Flip Home from Hell - Seeking Advice

[Jack Saunders]

I flipped a home and sold it a couple of months ago.  Everything was permitted correctly and done by the book.  The buyer has had issues with the toilet gurgling when flushing.  The home has all new plumbing and the plumber went back to check everything and stated the septic line must be clogged.  I bought the home as is but a new septic system was installed in 2019, I have the county record on it.   The new owner had it checked out and it ended up being the septic line from the tank to the house was never done 🙄.  The fix was 6k in repairs, they called the county as the septic was passed based on permit.  Now the county is threatening to take the General Contractor license unless the money is reimbursed 😳!  

Has anyone dealt with kind of issue?  I don't think it's worth trying to sue the county over 6k, it may cost more in legal fees.

This was my first flip and it has been a school of hard knocks. 

TYIA

[Mark Fries]

I am sorry the issues you are having. First, it seems weird and possibly illegal for people at the county level to threaten to remove a state licensed contractors license and threaten it over 6k. 

honestly I would take 1k from the possible 6k in question and hire a lawyer. Let them deal with it, while you look for your next deal. You have no liability in this issue.

[Matthew Paul]

I have replaced many septic systems in my younger years . Unless we were asked and were being paid extra , we never replaced the pipe going into the tank from the house . 

[Jonathan Klemm]

Hey there @Jack Saunders!  I've been in similar types of situations here in Chicago and for me it's always better to reflect on my lessons learned and to move forward.  VELOCITY OF MONEY is something that has taken me a long time to learn...closing jobs out (Even at additional cost) and getting to the next one is more important for us NOW after having some old projects suck the life out of us.

The fact that the county is threatening to take away the general contractor's license honestly SOUNDS ABSURD! Is it your license or you hired a GC and the county is threatening their license?

How much better will your next flip go after your school of hard knocks?  

[Jack Saunders]

Quote from @Matthew Paul:

I have replaced many septic systems in my younger years . Unless we were asked and were being paid extra , we never replaced the pipe going into the tank from the house . 

Good to know.  How can I verify this in the future when there is no power to the home?  I am trying to learn from this and move on.

[Jack Saunders]

Quote from @Jonathan Klemm:

Hey there @Jack Saunders!  I've been in similar types of situations here in Chicago and for me it's always better to reflect on my lessons learned and to move forward.  VELOCITY OF MONEY is something that has taken me a long time to learn...closing jobs out (Even at additional cost) and getting to the next one is more important for us NOW after having some old projects suck the life out of us.

The fact that the county is threatening to take away the general contractor's license honestly SOUNDS ABSURD! Is it your license or you hired a GC and the county is threatening their license?

How much better will your next flip go after your school of hard knocks?  

I hired someone and I agree with just paying to move on.   I just wish the GC and myself were given the chance to use our sub contractors to repair the issue as it would cost less. 

[Jacob Sherman]

always best to satisfy the county what they're asking and for it to be done properly and septic can be a bad problem for the future 

[Bill J Fay]

When flipping, I always recommend doing a sewer scope up front. This along with your roof should be one of the 1st items explored. If you catch these at the end, they can turn a successful flip on their head very quickly.

[Mary Ainsworth]

Here's what comes to mind for me

1. - Documentation is key: Gather all relevant documents, including permits, inspection reports, and the county record of the septic system installation.
2. - Consult with a real estate attorney: While you're right that legal fees could exceed $6k, a consultation could provide valuable insights on your liability and options.
3. - Review your insurance policies: Check if your flip insurance or any other policies might cover this type of situation.
4. - Communicate with the county: Try to negotiate with the county officials. Explain that you acted in good faith, relying on their inspection and approval.
5. - Consider reimbursing the new owner: While not ideal, paying the $6k might be the most cost-effective solution to protect the contractor's license and your reputation.
6. - Learn for future projects: This experience underscores the importance of thorough inspections, even on recently installed systems.
7. - Check statute of limitations: Depending on your state, there might be a time limit on claims related to construction defects.

As a hard money lender specializing in fix and flip deals, I've seen similar situations arise. It's crucial to have a team of trusted professionals, including a good real estate attorney, to help navigate these issues.

For future flips, consider adding clauses in your sales contract that limit your liability for issues discovered after the sale, especially for systems that were inspected and approved by local authorities.

Let me know if you ever are looking to finance your next flip by the way! I specialize in fix and flip loans

[Mike Klarman]

Unless you like to run up hill in the heat, chalk it up as business expense on taxes this year and move on to bigger and better.