Buying Home with Previous Fire Damage. How do I protect myself?

Question

Hello Biggerpockets,I am looking at buying a property that has had fire damage and has since been renovated. The current owner doesn't seem to have any information on the fire or remediation as they apparently bought it after the fact. The only information I have been able to get about the fire has come from a neighbor. The fire was significant enough that most of the trusses were replaced and the layout of the roof was changed so that the gable no longer faced the street. The biggest concern that comes to mind is how much of the wiring was replaced if it was exposed to that level of heat...If I place this under contract it would be a cash purchase. Am I doing enough by only requiring a basic inspection or is there other things I should be doing? I would be looking to get a HELOC on the property after purchase; is anything related to the fire likely to come up then?I've been around real estate deals my entire life as I grew up in a landlord family; however, this is my first prospective personal purchase. I appreciate any and all guidance the community is able to provide. Thank you.

Mindy Jensen · Answer

@Joseph Grosse , I'd ask the seller to have the inspections completed at the very least as a contingency of your offer.

Mindy Jensen · Answer

@Joseph Grosse , Do not purchase this house without having the seller finish all the permits. "Lots of unpermitted work around here" Yeah, that's everywhere. However, if you're going to own it, then you'll be responsible for bringing it up to code should your buyer demand that. Be the demanding buyer and make sure you're buying something sound and permitted. If you go to sell in a few years, and code has changed, you're now responsible for bringing the property up to the NEW code.

Jeremy VanDelinder · Answer

I agree with @Mindy Jensen in the permit issue—I was reflecting on the fire damage issue. I will say that in some places it can be exceedingly difficult to get retroactive permitting done—the municipality doesn’t want to be responsible to sign off in what they can’t see, which leaves the owner with the only option of tearing it out and redoing it.

Joseph Grosse · Answer

@Mindy JensenI just went by the inspectors office again. Spoke with the same person that pulled the permit records for me yesterday; she is legitimately trying to help me with this, which is nice to see. I have to go back in the morning to speek with some of the inspectors. I told my agent I was going to submit an offer this morning, he sent it over a few hours ago to sign and now I'm tell him I have to stall on that until tomorrow.Can't thank you guys enough for the help.

Mindy Jensen · Answer

@Joseph Grosse , talk to the permitting office and see what they say. If they say you'll have to rip out the drywall to have it permitted, then factor that into the offer. If they say they'll test it and if it passes, you get the permit signed off, then it's not nearly as big a deal.In a town near me, if you have unpermitted work, they make you rip everything out and start over.

Jeremy VanDelinder · Answer

An inspection is certainly in order, but a traditional inspector might recommend an inspection by an engineer. If the repairs were done correctly it’s not a concern but your challenge is to be sure it’s done correctly.

Joseph Grosse · Answer

@Mindy JensenAfter speaking with the third party inspector that is the conclusion I came to. The third party inspector is licensed by the state, but the city can have codes that go beyond state codes and could cause problems once we try to get the city inspector in there to do a permit. I just spoke with my agent, and he thinks we should be able to get the city inspector in the building during the standard inspection period already in the offer and exit the offer if necessary through the standard inspection clause. He's looking into it. I'm going to go down to the inspectors office again to see what they say... And make sure they aren't so busy that scheduling in the given time period becomes an issue.

Jeremy VanDelinder · Answer

@Joseph Grosse are you planning to hold it as a rental? If so it’s less of an issue than if you are going to flip. Still something to think about, though. Future buyer concerns could be mitigated with an engineer’s letter.

Joseph Grosse · Answer

@Mindy JensenI spoke with one of the city inspectors this morning. It seems the electrical permitting was complete. There was also a building permit application for the truss work, but the inspector was never brought back to inspect once the job was complete. The gable of the house faces a different direction than it use to, so the truss work is pretty significant. The city inspector seems to believe that it can be inspected from the attic, however if they find something big they want changed we could have a serious problem. I'm going to discuss the situation with the third party building inspector I would have in the property prior to finalizing the deal. Would you rely on the ability of a third party inspector to spot code violations on something like this?

Joseph Grosse · Answer

@Mindy Jensen@Jeremy VanDelinderI appreciate you're help. I'm in unknown waters here so please help me out. Does something like that need to be explicitly required in the offer? Or since they are technically already supposed to have to property permitted and up to code regardless can you force their hand once it's under contract?If I put that directly in an offer it's likely the seller will back out. It's probably faster and easier to find another buyer than to wait on permitting.