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March 2015

A Power of Attorney (POA) and code enforcement

When presented with obstacles, we can go under, over, around or through them, but we must keep moving forward


A seller called me back in October about his mom's house. He said she couldn't take care of it any longer, she had already moved out, she'd like to get $79K for it and she gave him a POA to sell it. He then told me the roof needed to be replaced, new kitchen cabinets had been installed 6 years ago, the electric was upgraded 4 years ago and the heater 1 year ago. There was no A/C and the swamp cooler also needed to be replaced. He thought the value was around $130K, but with the unpermitted room addition added to the back patio that needed to be torn down, $79K was a fair price.


This property was quite far from my office, but I knew the perfect buyer. I sent him a quick email and gave him the seller's contact info so he could make an appointment to go out and take a look. My buyer was real familiar with that neighborhood having flipped a home there recently and new for sure he'd be dealing with potential break-ins, and at least some vandalism. After he went out to see it, he let me know the most he'd be willing to pay was $65K. I emailed the seller a written offer of $60K. It wasn't until over a month later, in December that the seller got back in touch with and said his mom accepted my offer.


We opened escrow in early December and that is when the problems started. The sellers brought in their attorney to review the escrow instructions and wanted some changes made. Going back and forth took several weeks, but we finally got that dialed in. By this time, because of the sketchy neighborhood, my buyer wanted to do another walk-thru to make sure the house hadn't been ransacked by the local hoodlums.


Then escrow received notice from the city about a Notice of Pendency. This basically put the whole deal on standby while we dealt with that. There was an open code enforcement case that required the seller’s attention. Code Enforcement wanted the following corrections, what they labeled a Notice of Public Nuisance and Order to Abate, completed prior to closing escrow: 
 
            CCMC 13.80.030 Landscaping
            CCMC 13.80.115 Visual Blight
            CCMC 8.26.060 Display of street addresses
            CCMC 13.80.105 Illegal, nonconforming building or structure
 
My buyer sent me an email asking me what I'd like to do. Having been down this road many times in the past, this is how I responded:


As a buyer, if it is code enforcement issues, I've had excellent success calling the officer and telling them I plan on rehabbing the property after close. I've had to sign a document only once and I've done this many times.


My buyer emailed me back:


Yep, this is what I will do. I know one of the officers, and I've done this before so I'm hopeful they will work with us.

After he cleared everything with the city, he let me know the city mailed a release to the county recorder and he was doing one more final walk-thru and funding the next day.


Don't let code enforcement scare you. Their job is to maintain a level of habitability in our communities. Generally, they are not there to harass you. (However, there certainly are some exceptions!) See, when a city starts the process of putting the house into receivership for uncorrected violations, it gets very expensive very quickly. They have to pay a lot of attorney fees and prevailing wage rates for labor. All this they hope to recover from the sale of the property, but it is typically a losing proposition. They would much prefer to work with us investors to get the property cleaned up and a good occupant moved in. They typically have their hands full and one property becomes a burden taking up their valuable time. As investors, we can solve that problem. I've been required to sign a rehab agreement with timeline stipulations, but as an investor, I intend to rehab the property anyway. My suggestion: work with your local code enforcement and get to know the officers. I'm sure you've heard the saying, "It's not what you know in this world, it's who you know!" Creating a few solid relationships and you never know what leads might come your way.


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