New House -- Who is at fault?
April 26, 2010 11:59 AM   Subscribe

So my wife and I settled on a new house a couple months ago. We did our due diligence, had the house inspected by a licensed and reputable home inspector, bought the house under the guidance of a real estate agent with 20+ years experience buying and selling homes in our area. Nevertheless, the county sheriff came knocking on our door last week.

We bought our house from a company that specializes in taking foreclosed properties, buying them at bargain prices at bankruptcy auctions, investing some money improving the property, and then flipping them again for a big profit. They've been in the business for awhile, based on what we can gather from internet searches, and we also gather that they bought our property in early to mid-December of '09. They gutted the kitchen and baths, refinished all of the floors, and turned a half bath into a full one, and then put the property back on the market about 30 to 45 days later.

Apparently, though, while they were doing all this work, they managed to annoy one of the neighbors, who reported them for having trucks and workmen in the place at all hours of the day and night. The neighbor complained to the county, who sent an inspector out to investigate. At the time of the inspector's first visit, no one was on the property, but he noted that there were no building permits posted, that there was much building debris in the yard, and also that there was a deck and a outbuilding that were built by the previous owners who didn't follow proper procedures or get the proper permits to build the structures. He returned the next day, and did gain access to the property and did a more thorough inspection.

The county then attempted to contact the flipper (which is based in a different state from our property) by sending him a certified letter, which he apparently refused delivery, so the letter was returned to the county, unopened. Since the company is based in a different county and state, the county inspectors did not have any authority for more aggressive delivery methods. As best we can determine, this took place about a week after we made our offer on the house, about 10 days after the flipper put the house on the market, but prior to the closing "party," (which, I might add, the flipper, nor a representative for his company, did not attend).

So in the meantime, the county cooled its heels. We closed on the property, moved in, and celebrated our first month in the house. Last week, however, the sheriff served us with papers telling us that we were in violation.

We contacted the county the next day, explained that we had nothing to do with the trucks, the lack of permits, nor the construction of the out-buildings. Their attitude was that they understood, and were sympathetic, and that they would attempt to track down the flipper, but in the worst case scenario, we were on the hook for the violations, and that we could be compelled to allow inspectors full access to the property to inspect the work done, which we fear could include destroying some walls and such to allow them access to new pipes, etc. Furthermore, we figure we're probably going to be on the hook to bring the shed and the deck up to code, even though the structures clearly date back several years.

My real questions are these : Who was the person who dropped the ball, and should have caught that there were outstanding issues with the seller and the county? Should our real estate agent have picked up on it? Our inspector? The people who did the title search when we closed on the house? The mortgage company's appraiser? Us? Someone should have seen this coming, right?
posted by crunchland to Home & Garden (28 answers total) 1 user marked this as a favorite
These are questions which you should be asking a lawyer knowledgeable about the relevant law. Where are you located?
posted by dfriedman at 12:01 PM on April 26, 2010 [5 favorites]

If you bought it from a licenced real estate agent and did a home inspection, you probably won't ultimately be on the hook.

Ultimately is small comfort in the short term, though. Talk to a local lawyer who does property law (which most any non-specialty firm would have, I expect)
posted by Lemurrhea at 12:06 PM on April 26, 2010

you're going to get a whole bunch of people telling you to contact an attorney that deals with real estate issues.

It seems unlikely that YOU personally would be (or should be) on the hook for these issues, especially if they took place before your closing/move-in date.
posted by drstein at 12:17 PM on April 26, 2010

Do you have title insurance? Seems to me this is the sort of thing they take care of. And if you had a lawyer handling the legal aspects of the purchase, your first step should be to contact him or her.
posted by orange swan at 12:29 PM on April 26, 2010 [6 favorites]

Short answer: Get a lawyer.

Slightly more helpful answer: when you buy real estate, it usually comes with what's known as a general warranty deed. This deed "warrants," i.e. guarantees, a number of things to the buyer having to do with the ability of the seller to confer good and unencumbered title. There's an argument to be made that failing to comply with regulations which could enable the municipality to take action against you and/or your property would violate those warranties. But this is something you're going to need a lawyer to figure out.

When you look for lawyers, look for one who holds himself out as doing real estate. You're going to want to stay away from the personal injury firms and look for a more general practice type of outfit.
posted by valkyryn at 12:30 PM on April 26, 2010

By the way, your realtor should have a lawyer connected with his real estate company. I'd call the realtor first, then go from there. At the very least they could probably recommend a lawyer to you.
posted by St. Alia of the Bunnies at 12:32 PM on April 26, 2010 [3 favorites]

Most, if not all, home inspectors will put in their contracts that they are not responsible if they miss something or if say your heater breaks a week after they did their inspection and said it was fine. I can't imagine your real estate agent being held liable in any way either but I'm not going to even pretend I know that for sure.

I don't know how you could have seen this coming but unfortunately you'll probably be on the hook for it since you now own the property.

Seems logical that the transaction shouldn't have been able to take place until any issues were remedied but like mentioned above you'd probably be best off talking to a lawyer.
posted by bingwah at 12:34 PM on April 26, 2010

Yeah, seconding you check your title insurance to see if it covers unpermitted work. There's a few things that might happen if you have unpermitted work:

1. You have it inspected and retroactively apply for a permit.
2. The county makes you tear out the unpermitted work.

Either is pretty unpleasant, so definitely lawyer up for this one if your initial inquiries don't go anywhere.
posted by electroboy at 12:37 PM on April 26, 2010

Also, home inspectors aren't going to check on whether work has been permitted or not, so following up with them is most likely not going to be fruitful.
posted by electroboy at 12:38 PM on April 26, 2010 [1 favorite]

Some good advice up above. First and foremost, get a lawyer. Do not, however, ask the Realtor for the name of his/her lawyer. They may be a defendant in any action you might take and their lawyer would not be able to represent you.

In many states, there are separate warranties and representations required to be made by the Seller. These include a representation that, to the Seller's knowledge, there are no code violations. Look through your closing documents for the Seller's representations.

Generally, a title company insures against items of record. Inspections would not show up on the record until the county filed a legal action headed toward court. It appears they haven't done that yet, so there was nothing of record.

Again, see a lawyer specializing in real estate matters.
posted by Old Geezer at 1:11 PM on April 26, 2010 [1 favorite]

Hmm. Is this not a case of caveat emptor? (Not a laywer, just someone who recently bought a home and checked into the permits of work done first.)
posted by bluedaisy at 2:36 PM on April 26, 2010

I have a few questions.

Did you have a lawyer at your closing?

Did you get a valid Certificate of Occupancy from your town?

If the town issued a CofO after the work was done, you shouldn't have any problems. I'm pretty sure you got one, I can't imagine the bank would write a mortgage without one.

I wouldn't count on title insurance being any help, this insurance covers the lender, in case there is an ownership question regarding the property.
posted by Marky at 3:08 PM on April 26, 2010

Right, it's the *lender* who might be most interested in this, eh?
posted by bluedaisy at 3:14 PM on April 26, 2010

I am going to offer advice on how to deal with your local building inspector. Go done to city hall (or where ever the building department is) and set up an appointment to talk face to face with whoever is assigned this case. Explain, calmy and rationally without trying to hide anything, your situation. Ask what needs to be done to bring this into compliance, ask to read the relevant code passages if you feel you are qualified to do so (it is generally in technical/legal jargon and can be hard to understand. After you get this stuff from them, hire a general contractor with a good reputation (the building department official may or may not be able to offer a name) and get the contractors take on this matter using the building departments info. This should include some kind of time frame/cost estimate.
The most important thing to take to meetings with the building department is the attitude that you are trying to be responsible and fix a problem that you didn't create. This usually goes a long way toward getting their sympathy. They usually deal with all kind of shady, corupt slumlords all day long. Kinda approach this like you would dealing with the police, polite, respectful, but not willing to just bend over.
BTW most municipalities publish full copies of there building codes online and especially a form stating things that specifically don't need a building permits, which decks and sheds below a certain size are often including on things not requiring permits.
And remember building codes are in place to protect you and the general public. The mostly concern things like your house burning down/exploding and/or flooding and when they do any of these things not including your neighbors house in the festivities.

As to the legal who is responsible thigns, I have no idea. get a lawyer. The building department is not going to care about this (who is responsible) they just want to satisfy there open problems file. Good luck.
posted by bartonlong at 3:42 PM on April 26, 2010 [3 favorites]

Also, home inspectors aren't going to check on whether work has been permitted or not, so following up with them is most likely not going to be fruitful.

Really? Out here (Australia), this should show up. If it didn't, I would be talking to my lawyer about why not, especially as the work was so recent and obvious.

That is dealing with the past however, and to move on I would be going onto the front foot and dealing with your local authorities on a totally up-front manner, along the lines of what can WE do to get this regularised - that is, it is a problem for them and you.

I doubt that anything really destructive will be required, but obviously I don't have first hand knowledge of the behavior your authorities in these situations. In my experience, they check that everything works, look around in the roof space and underfloor, and check load bearing walls for integrity. If you were a party to the unapproved work being done, I could see a risk that they might want to make an example of you 'pour encourager les autres' but as you weren't personally involved in the work this seems unlikely.

Oh, expect to have to pay all the necessary fees for retrospective approval, and hope that you can recover them from someone, your lawyer (pehaps your new lawyer?) will advise on the likelihood of this happening.
posted by GeeEmm at 3:51 PM on April 26, 2010

A good real estate agent should have caught this, and investigated. The listing agent may have know, or not. In any case, you know how in some ask.e questions, people yell "LAWYER UP!" This is a case where you are really going to need a real estate lawyer. Worst case, you may have to prove the work is up to code. It might help if you could find any contractor who did work, and could help location of critical pipes, wiring, etc., t polimit the number of walls that might have to be pierced. Code exists to save your life, first, and protect property, second. Be very nice to the code enforcement folks; they are likely to be sympathetic, but they do have to verify the work was correctly done. Good luck.
posted by theora55 at 3:51 PM on April 26, 2010

Be sure to let us know how this turns out.
posted by neuron at 4:17 PM on April 26, 2010

Yeah, you definitely need a lawyer for this question. There is no way any of us can give you a definitive answer, too many variables, need to be familiar with the laws in your area, etc. This is one of those times, I'm afraid, where you just need to lawyer up. Good luck! Please post a followup once all is said and done (I hate it when people don't post a follow up). :-)
posted by 1000monkeys at 6:30 PM on April 26, 2010

Response by poster: For what it's worth, the house is in Fairfax County, Virginia. I neglected to add the detail that the house was marketed and sold as "for sale by owner," so there wasn't a listing agent. We were hoping to put off getting a lawyer since we weren't even sure who to go after, or even if we could, or hoping that we might be able to handle the whole thing in small claims.

That said, we have every intention of cooperating fully with the county officials, even if it means we're out a bit of money up front.

And I'll try to post a follow-up assuming the wheels of justice move before the thread gets closed.
posted by crunchland at 6:55 PM on April 26, 2010

Really? Out here (Australia), this should show up.

In the States, the home inspection is performed by a contractor (home inspector) hired by the buyer, as opposed to a building inspector, which is a municipal employee whose job is to ensure code compliance. American home inspectors vary quite a bit in quality and for the most part the inspection is used as leverage for final negotiations.
posted by electroboy at 7:49 PM on April 26, 2010

We were hoping to put off getting a lawyer since we weren't even sure who to go after

Your lawyer would determine that. If you're hesitant about getting a lawyer I would do what bartonlong said. You'd then have an idea as to what has to be done and the cost. Then you can determine if it's worth your time/money to get a lawyer involved or just take care of any issues and move on.
posted by bingwah at 7:13 AM on April 27, 2010

So you didn't have an agent on either side?
posted by bluedaisy at 2:46 PM on April 27, 2010

Response by poster: No. We had an agent. The seller acted as his own agent.
posted by crunchland at 3:36 PM on April 27, 2010

Honestly, it's your fault for not performing your due diligence, buying from a out-of-state flipper and then trying to cheap out on hiring a lawyer by using askme to solve your problems.
posted by electroboy at 6:58 AM on April 29, 2010 [1 favorite]

I'm inclined to think that while obviously the unpermited work obviously isn't your fault, it is your fault for not looking into this question. Did the realtor not suggest it? Ours was quite adamant about making sure we checked for A, B, and C and permits.

I also think you can make a claim it's not your fault and negotiate your way out of this with the town, but really it is your responsibility now.
posted by bluedaisy at 8:48 AM on April 30, 2010 [1 favorite]

Mod note: A few comments removed, this is not the place to have a general argument about the answerability of questions etc. You know where metatalk is.
posted by cortex (staff) at 10:39 AM on May 31, 2010

Best answer: So, since this popped up on my recent activity after so many days, I thought I'd post a little bit of an update.

When I talked to the county inspector about our case, I asked him the same question I posted above -- who should have caught this? He said that if he were in my shoes, he probably would have gone to the county and had them do a search for any outstanding permit issues associated with the property, but he admitted, since he deals with these issues on a daily basis, he is probably not a good yardstick to be measuring against. He suggested that our real estate agent should probably have seen this coming and warned us. He also suggested that perhaps the closing company, doing a title search on the property, should have probably set up a red flag.

So, in the end, the county exhausted their limited methods for serving notice on the flipper, so they have no choice but to make us deal with the issues. We obtained a retroactive permit for the work done on the bathroom, and we'll get the work inspected. If it is not up to code, I assume we'll have to repair or replace it so that it is up to code. As for the out-buildings, we've learned that not only were they not built to code, but their placement and proximity to the property lines, in relation to their size, makes them zoning violations as well, so we've chosen to demolish them -- which requires yet another permit. (We could have tried to apply for a variance, but the county charges an exorbitant fee just to make the application, and I was told that the chances of having it granted were virtually zero.)

The county enforcement people we've dealt with have actually all been very, very helpful and friendly, and sympathetic to our situation, but unfortunately, since the wheels of bureaucracy have already been set in motion, there's nothing anyone could do to stop them until they ground to a halt on their own accord. They also told me that this is an increasing problem in the current economy. It's more and more common for flippers to buy foreclosed property for very low prices, invest money in upgrades, but use non-licensed workmen, who don't always know the proper methods for installing plumbing, heating, etc. It's common for them to load up a van with guys standing around the Home Depot and set them loose on the property. Budget cuts at the county level also contribute to the problem, meaning there are fewer building inspectors, so they now have to be re-active instead of pro-active. We've heard stories about improperly installed furnaces that cause dangerous build-up of carbon monoxide gas, and of leaking natural gas lines that have caused fires.

In the end, we did also consult an attorney. He felt that it was too soon for us to be contacting him, since, at the moment, we don't want to sue anyone, such as the flipper or real estate agent. At the moment, we're looking at $170 for some permits, plus demolition costs. We're hoping that we may be able to get some reimbursement through our title insurance policy or home buyer's warranty. And the flipper? He's incommunicado, no doubt using the money he made in profit from the sale of our house and doing the same sort of shoddy, dangerous work on another property.

My hope is to help prevent others from falling into the same situation as we did. For anyone else buying a house out there, my advice is not go hire a lawyer (unless this is the local custom -- it's not, where we are). Instead, before making an offer, call the county zoning and permit offices and see if there have been any complaints filed on the property. Complaints were made about our property months before the county took action, and there is still no information about the complaints available online. Include language in the contract that the seller is on the hook for any outstanding zoning and permit issues, and have money set aside in escrow to go towards resolving the issues.
posted by crunchland at 6:38 PM on May 31, 2010 [2 favorites]

Response by poster: Update #2 : It's now several months on from when I originally posted this question. We've been through several rounds of inspections. The outbuildings have all been demolished, costing us several hundred dollars in dumpster fees and equipment costs. We did the work ourselves, with the help of several strong backed friends and relatives, but we got a quote for a professional, and that would have been $2500. We still haven't dealt with replacing the shed yet.

We didn't get off so easily on the bathroom inspection. The flipper completely ignored all of the county's building codes when he refurbished the bathroom, including shoddy plumbing work, and placing the fixtures too close together. In the end, we had to completely gut the bathroom, redo all of the plumbing, and redesign the layout of the room -- the current cost about $2500, and we haven't even gotten past the point of putting up new drywall and tile and replacing the fixtures. We had to remove the bathtub and replace it with a shower, since there would have been no way to put the tub back and still be within code for clearances between fixtures. Considering we're doing most of the work ourselves, the amount we'll end up paying for the redo on the bathroom is quite reasonable. We're just lucky we had enough savings to cover the cost.

The county has told us that we're pretty much off the hook for the violations, considering we showed good faith and got the required permits. They've given us until the end of the year to complete the bathroom project.

As far as recouping our costs from the home warranty and title insurance -- it looks like it's not as simple as we thought it'd be. Our title insurance has a deductible, and while we're close to actually covering it, we're still going to have to eat a majority of the costs.

I'll say it again -- if you are planning to buy a house that was sold in foreclosure to a flipper, you're best bet is to get some money in an escrow account at closing to cover this sort of situation. And yeah, call your city or county permit and zoning offices and make sure there are no outstanding issues with the property.
posted by crunchland at 9:28 PM on September 22, 2010

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