Well not a new lesson but, was reminded of a previous lesson and why I go so far with inspections.

We are in a area that very bad soil, so many, if not most, properties need foundation work which can range from minor to very expensive. In this recent deal, I had an opportunity on a pocket listing from a realtor I have worked with many times. I put in a contract and the numbers were very good, at least for our market. The home had foundation issues but, I was assured by the homeowner and the realtor that it was not an issue because the house had a lifetime warranty on the foundation.

So, I got a home inspection from a good home inspector and fellow BP member. The inspection was good overall -- some issues but, he also did some measurements of the foundation for me and confirmed the issues that I already knew. So, as part of the due diligence, I called the nationally advertised foundation repair company that had the warranty on the property. First, they were a pain to deal with and refused to set an appointment for me and refused to even talk to me about the foundation. Through the seller's realtor, they did come out after the homeowner called and set it up. The ultimate result was that the foundation company did not think any of the reparis needed were related to the "lifetime warranty" and quoted $28,000 in additional work needed. Keep in mind that seller and seller's realtor said the foundation was not an issue and that it would be covered by the warranty, they provided the warranty and all the necessary documents to confirm there assertions. BTW, I believe that they genuinely believed it to be true so, I don't blame them. Now if I had owned the property, I would argue and possibly sue the foundation company over the denial of warranty claim but, I don't own it and am not looking for that sort of issue on a flip.

So, that long story can be summed up with an important lesson -- make sure you not only do inspections but, follow through on the due diligence part of the deal before closing and include contingencies in your deals so you can walk away. Avoid problems that are going to delay your investment and, even worse, eat up your profits. I ultimately walked away from the deal after spending some of the best money ever on proper inspections. But, I wanted to share this story and lesson.

I would love to hear other investors stories and lessons learned.