In escrow – Overreacting to inspection/disclosure/water issues?

[Balboa]

Thanks in advance, even if just to Rich for providing me a place to rant…

Under contract to buy a house in North Park that’s been a rental for the last several years. While not traditional craftsman or Spanish, or even one of those non sequitur Tudors, the place was “rebuilt from the studs”, supposedly including plumbing and electrical. It shows very well. After other things we’ve looked at, the low maintenance systems and pleasant location (a block from McKinley Elem., two blocks from Saint Augustine’s) seemed like a big pluses. With recent developments, though, I’m wondering whether I should be walking away, or just extending the contingencies and escrow while I rack up more inspections and eventual peace of mind.

The disclosures said nothing about the plumbing or electrical upgrades and nothing about the roof that I know the seller put on … because his general contracting website shows photos of it being built. Nothing was disclosed about any actual problems.

The inspection (used Parra) revealed humidity and standing water under the house. Seller – a licensed plumber –is now busy trying to fix it himself. Apparently he fixed a definitely leaking ABS-to-city-cast-iron connection this week and he wants to reroute the neighbor’s gutters. Of course, those are completely separate issues, and how /when will I know if one’s the true fix? The water issues are reportedly a total surprise, despite the rusty box fan already under the house when our inspection took place. I’m having the pipes scoped Friday after the owner is done doing whatever else he is going to do.

Tried to set up homeowner’s insurance today – there was a $7k claim for water damage in 2012. According to the owner, a washing machine mishap. Neither damage nor repairs disclosed ahead of time. The seller came up with a draft document from his insurance company about what was needed and rate of coverage, but he managed all the work himself…no other documentation provided.

Is it reasonable to just extend the deadlines, get the plumbing inspection and a mold inspection and, if they are clean, march toward close? Or are these the red flags that they certainly feel like to a first time buyer? I honestly don’t even know what a plumbing inspection can tell me – seems like you just have to have enough time to experience rain/pipe use/dry weather to know if all is well under the house…

[CA renter]

Definitely a stressful situation, especially for a first-time buyer. I think it’s reasonable to ask for an extension of the contingency period if you need extra time to get these additional inspections. I would also seek the advice of your realtor regarding the items that were not disclosed, especially the water damage.

Let the seller know that you want paperwork for the roof and any other big-ticket items that were done to this house — including plumbing and electrical work. If the guy is a licensed plumber, have him draw up the paperwork describing the work that was done, the quality/type of copper or piping that was used, any warranty information, etc.

Always know that you can walk away, and don’t be afraid to do so if you feel that people are hiding too many things from you. IMO, that’s not a good sign, but it’s not necessarily worth blowing up this deal if everything is really okay.

Maybe ask Parra what your next step should be??? Your realtor really should be helping you more. Make him/her step up to the plate; you need to demand proper representation.

Best of luck!

[ljinvestor]

If it was recently rebuilt from the studs they should have permits on file with city which you can check on.

[CA renter]

[quote=ljinvestor]If it was recently rebuilt from the studs they should have permits on file with city which you can check on.[/quote]

Excellent point, ljinvestor.

[poorgradstudent]

I’d call most of these yellow flags more than red flags. Definitely cause for concern and full investigation.

When we bought our house the inspector did basically tell us something like “but you can’t really be sure until the next time it really rains” about some stuff. Water doesn’t flow ideally off our house/lot and we need to make some repairs, but we knew about that going in.

The bottom line is to weigh the price your offer was accepted at vs. the percieved risk. I know that neighborhood, it’s gorgeous and central, but the houses can be very old and have all the associated problems. There is something to be said for walking away if something *feels* off rather than dealing with it for years and years or $$$. But there will be something wrong with every house, even brand new construction.

[exsdgal]

From your description of the water issues, I presume the house has a crawl space. Couple of suggestions come to mind, 1) to check if there is any active plumbing leak in the house, close all water outlets and see if the water main meter needle spins. If the needle spins, there is some water leak that needs further investigation 2) it is also possible with the recent rains and bad drainage around the house, the water could have collected under the crawl space.

IMO it is also a good time to check the attic for any roof related leaks. Good luck with your purchase.

[UCGal]

[quote=ljinvestor]If it was recently rebuilt from the studs they should have permits on file with city which you can check on.[/quote]

Yep. Take a trip down to development services downtown and see what permits and inspections were done. If the seller didn’t pull permits, despite being a licensed contractor, I’d run away – far away.

The permit building inspections aren’t perfect by any means but they often catch “short cuts” and make the contractor fix them.

The rusty fan under the house is a big red flag to me. This guy is trying to cover stuff up.

[svelte]

I don’t know, none of that would scare me away.

I might ask for extra time to do a mold inspection and to re-inspect repairs made, but otherwise I wouldn’t run.

You might also come up with some rough figures for what it would cost to fix it right later on if it turns out the problem(s) return because they weren’t done right the first time – to help alleviate your fear that you’ll be out a fortune.

On our current home, we had the sellers do some repairs and they completed them…technically…they were half-assed and I noticed during the walk-through but we loved the house so I just said whatever and decided to redo them myself later on. That way I know they are done to my standards…judging by the other repairs the seller had done to the house over the years I figure he thought he was doing my repairs right according to his standards. It’s just his standards aren’t very high. 🙂

[Balboa]

Thanks, everyone, for the good suggestions and tales from the trenches. I’ve been MIA due to work and, of course, this house business.

I haven’t been down to the records department, but I did use the city’s Open DSD online permit/approval search. There was a combination permit for an addition, but the info is so sparse I had trouble interpreting it. I can see an inspection history, but again, kind of vague. You can tell that at least some roof work and some electrical was inspected and eventually got a sign-off. The city has an online service where they will email you permits from 1990 onward. I was expecting to get some sort of thing that said “owner is permitted to do x,y,z,1,2,3.” Instead, it’s just a copy of the cryptic approval info online.

We had the pipes scoped Friday and had a plumber out to the house today. Today confirmed that the work we waited for the seller to do himself was…not top notch. This plumber had what we thought was a good suggestion: either we get credited for the quote to do the work right, or we pay to get a plumbing permit and the seller does the work again *and* the work must pass inspection. We’ll see if it flies. The plumber thinks the standing water is a drainage issue, which is a bummer. Now we’re looking at a foundation inspection. (The seller himself is a licensed plumber. Shoemakers’ wives go barefoot…)

We sent a status list to our agent tonight. Recommended postponing termite tenting until after close so as not to take up inspection days, and asked about possibly extending the dates since a number of things are outstanding (mold, foundation, repairs, negotiation of same) and the inspection contingency runs on Thursday. I think we agreed to a 21-day close because *our* financial ducks were in a row and the property was described as “turn key.” Seemed like it would sweeten the pot. But our loan rate is locked beyond our current closing date, and we’re not actually in any hurry.

My husband is following this thread, so I will refrain from noting how much I love renting. Hi, honey!

[CA renter]

Personally, I would always opt for a price reduction vs a seller’s credit because you will otherwise be paying property taxes for this credit. The only reason to request a credit instead of a price reduction of the same amount is if you don’t have enough financial resources after the down payment, closing costs, etc. to do the work and still have some wiggle room.

Depends on how much you’re talking about, but in some cases, the amounts can be substantial, and you’ll be paying taxes on that amount (plus 2% a year, compounded) for as long as you own the home.

[Balboa]

I totally agree. We don’t actually need any help closing or financing repairs. We’ve been thinking in terms of credit because, based on previous negotiations, we’re pretty sure he would never agree to drop the sale price below 500k. Maybe a credit would be psychologically easier for him.

Background: this house has been for sale off and on for more than a year now. I don’t really blame the house. I blame the seller and agent who listed it at $610k/$620 per sq ft. Seller considers it his labor of love.

This place is cute and all, but not a special style, just 980 sq ft, no garage or driveway, 2/2 so not for most families these days, and you have to go up a flight of stairs to get in, so not necessarily for downsizing seniors either.

The price has been incrementally dropping for the last year. The house has never been pending. This fall, they listed it again with a value range (ugh). We made an offer — the only offer he got — and decided not respond to the counter because the guy was clearly not honoring the range. His agent comes back a few days later and says, “If you write ‘X’ offer, I can get him to sign but I need your offer in writing.” It was substantial increase but still below midrange and a number we could have gotten to in negotiations, so we agreed. The seller responded by dropping his demand by 5k. We did not counter.

The agents kept talking amongst themselves and we are told by the other agent *again* “If you write ‘Y’ offer, he will sign.” Another substantial increase, but we can afford it, especially given the rates (I know), and a review of sales in our preferred areas showed we hadn’t missed anything better at this price in the last year.

The guy demanded a measly 3,000 more dollars. It was never presented to us as an offer, because our agent knew we would absolutely not sign. The agents just agreed to cover the three grand from their commissions. I was stunned by that, and thought the listing agent should have to eat it all since he twice misrepresented/misunderstood his client’s position. But it is what it is.

I think the stakes for him are on the low side — yeah, it’s a black mark to have it on the MLS forever and then fall out of escrow. And we are papering the crap out of it will all these inspections. But he’ll just rent it out again if it doesn’t sell.

[exsdgal]

Buying a house is an anxious time, and one needs to be comfortable with all things before signing the papers. Only you can know if the house presents a value in terms of cost and associated hassles upon purchase.

Without knowing if the standing water under the house is a big pool or just small puddle(s) it is difficult to state the severity of the problem. Here are some general thoughts about the crawl space. Most crawl spaces have high humidity, generally from the lack of air circulation/ventilation.

Here are few no/low cost inspection options before spending further inspection dollars. 1) Walk around the exterior of the house and check for large visible cracks at the base of the house 2) see if the rain gutters are present and operational 3) any large trees/shrubs along the perimeter of the house 4) are there any concrete patios around the house (my guess is none)

The crawlspace dampness can be reduced by minimizing the water that seeps under the house. e.g. collect and divert roof rain water, install concrete patio (1-2′ deep) or a french drain to divert lot runoff water.

Regarding the plumbing, one of the main reasons pipes leak is due to high water pressure in the lines. You could check if the water pressure is within limits, and/or change the pressure regulator for the house. IMO most pressure regulators need replacement every 20-30 years. It is typically a couple of hundred dollar expense well worth the replacement cost in lieu of cost of replacing the house plumbing.

After your assessment if you decide to purchase the house, perhaps you can ask for a price reduction 5-10K. May be worth the effort. Good luck!

[Balboa]

Thanks, exsdgal!

For the low hanging fruit — There are no visible cracks anywhere on the property; there are no gutters at all; there are no large green anythings on the property; the *entire* place is hardscaped with the exception of a couple of planter strips and an 8×10 grass patch at one corner of the lot. The grass patch is surrounded by concrete and does not touch the house. The concrete is all in good shape.

We have been there twice now in the rain (husband went out at 615 am today) and there is no pooling or streaming that he can see from the outside. The house is on the high side of the street, and the neighbors across the road on the low side all back up to a canyon. The downward slope of all the patios (toward the street) seems adequate to our untrained eyes, and the block walls at the front of the house do have drainage holes, so somebody was thinking of the issue at least a little.

We’ll have to ask about the pressure regulator. The plumbing was upgraded to ABS, but somewhat half-assed. That said, the guy we had out yesterday said none if it is actually leaking right now. Just poor quality work that wouldn’t pass inspection.

[NotCranky]

The water could be coming from several properties over maybe a big apartment. See if you can find out if the neighbors have the same issue. This is not an extremely rare event. Well I see you say it’s on the high side of the street. Maybe a nice french drain down to the canyon would help, lots of people put them in because the clay soil doesn’t percolate well.

[ucodegen]

[quote=exsdgal]Couple of suggestions come to mind, 1) to check if there is any active plumbing leak in the house, close all water outlets and see if the water main meter needle spins. If the needle spins, there is some water leak that needs further investigation[/quote]Only works if the water is moving fairly quickly. Meters are designed to measure HCF (Hundreds of cubic feet). Small but dangerous leaks don’t always move the meter very quickly.

1) Use the ‘close off all valves etc’ step, then use a large screwdriver and press tip to the metal near the meter and handle against your ear. If there is hissing, or water sounds, could be a leak. You can work up the line by pressing the tip of the screwdriver against valves and metal water pipes etc. It may not id the valve, but louder tends to be closer.

2) Another tech is to shut all valves if you are going away for the day, photo the meter and then photo it when you get back. This way you’ll detect any needle movement.

3) Finally, you can turn off water, drain water out by opening a high and low valve (highest in the house and lowest, probably valve outside). After all water runs out, make sure all valves are closed. Select a valve that you can screw a pressure meter into and do so (turning that valve and that valve only on) SLOWLY turn the water back on – stop turning the main valve when you hear hissing. Wait for the hissing to stop (don’t want to cause water hammer). Turn all the way on and make a note of the pressure (photo?). Close main, wait for several hours and then read pressure again (photo/compare).

NOTE: Method #3 is very similar to the ‘leak-down’ test used when getting plumbing work signed off by the city (particularly with a new house). They often use just air only and use a compressor to bring the house pressure up (I think it is about 50 psi, 15 min, air only – but not on plastic water lines.).

NOTE: If you have an icemaker, it would be a good idea to turn it off. Make sure none of your toilets and faucets have the drip leak – it will be picked up on the readings.

NOTE: Not all meters are HCF only. Some of them actually measure down to 1/10 Cubic Foot (which is about a quart and a half).

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