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.

Here is more information about the property and an update of today's goings-on on this sitch'.

The property does indeed have cement footings under the pillars, but for two of the ones in the front, they rest on only half of the footings (oops). Instead of extending each footing out to accommodate the entire stucco pillar, they just stuffed dirt under the missing sections of footing (I may post pictures of this…). This is something that can be fixed, but it obviously indicates shoddy work.

Yesterday I put in a request from the county for the permit details because all you can see on the county website is the pass/fail results. They tell me it will take 5-10 business days to get the information I am looking for (they are just so dang busy these days, right?). I decide to go to the county building department with my inspector and we smooth talk the lady at the counter into seeing the entire file which has all of the permits and inspection results and the plans for the house. Here is what we uncover:

Original owner with a Utah address takes out a permit with the county in late 2005.

Sometime in early 2007 he defaults on the loan (presumably a construction loan). At this time the house is partially complete and all of the permits up to this point eventually pass (we thumbed through each inspection report).

Lender ("XYZ Financial" headquartered in the Sacramento, CA suburb of Elk Grove) takes possession of the property and in early 2008 they get a supplemental permit to finish the house. Lender is listed as the owner-builder on the supplemental permit.

We thumb through the various inspection reports while the house is being completed throughout 2008. Typical inspection stuff.

In early 2009, we see they had the final inspection. They even gave me a copy of it (see attached image). All of these items were things my inspector picked up.

My inspector has built custom houses for over 30 years and estimates $15-20K to bring the house into compliance. So why didn’t the original lender (current owner) simply polish this off and get a certificate of occupancy? Well, my friends, it appears that it boils down to ignorance.

The sellers (the original lender who finished off the house) claim that they are selling the house as is and that it “was a foreclosure”, implying that they don’t need to disclose these things and we can just take care of this stuff on our own. Well here is the catch – apparently in California the title company will not transfer title on a property that doesn’t have a certificate of occupancy. In other words, if this was a typical foreclosure and the house had been occupied before (i.e. had previously been issued a CO), then you can sell it “as-is” and the title company will issue title. In this case, the house isn’t complete so they can’t sell the house without a CO.

Pretty sad that they are pulling this stunt – without my due diligence here we would have gotten all the way to the closing table and the title company would have prevented the transaction from completing.

This lender/owner signed our offer indicating that they will do everything in sections 1 and 2 on the offer, so it appears that they are contractually bound to fix all of these things. They will also need to get a CO (read: take care of all the items on the final inspection report) in order to sell me this house.

I’ll let everyone know what they come back with tomorrow. From all appearances they are hosed and will be shelling out all of the necessary dough to get this thing finished. Otherwise, they will be in breach of contract and I’ll have a legitimate legal claim….kinda makes me produce an evil smile thinking about holding it up in court if need be. All the while these people keep shelling out the carrying costs and property taxes.

You go, girl!

elliemae says

You go, girl!

http://www.go-girl.com

You definitely should have the current owner get the CO. Don't take this on yourself. The permit is not in your name and may be inactive. Hard to read the list but it seemed mostly rather minor stuff, but that should in no way give you comfort that the house is well built. Any house built under financial distress is suspect. You cannot rely on the building inspectors as they vary a lot also. Some breeze through, others are quite detailed. However if your house inspector knows his stuff he can tell you if the construction is shoddy but they cant see through walls.

cashmonger says

Here is more information about the property and an update of today’s goings-on on this sitch’.
The property does indeed have cement footings under the pillars, but for two of the ones in the front, they rest on only half of the footings (oops). Instead of extending each footing out to accommodate the entire stucco pillar, they just stuffed dirt under the missing sections of footing (I may post pictures of this…).

Very informative. Thanks for the info.

Lucky,

I admire you for presuming diligence, skepticism and perfectionism as default positions of the consumer psyche, but the evidence reflects quite the opposite. Very few people see either god or the devil in the details. The buyers I interact with want fancy, and they want big, but most of all, they want to convey to you and everyone that they have arrived. And they want it all now, dammit! I have actually had friends say insipid things like, "I feel like such an adult now." Can you hear my flesh creeping?

The finer points on your checklist are mostly extraneous to this bunch.

Great checklist, though. You know your stuff and that's refreshing.

Austinhousingbubble says

The finer points on your checklist are mostly extraneous to this bunch.

Yea, yer right. We're all reeally, reeally stoopid and are gratfull that yer heer 2 point that owet.

Ellie,
He was referring to those idiot house buyers who "want it all, now".
At least I think that's what he meant.

Hope so. But it didn't read like it. Perhaps he meant "that bunch" rather than us.

I just ran across this tidbit, entitled "It's scary how dangerous people can be with data" from Active Rain, the RE blog:

http://activerain.com/blogsview/1309120/it-s-scary-how-dangerous-people-are-with-data-

It's Scary How Dangerous People Are With Data!
"Keeping with a Halloween theme - I decided that people are dangerous with data! Doesn't matter what kind - if they have enough of it - it's scary how dangerous they can be! Pick a topic - any topic - there's tons of stuff out there on it! Today, I pick real estate!

And here's the thing - just because someone has a bunch of data - doesn't mean they know what to do with it. And that's the real scary part.

Coming across a well-armed Seller, he said he doesn't need a real estate professional because he knows:

•How to access Tucson's MLSfor comps, DOMs and stats on the market.
•What his neighbors house sold for!
•What homes are selling for in his area - in fact, "For the whole city!"
•The average number of foreclosures and bank owned homes
•Where to get and how to write a purchase contract
•What title companies are suppose to do
•What the interest rate is and what Buyers want
I say, GREAT! So tell me:

•What were the cumulative days on market for your neighbor's house? And was that with the first or the third real estate company? Did the seller make any concessions?
•What percentage of the comps expired, had seller carry backs or lease options?
•What is the median price per square foot?
•What's the current inventory level for your area, heck, for the whole city! And how does that impact the sale of your home?
•What about the new construction home subdivision down the road - how does that impact the market?
•What is the list to sales price ratio?
•What version of contracts do you have and what are the deadlines for each?
•Which costs do Buyers and Sellers customarily pay for at close?
And the list could go on!

People are dangerous with data because most of the time, they really don't know what to do with it - when they have it."

Austinhousingbubble says

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

This is a 6,000 sq. ft. custom. My inspector who has built customs for 30+ years said it would take $800K to build this house in today's market. That is not counting the land. Even with the sh*tty footings on these pillars, once they are fixed, he believes the house is structurally sound and a steal for the price. We will see what happens. I'm not going on emotions, instead taking a scientific, logical approach during my due diligence. No way I'm going in on a $700K house without fully satisfying myself (no pun intended) and carefully heeding the advice of several seasoned professionals.