Recourse? Need advice 28 days into Multifamily purchase

[Matthew D.]

Hi Everyone,

I'm looking for advice on how to handle an issue. I recently purchased my first 4 plex. Everything checked out through inspections and the sales process between seller and buyer (me) was perfectly fine. Things had been going really well in this first month.

The seller owner financed the deal for 5 years with my cash down, so he is still attached to the success or failure of the property. 25 days into this adventure, I have been hit with a $2700+ bill for plumbing backup and sewage flooding of one of my ground floor units. Plumbing repair and professional clean up.

I have also been told from the other tenants and now the seller that an issue like this had occurred about 5 months ago. This is something that was not mentioned at all when we talked about disclosures and anything recent that had happened at the property. It was simply never relayed to me.

Do I have recourse to ask the seller and also mortgage company to cover some of the cost of this issue? - Considering it has now come to light a very similar issue had occurred recently, but never made mention by the seller?

Thoughts? Advice on how to handle?

[Joel Owens]

Is there a clean out in the yard on the way to the street?

Sometimes when they laid pipe with a property being built instead of taking a tree root out they bent the angle of the pipe slightly above it going to the street.

What this did is make stuff settle over time where the bend was and cause an occasional back up issue.

Plumber said you can pay a few hundred when it backs up every so often ( could last 6 months or 3 years before doing it again) or spend thousands and thousands taking the tree roots out and laying the pipe for that section at the right angle.

As a buyer you have your "right to your own inquiry". Did you get the lines scoped by a plumber before you purchased with the owner finance? If you didn't then it is on you. In court telling a judge you ASSUMED the lines to be in good working order so didn't spend money on an inspection before closing will not fly.

Did you get tenants to sign an Estoppel for each unit?

If you wrapped around the sellers existing mortgage on the finance you might have a due on sale violation and the sellers in place insurance likely would not cover your claim.

If the seller who owner financed owned this property outright financed you then hopefully you acquired and paid for the right insurance policy. Likely the policy excludes this item or if it does include it you have a deductible amount that is 80 to 100% of the repair cost and will have to pay the majority or all of it anyways. In that case filing a claim makes no sense if they only cover a few hundred. What happens then is you have a mark on the CLUE report for the property and your insurance rates could go up. Insurance claims are usually saved for when the bill is very large past your deductible amount.

Sometimes people get excited of the thought of owner finance and overlook certain critical steps to purchasing a property. Even if owner finance you have to buy correctly with the right terms and not get blinded by the potential cash flow possibilities.

If there is no way to get around fixing the issue then get estimates from multiple plumbers for solutions and costs. If your credit is good then maybe you can get 12 to 24 months zero interest special with a finance program and pay the costs over time but get fixed today.

No legal advice given.