patrick.net

Sellers are always seeing what they can get away with - only your due diligence decides what they can get away with - from you. Kudos to you for looking at it globally

The owners primarily deserve your derision. I think you dodged a bullet. I am sure your inspector is good and all, but this really indicates that anything - I mean ANYTHING could be lurking under the stucco. It failed ALL inspections?? Not a good sign.

I have heard in CA that some people (during the bubble) wouldn't accept offers with inspection contigencies. Sounds like you had one. I would always, ALWAYS have this. Honestly, realtors are nothing but salespeople so while they pretend to be RE lawyers and pretend to be there to 'protect your interests' that's BS. Knowing nothing about the actual condition of, value of, and quality of the house is exactly what I expect of them. THey simply want to make a sale, kind a like a used car salesman although the used car salesman usually knows when he is lying.

If you really want to go through with it, I would without delay contact the County inspections dept. and ask them for specifics on why it failed and if it could be made to pass - with what corrections. I guarantee you there will be permit/inspection charges from the County to come back and re-inspect. If you really want this house and the owners are willing to pay for all issues, including new inspections by County, etc. ok. If not, I'd walk and thank myself for the inspection contingency!

Hope this is useful to you.

For 700K, couldn't you just build something and make goddamn sure the thing was done right?

Re: Mortgage Brokers... they can't all be bad. Someone's gotta do it. So I'll hold my tongue on that one.

Re: Realtors... They're like prostitutes. They will do any act they're paid for (my apologies to your father-in-law). I'm sure there are some good realtors, it's just that every one I've ever met works for the seller and will do anything for the sale. Your f-i-l sounds like a good guy, but his profession has taken a beating over the past few years because of so many people jumping on the band wagon to sell houses during the bubble.

In my experience, no mortgage company or bank will lend to buy a home without a COO. When I was selling, I had to prove that a burned out light bulb wasn't an electrical problem. They don't want to lose their investment by lending to purchase a home that can't be occupied. That's why there are construction loans and home loans...

I do believe you're correct - that they must make it right or refund your $. Don't know about the inspection cost, depends upon what's in your contract. But you do have them over a barrel on those. I would just wonder what else is wrong with the home, and wonder why the inspection company didn't know it didn't have a COO. I thought that was part of the inspection process.

Austinhousingbubble says

For 700K, couldn’t you just build something and make goddamn sure the thing was done right?

Yea, he could do that. If he wanted to wait up to a year and go through the headache. With so many homes to choose from, why would he build another if he can find something move-in-ready?

I'm puzzled on how the house was ever competed without passing inspections. If you fail for an electrical rough, there no way in hell they are ever going to pass it once you put up the sheet rock. Same thing goes for pumping. Normally builders make sure they get passing inspections before going on to the next step. You can forget about ever getting final Electrical or Plumbing inspections until you have passing rough inspections, and they want to see the house without the walls up before they will pass a rough inspection. I'm not familar with every type of inspection required, but many of them relay on passing inspections before it. I guess a builder could ignore the county inspections and just continue building it, but they be absolutely crazy to do so, they will never get a CO without passing inspections and the inspectors could force you to rip out stuff before they will inspect pervious steps. Even big outfits like Ryan homes that build shabby constructioned mass market houses do not ignore the inspectors, they might look for short cuts to get it to pass a cheap as possible, but they make sure the have a minimally passing house. Makes me wonder if the current owners built the house themselves using subcontractors, and just ignored failing inspections, No builder in there right mind would just ignore the county inspectors and continue building, to do so is finicial suicide!

I sold a house in CA in 2004, and the buyers put it in their offer "as is". I didn't ask for that. Even I knew that was ridiculous. And even though the buyer could have done an inspection, they didn't. They literally took the house as it was. Good thing for them it was a good house (I paid for my own inspection prior to listing), but it was still a gamble on their part.

Yea - but the lender wouldn't have closed if it something was off and they were aware. I doubt the buyers would have been able to get their depo back and you could have sued, although it would take years...

TechGromit says

I’m puzzled on how the house was ever competed without passing inspections. If you fail for an electrical rough, there no way in hell they are ever going to pass it once you put up the sheet rock.

Excellent points TG. How does it fail 'ALL' inspections and get 'finished'. Perhaps it was just a final inspection that failed?

SJGU, that "as is" business - I've only seen that in CA and only during the insanity of the bubble. When I was tentatively looking around in 2005 (didn't take long for me to stop taking THAT seriously) I heard more than once that 'if you want to get your offer accepted, you have to bid as-is because there will be many competing bids'. Nuts to that.

Despite many contracts that state the house is being sold "As is" most still state that the seller is required to obtain a Certificate of Occupancy. I beleive ALL banks require this before they will sign off on the mortgage at closing.

What's really weird is how in hell can the seller imagine they're ever going to close? Is this some scam to get escrow money?? I've seen that before on a FSBO.

I think your conclusions about it are right on. If you are financing it (not paying cash) then the mortgage company won't allow you to close without the CO. Even if it is being sold "AS-IS" there probably is still a financing contingency.

The realtor or escrow company is holding your deposit right? You shouldn't have any problems getting that back.

The only way you could finance it (that I know of) would be a 203(k) loan through HUD.
I was looking at a bank owned property that needed a new kitchen and some HVAC work before the CO would be issued, and after talking with several banks, they all indicated this would be the only way in which I could obtain the financing without requiring a proper CO prior to purchase.

I'd either renegotiate the selling price based on the value of the work to be done to obtain the CO, or walk away and recoup what I can... doubtful that you can recoup the cost of your inspection expenses, but at least your inspector did their job and brought the issue to your attention.

What I want to know is how the sellers closed their loan originally if a CO was never issued.

For 700K, couldn’t you just build something and make goddamn sure the thing was done right?

Yea, he could do that. If he wanted to wait up to a year and go through the headache. With so many homes to choose from, why would he build another if he can find something move-in-ready?

What's the worse headache -- dickering with real estate agents and inspectors for a year to overpay for a structure built to sub par standards or building the thing to your own standards?

Why assume this little problem isn't the tip of an iceberg? It's telltale half-assery in my book. If you've got the kind of bread to throw around like this guy does, why not put that (presumably hard earned) cash toward something you know was done to your own exacting standards? Talk about satisfaction. Oversee it like a hawk from foundation to shingle, the additional benefit being that you can also make sure there are no ciggys and Pepsi bottles full of meth-laced piss tucked behind that good Chinese drywall.

Bottom line: $700,000 is A LOT of money. It should afford you a palatial spread built from top to bottom like a fortress. Instead, it sounds like it affords you a bigger version of the flashy chaff I see being built in a flurry these days, but for more granite flourishes and maybe tucked inside of a nice neighborhood.