Flip This House #3

Parent Cafe
2421

Don’t do the repairs until the appraisal contingency is removed!

Also, I would strongly suggest that the agent simply provide a credit to the buyer for the estimated cost of repairs. They can hire whomever they want after the house closes or they can simply pocket the cash. What if the foundation people find additional “problems” once they start work? What if the deal doesn’t ho through? What if the repairs are made and the agent doesn’t pay? With something like this, If the agent is willing to pay, it should be in the form of a credit.

2422

PS. There is no such thing as an “as is” sale of residential real property under California law. The California Supreme Court has expressly held that all the language disclaiming warranties, etc., is meaningless. The seller has a duty to disclose all known defects (and perhaps even defects that should have been known). You can’t escape this duty by making a sale “as-is,” or by purporting to disclaim warranties. There is often protracted litigation over whether a defect was known or not, or whether a particular “condition” is something that must be disclosed. General disclosures are usually better than specifics (“the windows, doors, roof and ceilings leak” is a better disclosure than “the second panel of the french doors in the master bedroom leaks.”) i don’t practice law in this area but I carefully reviewed all of the relevant case law and statutes when I sold my house, which had a lot of problems.

2423

I agree, but I always see these statements in listings or in a contract “Seller has never lived in property and cannot provide disclosures” and the transaction goes through without any disclosure form being provided to the Buyer (I am usually the buyer in this situation).

I walk into the house and it is very obvious that there are serious issues such as garage roof has collapsed. Any Seller that has even walked into the property would know these issues and should probably have to ‘disclose’.

For example, the Seller of the La Mesa mess that I purchased knew a lot and refused to provide disclosures except for ‘Gas Turned Off’. Later I find out that the elderly gentleman went to the City several times and actually pulled a permit to fix a lot of issues, most notably the garage. The City Building Officials definitely knew who he was and told me everything that occurred. He knew the garage was a huge issue and that the property was in a Historic District but he did not disclose it.

I later called the listing agent who was the Seller’s grand daughter. She was a young new realtor. I explained to her that her Grandfather, who owns other rental property, needs to understand California disclosure law and that she had placed herself in a serious liability situation by representing him. He refused to acknowledge that anything was wrong with the property and, as a real estate agent, she needs to ensure her clients are disclosing everything.

2424

I’ve been off the grid today – on an airplane – and wow, this has exploded. Good for your agent for agreeing to pay the $1900. Good for you for insisting on two more estimates. It will be interesting to see what the other estimates have to say.

2425

Have they submitted the list of repairs? I’d want to know what else is on that list before the agent or CoralBrook starts paying for these repairs. If you (or the agent) pays for the foundation, who knows what else they will want paid for/credit for/whatever. Full list of repairs, then start finding actual repair people who can get it done within the 21 days. If they won’t just accept the repairs that are already complete.

2426

Haven’t been able to post today, CC over loaded. Lots of happenings today. Will report tomorrow

2427

Looking forward to hearing what’s what.

2428

Foundation Inspection
The foundation inspector was actually a Geo Soil and Stability inspector. He was very nice and very knowledgeable. He had all kinds of interesting equipment and testing devices and I learned a lot from him. He was checking to see if the house was slipping or sliding down the slope.

One of the things he checked was the floor leveling. I remember my carpenter saying things like the original floor joists are uneven and it was difficult to install the baseboards and the doors. Turns out that we have a 2.75" difference in floor height from the back south corner of the back bedroom to the front door. Allowable tolerance is 1". Yikes! But he said that he was not alarmed at all because the house is 80 yrs old and had ‘settled’ over time.

So, he went underneath the house and did all kinds of tests. Thank God he came up and said that the house is not currently settling, no evidence of recent movement and the settling had occurred a long time ago. So, the 2.75" is just something everyone has to live with. For those of you who live in old houses, you’d be surprised at the floor level in the old homes. I usually take a golf ball and just place it in the middle of a room and see if it starts rolling somewhere.

He confirmed that the crack below the fireplace needs to be repaired with ‘pressure injected’ epoxy and needs two small metal straps with bolts. I asked him about my concern regarding drilling into the old concrete stem wall because it was not built with rebar and I was worried that drilling bolts might cause the concrete to disintegrate. He said he did a test of the concrete strength and it is amazingly strong for the age it was built. He said that sometimes builders at the beach in the old days would throw beach sand into their concrete mixing and the salt ruined the concrete over time. There were not big concrete mixing trucks in those days, all the concrete was mixed by hand in a hole in the ground. Sometimes it’s a crapshoot if it was mixed properly. Evidently I have golden strong concrete walls.

So, since he was reasonable and he confirmed that the crack needed some more repair, just to prevent it from moving any more in the future, my agent and I are going to agree to pay for the original repair.

Agent called two other foundation companies and they said that our estimate for repair is reasonable from XYZ company. They said that XYZ company is erratic. Sometimes their quotes are way out of line and sometimes they are reasonable. I have previously dealt with the ‘way out of line’ quotes, but we will take this quote.

Buyers have finally submitted, this morning, their Request for Repairs. The only new item on the list is the request that the foundation crack be repaired by XYZ company at Seller Cost.

Meanwhile, they submitted the request for repair today and they are sending original home inspector (have no idea why) over to inspect the repairs tomorrow morning. Huhhh!! How am I supposed to have a foundation repaired by Saturday morning? How do they expect a Seller to repair everything on a list within one day??? It’s not making sense

2429

cb, I guess that’s all good news. Isn’t the date for the release of all contingencies Monday? So shouldn’t you have until Monday to perform these repairs?

2430

The date for releasing physical inspection contingency is Monday. Normal practice in California (or at least San Diego market) is that the Buyer submits Request for Repairs, Seller responds with what they will or will not repair, Hopefully everyone agrees and then Buyer ‘releases’ the physical contingency. Repairs do not have to be completed prior to the release of contingency, they just have to be completed before close of escrow.

For some reason these Buyers are insisting all repairs confirmed before they will release the physical inspection contingency. Not sure how that is going to happen.

2431

Have they released the appraisal contingency?

2432

BIG APPRAISAL ISSUE!!!

I’m not calling the XYZ Foundation Company to come hurry up and do repair because we have stumbled across a much bigger issue.

Appraiser came through house last Saturday. Technically the report was due to the lender on Wednesday. On Monday my agent followed up directly with appraiser and received “I don’t think there will be any problem with the value, I’m completing the report today”. On Tuesday she followed up “Still working on it, it is due on Wednesday”.

On Wednesday my agent started contacting the lender, no reply back from lender all day. Yesterday we find out that the report has not been turned in yet and they don’t know where it is. Call into Appraiser and now we have a big issue. According to appraisal standards (she is blaming it on the bank not allowing), any rooms that are not accessed directly from the main living area cannot be included in Gross Square Footage. This means that our house just went from 1300sf to about 1140sf. AND… The bathroom cannot be included!!! So, she had to start all over and has to use comparable properties sold that are 2bedroom, 1 bath. The appraiser is allowed to value the Accessory Building but it’s going to be hard to find comparables to demonstrate how much value is placed on the ‘granny flat’ or office/bathroom external building.

This is a huge issue for us and will probably kill the deal. Unfortunately, most of the value in this home is ‘subjective value’; the expansive views, value of complete remodel and value of the detached office and full bath. I am not sure whether the Buyers are aware of this issue, that is between the agent and them.

Appraisal contingency is supposed to be released today, but I cannot imagine that the Buyers will release without an appraisal turned in to the lender.

2433

Can you appeal or get another appraisal? That makes no sense to exclude a room not immediately accessed from the main living area. So sorry!

2434

The main issue about this appraisal that I am worried about is that the appraiser who visited the property on Saturday was obviously not ‘experienced’. With new guidelines, reports are completed by the appraiser and then turned into their own company for an internal review. I’m guessing that she turned it in and this issue came up in her internal review - or the bank’s review. It was sent back down to her to correct. At this point that appraisal needs to be in the hands of a supervisor or manager with a lot of experience in unique or unusual coastal property appraisals.

2435

The thing I could kick myself about is that I could have easily opened up the door inside the wall (after final inspection) between the laundry room and office area - this would have made the back area included in the living area square footage. But the feedback from most everyone going through the Open Houses was that they loved that the office was ‘detached’ and they wouldn’t want the little door through the laundry room.

2436

Don’t know what your roof lines are like, but 10 years ago we were told if we connected the porch roof of the main house to the roof line of our accessory building, we could be appraised for the additional sq footage in accessory bldg, even if the walkway was still open air (no walls). We never did it–didn’t want property taxes to go up. We’re in LA county.

2437

This is completely attached to the house, no change in roof line and sharing wall with main house. The issue is that you have to go ‘outside’ to enter this square footage. I researched ANSI guidelines on Internet and it appears that this is the guideline. However, I have copied some articles written about the issue and forwarded them to my agent to give to Buyers, if needed (not my business what goes to buyers). It appears that there are wide guidelines on how an appraiser can ‘value’ the additional structure based on what the market is paying. It is similar to a ‘casita’ being on a property.

Unfortunately this neighborhood is so crazy, it’s very difficult to find any comparable that has same characteristics. If the appraiser could go out of the neighborhood, they could find a lot of guest houses, pool houses, casitas, but they cannot go out of the neighborhood. It’s all subjective

2438

Oh wow, what a shame! There really aren’t comparables for your specific home, are there! Maybe time for your agent to start contacting the other potential buyers; this deal may still happen with amendments but looks like timeframes need to be extended. Hopefully the revised appraisal will come close.

2439

Have an open house this weekend. Seriously.

2440

Both of the buyers have been contacted but my agent (for obvious commission reasons) wants to make this transaction close. They are both still interested but want to come through the house for a more detailed review. We haven’t pulled the trigger just yet… waiting for the appraisal.