My husband and I purchased our first home the year we got married. We narrowed down our search to a specific area of metro Atlanta. We didn’t have kids at the time, but the school system is the main reason we picked that area.
We found our starter home.
After a few months on the market, we finally found a house with most of the things we were looking for. The disclosures mentioned minor structural damage work in the garage that was fixed. After the home inspection, the home inspector asked to see a letter from the structural engineer who had done the work to understand the scope.
The structural engineer visited the property and provided a report attesting that the appropriate work was done to correct the issue. After reviewing the report, the home inspector had no additional comments.
Time to settle into our new home.
We closed on the house and moved in. A couple of years later, we noticed a crack on a wall in the basement. During heavy rains, water would get into the garage through the crack. We brought in a structural engineer who told us additional work was necessary to fix the issue. According to him, the structural work was only done on one side of the wall, which was not enough to fix the issue. We did not waste any time. We hired a highly recommended company and got all of the work that the engineer had requested done.
Listing our house.
A year later, we were ready to put our house on the market. Our family had expanded faster than we had anticipated with twin babies. We wanted to stay in the same area but needed more space.
We noted the previous structural issues in the disclosures and volunteered to provide additional documentation to potential buyers. This was to reassure them that we had done the necessary work to fix the structural issue. We spent close to six years in that house, and during that time, property value had increased significantly. After market research and discussions with our realtor, we listed the house for about 50% more than what we paid for it and moved to our new home.
We got a deal, and then the nightmare begins.
There was a lot of interest when we first listed the house, but water damage happened within a few weeks. Somehow, the fridge water line broke, causing extensive damage. It was a holiday weekend, and we were out of town. We came back to see the main level and basement severely damaged. We had to take the house off the market for close to two months while getting it fixed. We had a good offer on the house that instantly disappeared.
Time for the second offer, and then more drama occurs.
After close to two months, we completed the repairs and listed the house again. We received and accepted a great offer to close within three weeks.
Everything was on track. One day, the buyers asked if they could contact our structural engineer. We gladly provided their contact information.
A few days later, the buyers pulled their offer after meeting with and receiving a report from the structural engineer we had hired to help us fix the structural issue. We completed all of the work listed on the engineer’s report, but after meeting with him, the potential buyers ran away as far as they could.
After talking to the engineer, he refused to provide the report unless we paid him as well. At that point, the engineer had not notified us that he would write such a report after working with us. We didn’t trust his judgment, so we declined his offer.
Hiring another engineer
At our realtor’s recommendation, we hired another company that issued a structural engineer report. Based on the report, additional work was needed now and potentially more work in the next year. The work was estimated to be up to $100K. We would also have to take the house off the market again for another four weeks.
We finally sold the house.
We considered renting the house but decided against it. We sold the house to a cash buyer, and that deal wiped out most of the profit we were expecting to make on the house based on our last offer. But it made perfect sense. To us, that house was a money pit, and we were eager to move to the next chapter of our life without it.
The experience was an expensive real estate crash course, but the lessons we learned are invaluable.
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You might want to think twice before buying a house with structural damage as a first investment.
When we purchased our first home, we didn’t know enough about real estate and what to look for. For a savvy investor, structural damage might not be a big deal. But for newbies like us, it turned out to be a nightmare. We didn’t know anyone who had dealt with structural damage before, and the first two structural engineers we dealt with didn’t help the situation at all. We spent more than ten thousand dollars to fix the structural issue based on the recommendation we received, but it turned out that wasn’t enough.
Don’t rely on your home inspector too much.
Today, I see home inspectors as general practitioners. When you see your general practitioner, they sometimes need to send you to a specialist.
When we purchased the home, we relied on the seller’s structural engineer report guaranteeing that he had done the necessary work to fix the issue because that’s what our home inspector requested to see.
In hindsight, especially since the seller was an investor, he probably had a relationship with that structural engineer.
Though we will never know if the structural damage was addressed properly when we first moved into the house, we should have hired an independent engineer to assess the damage.
Based on the outcome after we hired our own engineer, I would say that we should have hired another engineer for a second opinion and decided whether or not to purchase based on those two reports.
Not everyone has high ethical standards.
We did all of the work the engineer we hired recommended; however, after meeting with a couple who was eager to purchase our house, he wrote a report that made them walk away without giving us a heads up. He also refused to send the report to us unless we paid him as well.
When we sold the house to an investor, we disclosed upfront that the house needed structural damage work done. The buyer asked us what was wrong, and we explained while also suggesting that he brings a structural engineer for a second opinion. The buyer mentioned that he would, but it turns out that he never did. With a cash sale, a lot less paperwork is involved than in a traditional sale. We were upfront about the structural damage. Though we were not required to provide any documentation based on the sale terms, we volunteered to provide additional information and paperwork. The buyer never requested more information, which we found odd. Years later, we found out that the house was put on the market almost right after we got rid of it. If the buyer had received the last engineer report, he would have lost the opportunity to be vague about the structural damage in the sales’ disclosures.
It’s not a deal until the deal closes.
We purchased our next home with ten percent down. We intended to do a free mortgage recast a few months later after selling our house. We were planning to take a portion of the sale’s profit to increase our home equity and get rid of private mortgage insurance. We were also planning on purchasing an investment property. When the original deal fell through, our plans were derailed. Luckily for us, we didn’t make any commitment but instead decided to wait for the sale to happen.
When you do the right thing, you will receive grace.
We were days away from making a 50% return on our real investment. The second offer fell through. We worked out a cash deal while the house was off the market. We could have been dishonest and easily cut our realtor out of the agreement. But we wanted to do the right thing and informed her that we were closing on the house. The next day, the realtor told us that she didn’t feel right taking any commission on this deal from an honest couple, given how things panned out. That gesture meant so much to us and we established trust and a relationship in a business where a lot of people choose to cut corners. It reinforced that no matter what you have to lose, doing the right thing is invaluable.
Here are a few things I would have done differently as a first-time buyer.
- Hire two independent structural engineers to determine if additional work needed to be done before making the purchase.
- Obtain multiple quotes to estimate the cost of potential repairs.
- Use the estimate to negotiate the purchase price down.
- Shut off the water supply at the house over the holiday weekend to avoid water damage.
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It could have been worse.
Was it painful? Absolutely! We would have spent less money to get the house ready if we knew what was ahead. We also had plans for the sales profit.
Do I regret it? No, it was a life lesson. We went through it, so hopefully, you don’t have to.
It taught me what to look out for as a real estate investor, and what kind of investor I want to be.
That expensive lesson led our family to tighten our finances even more. It reinforced the importance of being prepared for rainy days. It was a reminder of what we had learned the year prior when we received medical bills after our twins spent months in the hospital at birth. You shouldn’t get too comfortable because one bad financial decision or one medical diagnosis can wipe out your savings.
Being conservative in your spending is the way to prepare to weather financial storms.
“I didn’t lose money, I paid for lessons.” Unknown
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