Chicago Damage Assessment Inspections and Violations. HELP!!!

[John B.]

I'm a Canadian investor investing long distance in a few cities in the US. I'm having problems with these 2 properties I'm rehabbing in Chicago.

The way we approach a project like this is to get an inspector, get quotes from contractors, and do the work required to bring the house to move-in condition, without doing anything too outrageous or too fancy for the neighborhood. We have our realtor work as sort of a project manager, reporting on the progress of the work before every rehab draw.

We've been doing work on these two properties for TWO YEARS now. My contractor is slow and he's also been blaming the slowness on various city permits and inspections. Now, we have done a couple other rehabs in other states, we're by no means experts, but does the City of Chicago really normally meddle so much?

We've had numerous problems with these properties, but to keep it short, I'll keep the story to the problems that we're dealing with currently.

We thought we were finally wrapping up on these properties, when the city found out that we didn't register the buildings as vacant. We had no idea this was a requirement and our realtor didn't inform us. 

Then, they issued stop work orders until they've conducted damage assessment inspections. I'm told this is something that should've been done before the purchase, but we've never heard of this. Googling also didn't bring up anything. Investors in Chicago, is this a thing?

Now, after the inspections, the city found violations and they want us to fix many things that we didn't have in the budget. These are old properties and they want us to totally replace things that we were hoping to grandfather or repair. For example, they want the garage demoed and replaced, they want the roof replaced, and many more. We're overspending by more than $20k per house on these violations alone (not to mention regular unexpected rehab costs) and we're not sure we'll even break even anymore at this point!

1. Is damage assessment inspection a compulsory thing to do before purchasing distressed homes in Chicago?

2. How binding are their demands? If they want us to fix something, do we have to? What if we don't — does it mean we won't be able to sell the house?

At this point, I'm so stressed out that I just want this to be over. No money is worth losing sleep over, and right now we're not even sure we'll make any. We bit off more than we could chew, yes, we realize that now. So please spare me the "you should've done due diligence" talk because I can't handle it right now. Practical advice needed to get us out of this hole we dug for ourselves, please.

[Tony Reyes]

Hey John,

I'll start by saying, that it happens to the best of us. Usually for being uber optimistic. I"m a GC, who works a LOT in the Chatham, Pullman, Calumet Heights neighborhood. We flip are own homes and do work for some prominent investors in this area. 

Secondly. It sounds like your GC never pulled any permits. Hence, the stop work order. The inspection that they are requesting is to see what was possibly done out of code or done without a permit, However I don't believe it is called a "damage assessment inspection". 

I'll answer your questions in the order they were asked.

1.Normally when your buying a home that is on the demo list. Which I'am assuming this was (damage assessment inspection). It means that It has been previously registered with the city. This is typically because the windows have not been bordered up and it has been vacant for some time. Or, because the integrity of the structure is not sound. Either way, it is already on the City's radar so they do regular inspections (drive bys) to see if any change. If not they keep reporting violations to the address. Which your attorney should have been aware when doing the title search. Or at least the next court date. (FYI, If you hold your property in a LLC, your attorney has to go for/with you to court).

That being said, the Inspector probably noticed some activity at your property and saw no permits in the window, while conducting a routine inspection. Which resulted in a stop work order. 

2.The City Inspectors from time to time can request some outrageous stuff, but that isn't the norm. If you have a violation list. The quickest way to resolve your violations, is to consultant an Architect. They will do a walk thru of your property find out what is, and is not in code. Create plans for all the trades and submit to the City. The Building Dept at this point will approve these plans or ask for revisions. In either case by the time the permit is released everyone is on the same page. The GC will manage the schedule and scope of work, based on the approved blueprints. And get you past the critical and final inspections.  This way you are not at the mercy of a disgruntled City inspector misinterpreting the code or giving you a hard time. 

That being said. I do think 2 years is way too long to do any SFR. Contractors build entire homes in less than that. Also, unless your agent is a GC/Contractor, they shouldn't be managing the project/payouts. The agent could unintentionally be paying the individual contractor too much upfront, which put leaves them with more to lose by finishing the job, then to gain. (now, thats not for all contractors).

Also be on the look out for further court dates. 

Hope this helps