Hi Everyone -
I wanted to share my recent experience with the community. Just thinking about writing this post is making me sick but I'm hoping others can learn from our mistakes...
One of our flips has a driveway that is supported by a retaining wall 125 ft. long, with the lowest point of 1 ft. high and highest point of 12 ft.. Imagine a right triangle of sorts.
After buying the property in the fall of 2013 and completing the rehab Dec 2013, our neighbor noticed that the wall was bulging and didn't look structurally sound. Worried for his own safety (the wall separates our house and his), he approached our contractor and asked what was being done about the wall. Our contractor replied "Nothing, it's not part of our scope". We never heard about this conversation...
A month later we get a violation letter from the township stating that our wall was not structurally sound and we needed to get an engineer to evaluate its soundness and if needed, remediate it. That was January 2014...
We hired an engineer to take a look at the wall and write up plans. $1,500 later, we had plans (which were approved by the township) that required demo'ing the existing wall, demo'g some of the driveway and building a new wall including creating a 10 ft. footer to support the wall. When I first heard this, it sounded like a lot of work...boy we had no clue...
We hired a contractor to execute the plan for $15,000. We paid him 1/3 up front and he got started. A week in, we get a call from the township inspector stating that our contractor never took a copy of the plans and that the footer he created was 2 ft. (not 10 ft. like the plans required). Upon learning this fun fact, we questioned our contractor "Did you read the plans...Did you notice it called for a 10 ft. footer?" to which we never got a straight answer. We ended up letting him go and losing $5,000 in the mix...
What followed was a 6 month miserable attempt in identifying an engineer that could draft up plans for a wall that didn't require a 10 ft. footer (b/c doing a footer required digging up our neighbor's property) and a contractor that could execute. We went through a handful of contractors and engineers resulting in some empty promises (no call backs) to getting bids ranging from $32,500 to $52,000! Meanwhile, our neighbor got his lawyer involved and we were then talking w/ an attorney about what an easement may entail and asking about when the work would be done. Hell on earth...
We finally identified a contractor and engineer (referred from the neighbor's daughter, who is also a rehabber, but past on our house because she knew about the wall issue...). We ended up spending $25,000 more to complete this wall by September 2014, 9 months since receiving the violation letter.
We have now held this God forsaken house for 14 months and will be putting back on the market sometime in the next week or so. Oh by the way, this house is very close to a highway...it doesn't get any better than this folks...
There are so many lessons that we learned here, I don't know where to start. But here are the ones that really stick out to me:
1. Be friendly with your neighbors from day 1. Introduce yourself, hand out business cards and let them know to contact you if anything ever happens while you own your flip. If we would have done that from the beginning, the township's involvement could have been avoided. If you can, talk to neighbors as you are inspecting the property for the 1st time. (before you buy). They could have that nugget of information that could save you $$$$ or in my case, would have caused to run as far as possible form this house!!!
2. Take a step back when walking through a property and try not to get too excited about the prospect of buying your next flip. We might have identified the problem with the wall if we weren't so excited about getting our next flip.
3. Manage your contractors, have definitive deadlines to address the renovation in short order and be in regular communication with them. If you can't devote the time, hire a project manager. This is huge! Because we are were all part time, we heavily relied on our contractors to take responsibility of getting the plans and executing and we went on our Mary way. We should have been significantly more involved earlier and more often.
4. Don't assume anything; question everything. Just because the professional engineer drafted up plans and the township approved them, doesn't mean they are right! The 1st set of plans called for work to be completed 10 feet into the neighbor's property but no one seemed to worry about whether the neighbor was ok with it! People more experienced than us (and you) make mistakes. This goes for anybody else you work with that influence your decision making process.
5. Hiring an inspector isn't a guarantee. We hired a home inspector and the wall wasn't mentioned once. Contemplating lawsuit against the inspector required us to review our contract w/ him which stated that at most, the inspector was liable up to 2x his fee (a whopping $700!). Having an inspector is good b/c it is another set of eyes, but have realistic expectations.
6. Involve a public adjuster before getting your insurance involved. As soon as we received the violation letter, we should have taken pictures of the existing wall and reached out to a public adjuster. Instead we didn't really think about it until months down the road. On top of that, we involved our insurance co. before we got a public adjuster which significantly reduced the probability of getting a claim paid. Public adjusters are your advocate in working with your insurance company.
I hope you enjoyed this forum post as much as I did. I hope to be posting about a success story to offset this learning experience.
