I had a home inspection completed this morning on the investment property I am considering purchasing. The inspector was very detailed and took time to explain any current and potential problems.
There were 4 major items that needed to be addressed.
- TERMITES. The property shows evidence of termites. The inspector found several areas with rotten wood and termite mounds. His opinion is that the problem was not severe and could be addressed by a termite profession. The termite inspected was scheduled for the afternoon.
- Furnace is at the end of its useful life. The furnace appears the be the original one put in when the property was built.
- A/C is at the end of its useful life. Also appears to have been put in when property was built.
- Water heater at the end of its useful like. Again, appears to be original.
I'd prepared for the mechanical issues and had money aside to handle these things. I was NOT prepared for the termite issue. Thankfully,the termite inspection revealed the problem was not nearly as bad as it seemed and could be treated and repaired for $599.
I have decided not to purchase the property and my agent sent over a fax to the selling agent about an hour ago advising that I am not longer interested in the property. What changed my mind??
While out at the property, I spoke with the next door neighbor who wanted to know if I was going to be purchasing the property. I advised I am considering it depending on the home inspection. She told me she has lived there for about 2 years. I asked her what she didn't like about the property and she said the HOA fees were $250 a month....
I immediately called my agent to check on this and he immediately called the selling agent. We had originally been told that the homeowners association had been disbanded. About 4:30 pm, my agent called me back with the news about the homeowners association. The community has 119 homes and only 16 of them are paying the monthly dues. The property is 75% rented and 50% of those are Section 8. Since the dues were not being paid, the property is about $150k in the red. There is no money for exterior repairs and there has been a lien filed against the property for the $2000.00 balance owed by the seller. The water bill is supposed to be paid by the homeowners association but since the dues were not being paid, the water bill has not been paid. At any time, the water can be shutoff to the property. I decided this is a headache I did not want to deal with and decided to cancel my offer.
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Very wise decision.
It is always good to talk with the neighbors when you enter escrow and are doing your research on a property. There should have been docs or some discloser information on the current HOA situation, liens, etc.
When I enter a contract on a condo, I make part of the terms of my ability to back out of the deal dependent upon the building inspection and review of the HOA documents and financials.
The large number of non-owner occupied units is also problematic. I know your plan was to make this an investment property, however, financing with such a high ratio of rental units is difficult.
Again, very wise decision not to buy.
You know, I LOVE houses and plan on investing in them some day as I do most of my own work on my current house. That being said, I wouldn't even consider looking at houses where I don't already know the neighborhood.
That kind of research should come before any offer. You got lucky to talk with someone before you were locked in. What would have happened if you didn't find that out until later?
Looks like you dodged a bullet.
*annie - i was a little bummed about it but now I am glad I cancelled the purcase.
*curtis - I don't even want to think about what would have happened if I'd purchased that property but I know it would not have been good.
*chitown - Glad I caught it before it was too late.
WOW! God must got your back. LOL. Cuz you definitely dodged that one. You live and you learn. I am kinda ticked that this information wasn't provided to you BEFORE you even signed a contract or anything. Isn't it illegal to not furnish ALL information of a property for sale?
*dimps - You are absolutely right. I prayed about it and asked that if something was not right, that the transaction would not be completed. He definitely has my back!