All Forum Posts by: Joseph M.

Your best bet is to own up to what was done, DO NOT LIE and be very humble with the inspector.  Inspectors have real power.  They can make life very hard.  They can also be a good ally.  I have had an inspector fail me for using the wrong type of "fire proof chalk" around a low-volt door bell wire!!  Apparently he likes the red chalk. :(  Cost me a week of work as he only came around 1 time per week.  I have also had an inspector not only pass me, but give me hints on what to do on the next stage to save money.  Point being, just be honest, don't complain, do what he/she says to do and act like a professional.

*I placed the original post in the wrong area, so sorry for the double entry.

Hi Everyone,

I just wanted to reach out to everyone (especially the new investors) to remind everyone of the importance of getting a professional home/property inspection PRIOR to the ending of your due diligence period. Sorry if this is a little long, but it is all fact and is a learning opportunity for all to read.

This morning, I eagerly awaited my team's call so I could finalize my deal on the property I have in contract. My DD period ends later this week and I have crossed most of my "t's" and dotted most of my "i's". I verified all of the needed information (taxes, flood zone risk, insurance, permits, septic / well information, tree trimming, budget estimates for a new roof...). The last thing was my inspector. Due to scheduling conflicts, my home inspector [who is part of my team] was not free until this morning.

No biggie, right? I have done countless deals and 10+ in this area alone, I don't REALLY need him. Hell, after 19 years in this business, I know what I am doing and I can save a few bucks!  [We all have that voice in our heads at one time or another]  WELL, thankfully I listened to the other voice...the voice of reason and logic. I have a great team and they are there for a purpose. That purpose is so my business can grow and succeed.

My inspector gets to the house with some of my other team members. I am not on site but always available via phone. This is a 3Bed/2bath SFR around 1,300 sq.ft. single story. Currently vacant. My inspector does a GREAT job and takes about 4 hours to do a full inspection. After about 1 hour and a half, he pops out and says "Kill the deal". As my team rebounded from the shock of this news and before they could call me on my cell, the previous "property manager" arrived at the house. A long discussion started between my team (with inspector on hand) and the previous "property manager". So here is the end result, which was confirmed by the previous "property manager".

Apparently this property was a rental beforehand and for a long while. Sometime in the past, there was some type of water issue and it was repaired in a "cost effective manner" by the current owner. This water damage was located in a part of the house that is hard to reach from the crawl space below and it was recently covered up my new flooring above (new carpet smell was still in the home type of recent). This was confirmed by the PM. Upon my inspectors inspection, this is what he found: near complete wood rot on multiple floor joists, wood rot on the main beams (called girders) that the joints connect to; wood rot on the sub-floor and...it is covered in mold! All of this was repaired using 2x4 sections screwed horizontally into non-rotten wood. The water issue also caused a ton of mold to grow in the HVAC vents. The damage is estimated to cost between $12K-15K, depending on what else we would find.

NONE of this was disclosed in the mandatory RE disclosure form that the seller filled out and signed. Hence, I cancelled the contract and stopped payment on my DD check (they did not cash it yet).

Now, for the moral of this long story. 1) Do not trust either the disclosure nor what a seller says. Always verify and fully use that DD period. It is there for a reason. 2) No matter how long you have been in the business, it is always recommended to fully use your team. They have strengths and expertise that you do not and they are there to support you. 3) For the cost of a home inspection, you can avoid what could be a HUGE loss. For me, it cost me $360 to save months of headache and untold expenses and possible liability.

I wrote this to show that there is risk out there in our business and it is not always one big rose garden. With the proper systems and a good team, those risks can be minimized and the best deal COULD be the deal you pulled out of.

Hope this helps and again, sorry for this story being so long.

Wishing everyone success!

Joseph

Great job on your first swing at bat!  Your base hit was better than my first base hit.  Welcome to the biz and realize this is a long term business.  Keep all of us posted on your next project.

Hi,

I am in the Sacramento area (El Dorado Cty.) and if there is a meetup, please let me know.  I would enjoy attending.

Joseph

Great job!  I really like the staged pictures.  Keep us posted on your next one.

Quit-Claim. 

Hi Everyone,

I just wanted to reach out to everyone (especially the new investors) to remind everyone of the importance of getting a professional home/property inspection PRIOR to the ending of your due diligence period.  Sorry if this is a little long, but it is all fact and is a learning opportunity for all to read.

This morning, I eagerly awaited my team's call so I could finalize my deal on the property I have in contract.  My DD period ends later this week and I have crossed most of my "t's" and dotted most of my "i's".  I verified all of the needed information (taxes, flood zone risk, insurance, permits, septic / well information, tree trimming, budget estimates for a new roof...).  The last thing was my inspector.   Due to scheduling conflicts, my home inspector [who is part of my team] was not free until this morning.  

No biggie, right?  I have done countless deals and 10+ in this area alone, I don't REALLY need him.  Hell, after 19 years in this business, I know what I am doing and I can save a few bucks!  [We all have that voice in our heads at one time or another]   WELL, thankfully I listened to the other voice...the voice of reason and logic.  I have a great team and they are there for a purpose.  That purpose is so my business can grow and succeed.

My inspector gets to the house with some of my other team members. I am not on site but always available via phone. This is a 3Bed/2bath SFR around 1,300 sq.ft. single story. Currently vacant. My inspector does a GREAT job and takes about 4 hours to do a full inspection. After about 1 hour and a half, he pops out and says "Kill the deal". As my team rebounded from the shock of this news and before they could call me on my cell, the previous "property manager" arrived at the house. A long discussion started between my team (with inspector on hand) and the previous "property manager". So here is the end result, which was confirmed by the previous "property manager".

Apparently this property was a rental beforehand and for a long while.  Sometime in the past, there was some type of water issue and it was repaired in a "cost effective manner" by the current owner.  This water damage was located in a part of the house that is hard to reach from the crawl space below and it was recently covered up my new flooring above (new carpet smell was still in the home type of recent).  This was confirmed by the PM.  Upon my inspectors inspection, this is what he found: near complete wood rot on multiple floor joists, wood rot on the main beams (called girders) that the joints connect to; wood rot on the sub-floor and...it is covered in mold!  All of this was repaired using 2x4 sections screwed horizontally into non-rotten wood.  The water issue also caused a ton of mold to grow in the HVAC vents.  The damage is estimated to cost between $12K-15K, depending on what else we would find.

NONE of this was disclosed in the mandatory RE disclosure form that the seller filled out and signed.  Hence, I cancelled the contract and stopped payment on my DD check (they did not cash it yet).

Now, for the moral of this long story.  1) Do not trust either the disclosure nor what a seller says.  Always verify and fully use that DD period.  It is there for a reason.  2) No matter how long you have been in the business, it is always recommended to fully use your team.  They have strengths and expertise that you do not and they are there to support you.  3) For the cost of a home inspection, you can avoid what could be a HUGE loss.  For me, it cost me $360 to save months of headache and untold expenses and possible liability.

I wrote this to show that there is risk out there in our business and it is not always one big rose garden.  With the proper systems and a good team, those risks can be minimized.

Hope this helps and again, sorry for this story being so long.

Wishing everyone success!

Joseph

@Carmelo Pollicina: You are in a difficult position as few banks will handle a mortgage to a LLC . What I have done is talk with the lender. I explain to the lender that I have no issue with having them switch the deed from my LLC and into my name (usually via a Quit Claim). They can do the financing and then after closing, I will then switch the property back into my LLC (again, via a Quit Claim). The property is now in your LLC and the debt is under your name.

I get that permission in writing to demonstrate full awareness of what is going on. This would be needed in the event someone mentions the "Due on Sale" clause. I have found out, though the past 19+ years of doing this, that as long as you communicate with the bank and you pay your mortgage on time [from your LLC's bank account, of course], there is nothing to worry about. With all of that said, I would talk to your attorney to make sure that this is accurate in your situation.

Hope this helps and good luck.  Keep us posted.

Hi Jacent,  Are you still wanting to have a EDC (Sacramento area) meet-up?  Please feel free to ping me off-line if you need help setting something up.  It would be great to hold something in the Cameron Park area maybe starting in February.  Let me know.  Thanks.

@JoshR.  Way to go.  That is a great 1st deal for sure.  Keep the posts coming.