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The foundations of our California dream home are rotting

Discussion in 'Real Estate & Other Investments' started by Scorpio, May 14, 2017.



  1. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    The Moneyologist: The foundations of our California dream home are rotting — do we sell or sue?
    By Quentin Fottrell
    Published: Apr 16, 2017 8:32 p.m. ET



    A cautionary tale about flippers and first-time home owners


    [​IMG]
    Dear Moneyologist,

    We finally bit the bullet and bought a house when we moved to L.A. two years ago. Hindsight being 20/20, maybe that wasn’t such a great idea. Our house was originally built in 1929, and sits on a hill with a lovely view in an up-and-coming neighborhood called Glassell Park. We bought the house from investors who marketed it as “fully remodeled” with new stucco, and hired a home inspector to make sure there were no problems. Some details: Our house is 792 square feet on a 7,000 square foot lot, purchase price in 2015 was just over $560,000. Our mortgage payment, because I got a Department of Veteran Affairs loan, is $3,400 per month.

    The new stucco on our house is cracking severely. To continue our fiasco, because of all the rain, our roof started leaking. The previous owner had patched the broken Spanish tile, instead of replacing it, plus other issues with the roof in general.
    Kim in L.A.

    We engaged a real estate attorney because the new stucco on our house is cracking severely. He came out with his licensed contractor to look at the house and found that the frame of the house is rotting, causing the house to move (remember, we’re on a hill). The foundation is post-and-pier and was supposed to have been fixed by the seller and was signed off by the L.A. city inspector. To continue our fiasco, because of all the rain, our roof started leaking. When we had the insurance company representative out, he told us that our roof needed work, because the previous owner had patched the broken Spanish tile, instead of replacing it, plus other issues with the roof in general.

    So we are pondering what to do. Do we cut our losses and sell the house, with full disclosure of the problems? Houses like ours are selling for about $600,000 in this neighborhood, with little to no remodeling done. Or do we wait through the lawsuit, hope that we win, fix the house, maybe make an addition and then sell it, probably for upwards of $700,000 if we increased the square footage to 1,200. I have no idea how much it would cost to fix the frame, but from what the contractor said, we would have to lift the house, cut out the bad frame and rebuild the bad frame, which sounds expensive. Sometimes we wonder if buying a house isn’t just a money suck and scam to get people to take out big mortgages and pay interest rates, and we should just go back to renting.

    Kim in L.A.

    Dear Kim,

    When I saw the reference to “new stucco” in your story I had that sinking feeling. Stuccoing over the cracks is probably as common as papering over the walls.

    But you did your due diligence: You hired a home inspector who missed some very basic problems; they are often covered by insurance to settle cases such as this, so that is one avenue you have of recouping the thousands of dollars it will cost you to fix these problems. And the fact that the previous owners were investors who flipped the property and actually had the gall to market that house as “fully remodeled” and, presumably, gave you a report of the work, which could give weight to your case. Of course, “full remodeled” could also simply refer to new kitchen units. Check the language they used. If the sellers knew of material misrepresentation, they are guilty of “failure to disclose.”

    The flippers had the gall to market that house as ‘fully remodeled’ and, presumably, gave you a warranty of the work gives weight to your case. If the sellers knew of material misrepresentation, they are guilty of ‘failure to disclose.’
    The Moneyologist

    I say stay and fight, rather than cut and run. Even if you sell with full disclosure of these problems, and break even, you will go back to renting. (And it sounds like you would still lose the money, attorney fees and any taxes you paid before and after you bought the home.) Buying a home is a huge achievement and I wouldn’t let one bad experience or shoddy renovation deter you. You would regret that decision in 20 or 30 years when you would have had your mortgage paid off. You owe it to yourself to not let these flippers (or the house inspector) off the hook. At least, give it a shot. They will simply move onto the next house and do the same thing to another unsuspecting couple.

    Your problem is not unique. More homebuyers should be on their guard when buying flipped homes. Flipping reached levels not seen since 2007 in the first nine months of last year, according to data from ATTOM Data Solutions, the parent company of real-estate website RealtyTrac. (A home flip is a property that is sold in a sale for the second time within a 12-month period based on publicly recorded sales deed data.) Not to add to your saga, but some experts say post-and-pier foundation is more vulnerable to earthquakes. And buying a home on a hill in L.A. is sometimes a more risky prospect. (That may give Californians a bigger sinking feeling than “new stucco.”)

    This was not an elderly couple who didn’t know that their house was sliding down a hill and got conned by a shoddy construction company; these sellers were investors who (by their own admission) advertised this “remodeled” home and decided to hide their findings from you. It shouldn’t be hard to find the company that renovated your property and, if the investors did the work themselves, that would be even more damning in a lawsuit. It sounds like you love your home. Raise these issues with your lawyer. Given that he is paid if he wins, give it six to eight months and let me know how you’re getting along. Your home may even have inched up in value by then.

    If this looks like a years-long battle, we can revisit the fate of your dream home then.

    Do you have questions about inheritance, tipping, weddings, family feuds, friends or any tricky issues relating to manners and money? Send them to MarketWatch’s Moneyologist and please include the state where you live (no full names will be used).

    Would you like to sign up to an email alert when a new Moneyologist column has been published? If so, click on this link.

    Hello there, MarketWatchers. Check out the Moneyologist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas: inheritance, wills, divorce, tipping, gifting. I often talk to lawyers, accountants, financial advisers and other experts, in addition to offering my own thoughts. I receive more letters than I could ever answer, so I’ll be bringing all of that guidance — including some you might not see in these columns — to this group. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyologist columns.

    http://www.marketwatch.com/story/th...e-sell-now-or-sue-the-former-owner-2017-02-14
     
  2. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

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    I have made more money flipping new homes with warranties rather than resale fixer uppers. That's the nature of the South Florida market.
     
  3. Usury

    Usury Gold Chaser Platinum Bling

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    I think the "advisor" in the article is dead wrong. He's "assuming" that the sellers did something wrong and intentionally hid information from the buyer, with no basis of fact to back up that defamation. Soon he made need legal advice himself.

    Often times in cases like this, there no way to know about this sort of hidden problem until it manifests itself to the point that you have to rip open walls to see what's going on. I don't have all the facts either, but if it were me and I could sell NOW and walk away without coming out of pocket, I'd do that in a heartbeat. With a VA loan, chances are he paid nothing out of pocket to move-in, so where's the loss? In 6-12 months, the bottom could fall out of the market and it's worth half what it is now...who knows.
     
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  4. D-FENZ

    D-FENZ Gold Member Gold Chaser Site Supporter ++

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    Two years ago they paid $560,000 for a Great Depression era, 792 square foot hutch on a speck of dirt in L.A.? And it's a dream home?

    They don't need a 'Moneyologist', they need a psychologist.
     
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  5. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    yep Usury, law states 'knowingly' which is a difficult thing to prove in court,

    then if looking at it, talking about the rotten wood or? That is a maintenance thing, etc.
    The house was inspected, and it was not readily apparent to the guy.

    Then roof leaks prior, but if the tiles were properly repaired, that doesn't justify replacing a whole roof. Those things are good for years and years. Faulty installation sure, but otherwise, those roofs can be repaired and be fine.

    Without more detail, it is possible a foundation shift, a rotted wood situation, or a untended roof leak from prior could all cause multiple issues. Without knowing more, it is hard to determine the chicken or the egg.

    for instance, roof leak could cause rotting which could cause load shift, which could cause multiple interior and/or exterior issues. Which without much more information, strictly speculation, is possible to have caused the current complaints.

    While you may believe the guy knew about it and covered it up, proving it in court is far different. Especially if the guy is willing to put his hand on the bible and lie repeatedly.
     
    Usury likes this.
  6. Someone_else

    Someone_else Gold Member Gold Chaser

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    Yeah, if the inspector signed off on it, I think that would shield the seller.
     
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  7. Usury

    Usury Gold Chaser Platinum Bling

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    TWO inspectors--city and buyer.
     
  8. solarion

    solarion Gold Member Gold Chaser

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    Hope she at least got a kiss before that pounding. I know real estate is hopelessly over priced in Socal, but for $700 a ft2 I hope the floorboards are gold bars.
     
  9. Howdy

    Howdy Silver Member Silver Miner

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    Anyone who "dreams" of a home in California must be smoking some good stuff. If I lived there, I would be dreaming of the day I made enough of that California money to leave.
     
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  10. Ensoniq

    Ensoniq Non-Black Member Midas Member Site Supporter ++

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    City inspectors just sign off that a real inspector looked at it then take their fee;)
     
  11. ttazzman

    ttazzman Midas Member Midas Member Site Supporter

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    I am sure the buyers were afforded time to perform any inspections they deamed necessary to satisfy their requirements. ......if they have a problem it should be with their inspector. ....but probably the inspection contract they signed had a liability limit...so now they are searching for someone else to pay for their utopian dream instead of taking responsibility for their own actions............and wow half mil for 800sqft that in itself is shocking to me i guess i am spoiled i think my living room is larger than that and at a fraction of the cost
     
    Last edited: May 15, 2017
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