How bad is it? inspection report came back

[profhoff]

We’re in escrow on a property about 1.5 miles from coast. Built in late 1980s. It was clear at showing and then crystal clear at inspection that house has termites, dry rot on all west facing windows, stucco open to rebar along bottom of house, water intrusion that has damaged engineered wood floor, other damage to engineered wood floor from indeterminate causes but could be more water damage that got under floor and got sucked along grain of wood. Also, evidence of prior leak in garage from roof. Many other windows on their way to rot. All window casings are wood. Patio doors damaged/rotted. One first floor room looks to have been patched at various places, but it’s not directly under any obvious water so not clear what happened there. Garage had a lot of junk in it so couldn’t fully inspect.
Basically, house has a lot of deferred maintenance. A LOT.

Question – is this typical? How can I be sure I know what I’m getting into? Agent and GC I brought out to discuss potential cosmetic renovations with, and even inspector, say this is nothing unusual this close to coast when no attempt made to maintain.

Other issues: some electrical outlets don’t work. There’s no GFIC (isn’t that the law?), and other stuff like that.

GC says we can fix it all, but there is a concern about opening the west-facing walls to learn the extent of the dry rot.

Keep in mind that houses are very hard to find and we snagged this one with multiple buyers waiting in line if we walk and for all the issues, house has a lot of pluses. But it’s clearly going to cost serious five figures to repair, replace and bring it up to buff level.

Thoughts? Advice? Suggestions?

[Oni Koroshi]

Shouldn’t you have done an inspection before starting escrow?

Salt destroys everything, that’s just the name of the beast but having rebar exposed through the stucco and water damage coming into the house? On top of that there’s electrical problems from a house constructed in the late 80’s?

Everything about that sounds horrible and I would run from it unless you’re planning a gutting most of the house then most of the problems are fixable.

I wouldn’t be surprised if it cost around 6 figures to get things in a nice condition.

First thing is to figure out where the water is coming from and fix that. Sounds like you at least have a bad roof but is the outside of the house properly graded or is water pooling and coming back to the house and getting through the weep screed.

Get your estimate on fixing what you think are all the problems and add at least 20%. It sounds like a serious project.

[(former)FormerSanDiegan]

[quote=Oni Koroshi]Shouldn’t you have done an inspection before starting escrow?
[/quote]

Sounds like you have not been involved in a purchase of a house, at least not in CA.

The standard process for at least the last 20 years is once you make an offer, there is an inspection contingency (unless it is waived, which is a bad idea) that usually must be removed within some time frame (e.g. 17 days).

It is not normal in CA for a seller let a buyer perform an inspection (which involves testing the homes systems such as AC, dishwasher, plumbing, etc) without an offer and a deposit.

Likewise, it does not make sense for a buyer to pay for an inspection (hundreds of dollars) if they don;t know the seller would agree upon their initial terms.

In many cases a seller may consider reducing the price or offering a credit towards closing costs or some combination if there are significant findings in the inspection.

[(former)FormerSanDiegan]

Do you have the resources (time, money, desire) to bring the house up to snuff ?

If so, ask for a credit or a reduction in price based on estimates of the repairs.

Some of our experiences …
We’ve bought 4 houses and sold two (primary and rentals) and have a couple instances of significant items in the inspection.

In one case we asked for about $10K credit on a $1.1M house. Seller wouldn’t budge, so we walked…. luckily.
In hindsight the repairs would probably have been 2 -3 x our request.

IN another case we found a slab issue and requested a credit for an estimate of the repair. That one we did get. And still own to this day. Spent some money on it, but it was a fixer that we got at a fixer price.

Other two cases there was the usual list of issues:
1- some termite damage
2- Missing GFI / grounding
3 – water pressure valves/limiters (or something like that… been a while) based on newer codes.

In those cases we typically had some of the work done, seller paid prior to close.

So, if you are getting a good price and have the resources and willingness to polish up and fix this, then consider moving forward. All houses have problems.
If an extra $20K in fixes in the first few of years will cause you to lose sleep, I would consider walking away.

[matt]

I just went through a major renovation in Mexico of all places and mainly remotely.

If you proceed here is my advice:

1. Create a high level list of what u think needs to be done
2. Tour the house in detail with at least 3 well recommended GC’s
3. Take extensive notes and use their comments to develop a detailed list of works. Specifications, etc
4. Request bids and compare pricing (mine ranged from 150 to 550)
5. Take all to dinner to get a feel for who they are – watch out for scare tactics, e.g. Mexican contractors are all crooks
6. Identify a preferred bidder and use your pricing comparisons to squeeze a litttle or fine tune scope (I didn’t squeeze too hard because they need to make money too and you don’t want them cutting the wrong corners)
7. Prioritize functionality over aesthetics (securing the house from the elements comes first)
8. Sign a contract and embark

Maybe I got lucky but the above worked really well for me – ontime and on budget. Here’s a link to my place in Los cabos post renovation. It was battered by hurricane odile so a complete disaster. We now have aluminum shutters and extreme low maintenance exterior (stone tables, etc).

http://abnb.me/EVmg/TFR7OVgYmG

Matt

[flyer]

We own several coastal properties, and, by nature, they can require a lot of maintenance, but, since we bought them long before prices soared, they were all well worth the investment.

That said, in today’s market, you have to ask yourself if the home is really worth investing whatever it takes to address all of the issues you’ve mentioned or not–because, from what you’ve said–that sounds like what it’s going to take.

[thunked]

Well…

[bewildering]

Every house has some issues.

Your realtor should be advising you. I think this is the point of the buying process when realtors really earn their money. Your realtor should know some contractors. Find out how much the repairs will cost.

The sellers have to work with you. No mortgage company will give you the loan without a termite clearance. And the termite clearance required fixing rotting wood and dry rot. The termite clearance is a separate report from your inspection. They report to the mortgage company.

In my case, the inspection report did not notice some stuff that Termit guy noticed. Contact Michael Keller from Top Notch termite company. Have him take a look. His due diligence saved me 10,000s as the sellers had to fix before we could close.

I do warn you, that this process took us months.

[gzz]

Matt, getting THREE GCs in San Diego to tour a midrange house with you, give you bids and free advice, yeah good luck with that!

I am semi-seriously thinking of getting into this biz based on the fact it is so hard to even get one on the phone to set an appointment!

Bewildering, not sure what you mean by termite clearance, I purchased two san diego homes with serious termite issues no problem with conventional very competitive rates.

[gzz]

Termites: tent, replace some wood, patch the rest. No big deal.

Replace laminate flooring: no big deal.

Multiple outlets do not work at all? Sounds like a serious electrical fire hazard. If it were an easy fix and just replace the outlet box, it would have been done already.

Most houses on my street are 75+ years and have had complete replacement of their original electrical systems. It can be done, but it will be very disruptive and expensive.

[FlyerInHi]

[quote=gzz]Termites: tent, replace some wood, patch the rest. No big deal.

Replace laminate flooring: no big deal.

Multiple outlets do not work at all? Sounds like a serious electrical fire hazard. If it were an easy fix and just replace the outlet box, it would have been done already.

Most houses on my street are 75+ years and have had complete replacement of their original electrical systems. It can be done, but it will be very disruptive and expensive.[/quote]

I concur.
Plus in a sellers market, if you don’t buy, someone else will.

[sdsurfer]

The good GC’s are busy right now so they dont have to be available. I’ve had quite a few friends mention that during times like these you only do what is necessary and you wait for a downturn to do the major remodel if you can since it’s less expensive and more GC’s are available.

[profhoff]

Okay, things are moving along. Now here’s a question – on the request for repairs, suppose we check “seller credit buyer X” instead of “seller reduce purchase price to Z”. Then suppose we negotiate and get some credit for repairs. At closing, can I apply that credit to REDUCE the purchase price of the house even though I didn’t check that box?

[moneymaker]

I doubt it, the agent gets a commission based on the selling price, on both sides, so neither of them are motivated to reduce the selling price.
I wish there was a clearing house type thing for home inspections so one could see all that stuff up front before even offering on a house.
Sounds like a great business idea problem for someone to solve, the one issue I suppose is no 2 inspectors are going to completely agree.

[Author]

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