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Dear PoPville – Lessons of a Bad Home Purchase

by Prince Of Petworth August 21, 2014 at 2:30 pm 110 Comments

“Dear PoPville,

In March we had to file a lawsuit against the house flippers who sold us our house. Turns out they had illegally renovated our house. The flipper did not even have a D.C. business license. He runs approximately 15 limited liability corporations (LLCs) out of his $2 million house in Potomac, Maryland. Like some (but not all) other house flippers, he runs the house flipping LLCs like shell companies, undercapitalizing them, mixing his personal assets with the LLC assets, and failing to hold any board meetings or to otherwise respect the formal rules that govern LLCs. Those shell companies essentially protect him from liability and make it hard to find out who is behind the shoddy construction. We fully expect that the LLC he used to flip our house has no insurance and no money in it. That means that if we want to recover our losses, our attorney will have to “pierce the corporate veil” of the flipper’s LLC (a potentially expensive proposition) and show that he was using the LLC as an alter ego, that he didn’t respect the rules governing LLCs, and that he was using the LLC to perpetrate fraud.

In addition, the real estate firm for the seller/flipper was not registered and was not in good standing (and thus was also operating illegally in D.C.), and the contractor also had no license and used unlicensed subs.

Examinations of the D.C. Department of Consumer and Regulatory Affairs (DCRA) building permit records, deeds in the D.C. Recorder of Deeds, pre-flip real estate listings and then post-flip listings strongly suggest that the same flippers who did our house have also illegally renovated dozens of other homes in D.C. They’ve covered up their tracks well, in part by using permits for minor repair work while they greatly exceeded the permits and gutted the place amid a total rehab. Their carefully hidden illegal work includes the tearing down of load-bearing walls or columns to create a superficially nice but structurally defective and non-code compliant open floor plan, floors that sag two inches or more, an asbestos-contaminated HVAC system, a now-collapsing porch built by draping brand new casing over thoroughly rotten wood, a construction-debris-filled sewer line that will likely spew sewage into our basement yet again soon unless we excavate the pipe to replace the whole thing, zero insulation in the walls and ceilings, and several other problems. We plan to keep the house, but we know that if we ever want to be able to sell the house in the future, we will have to disclose all these problems, will have to undertake a significant redo of the house, and be able to show prospective buyers documentation regarding how we fixed each defect.

Having to move out of our own house for safety reasons and rent an apartment while still paying a mortgage is not the best thing that’s ever happened to us. But we were fortunate to discover all the well hidden latent defects and the failures to obtain the required permits in time to hold the flippers accountable before it was too late (before the three-year statute of limitations). From a search of a few dozen hours of the DCRA permits records, deeds, and other city documents and records, it appears that dozens of other individuals in D.C. (as well as DCRA, tax authorities, lenders/banks, insurance companies, etc) were similarly defrauded, bought homes from these guys and — whether they know it or not yet — also ended up with houses that were partially or in large part illegally renovated, not inspected properly (or at all), built by unlicensed contractors, affected by artificially inflated values, and unsafe.

I know you cannot name the flipper and his partners in crime due to liability reasons, but if interested, readers can look up the defendants in our civil suit online via the D.C. Superior Court case search system; our civil case number is 2014 CA 001722B. More importantly, even though many of your readers already know this, I’m also writing to serve as a reminder that there are many greedy individuals who continue to successfully take full advantage of D.C.’s weak regulatory system and have turned D.C. into a veritable Wild West of U.S. real estate. The story is not simply about artificially inflating the value of houses and some home buyers who are whining about getting taken. It’s about real estate and regulatory systems that are allowing shady flippers to dot the D.C. skyline with houses that are unsafe to live in. Our story appears to be the tip of the iceberg.

The story of what flippers can hide and get away with in D.C. is pretty amazing: no license/registration, no permits, no problem. The fact that we did a quick check to ensure they had permits before buying the house didn’t help (they had permits, but they were for relatively minor repair work, not for the complete-gut-and-redo job they did on the house). And the house inspector we hired before we bought the house didn’t stand a chance at finding the things they hid well behind new drywall, under gleaming bamboo floors, new carpeting, etc.

So the story appears to be much bigger than our illegally and badly renovated house, unfortunately. DCRA’s Consumer Protection Office and Inspections/Compliance Office have helped us a lot so far in investigating the defendants in our lawsuit and putting them under a lot of pressure to settle. It’s too bad, though, that DCRA cannot do more on the front end (via prevention-related regulation) to more effectively prevent this kind of thing.

The real estate market represents an essential money-maker for the city of D.C. And of course not all flippers are bad; many help improve neighborhoods. But after having spent the better part of the last six months digging up the dirt on the dirty flippers of D.C., seeing how often they get away with the same scams (even after getting slapped with stop work orders), navigating the D.C. regulatory bureaucracy, etc, it would seem that D.C. needs to undertake several reforms to address this problem before it gets even worse. Some of these reforms might include:

  • Stiffer penalties for building permit violations, including the establishment of daily fines instead of one-off fines;
  • Speeding up and simplifying the process of applying for building permits so as to entice flippers not to skip the permits or cut corners;
  • Hiring more inspectors;
  • Expanding D.C.’s valiant but still-too-small Consumer Protection Office, and the adoption of needed implementing regulations so that the office can finally levy fines for false advertising;
  • Ensure that violations regarding permits and inspections are also recorded by the Recorder of Deeds;
  • Increase penalties for and obstacles to remove Stop Work Orders issued against un-permitted house renovators;
  • Doing away with or greatly strengthening and spot checking the laughable third-party inspection system through which DCRA outsources its inspection duties to private contractors with little to no oversight;
  • Stronger seller disclosure statements to force those who give flipping a bad name to reveal what they knew about the house’s defects, and to list explicitly which permits and inspections they obtained;
  • A DCRA-sponsored amnesty period (followed by a robust crack-down) to entice unlicensed flippers and/or contractors to turn themselves in and report and remedy their un-permitted (and thus unsafe) houses;
  • The establishment of a fund akin to the Guarantee Fund that Maryland has to compensate homeowners from losses due to poor workmanship;
  • Requirements that title insurance searches uniformly include permit records, not just deeds;
  • Better training for appraisers from the Office of Tax and Revenue, who often do not even go into a house to assess it;
  • Requiring the disclosure of beneficial ownership information on permit applications and real estate listings, to ensure that flippers cannot trot out a new LLC every week to hide their bad reputations behind a new unknown company or LLC;
  • Adjusting the legislation that allows for piercing the corporate veil, so that in situations where patterns of fraud are clear, citizens trying to sue the shady flippers of D.C. don’t get stuck pursuing an uncapitalized, penniless shell company while the owner enjoys his/her ill-gotten profits and impunity;
  • Increasing regulatory cooperation and joint investigations between D.C., Maryland and Virginia, as well as applying penalties region-wide to repeat-offenders of un-permitted, unsafe house flipping; and
  • Harsher tax fraud penalties, including for those flippers who claim un-permitted renovations or improvements as tax deductions. “

A lot of readers may believe that it’s not a big deal if permits for renovations are obtained, or that it’s not a big deal to buy a house with work that was done without permits. Many might believe that “well, if the work is safe enough or is done to code, it’s merely the bureaucracy that’s being shortchanged…and besides, the D.C. bureaucracy is notoriously slow and charges too much for permits.” I may have even once been sympathetic to that line of thinking. Not anymore. While I cannot sing the praises of DCRA’s consumer protection and compliance divisions enough in terms of how they have aggressively gone after these crooked flippers and shared with us some excellent insights and their time in effort to help us, DCRA was nonetheless required to glue a big bright orange sticker (the scarlet letter of D.C. housing) on our front door and require us to fix what the flippers did (or rather didn’t do). And if we don’t get it fixed promptly, we actually risk having the house confiscated and/or being prosecuted by the attorney general (per the bright orance notice now pasted on our front door), I changed my opinion pretty quickly.

To engage in a bit of mythbusting, it’s worth pointing out that work by private contractors is almost never done to code if there is no ‘threat’ of being scrutinized or inspected. But even if un-permitted work is done to code, if you end up owning a house that features work that was done without permits (and inspections), the city can and will slap a stop work order on your house along with a Notice of Violation / Notice to Abate and hold you (the owner) responsible for ensuring that the work is permitted, inspected, and code-compliant as required — even if they know it was the house flippers who did the wrong thing. This is what happened to us; we risk having the house repossessed by the D.C. government if we do not fix what the flippers did. At the risk of sounding like a public service announcment, even if you have no problems (or are not aware of the problems) and have not been tagged by the city government as having a house with un-permitted work, you could still encounter problems. For example, when you sell such a house (with un-permitted work), buyers and/or banks (lenders) may ask for proof of proper permits regarding changes to the house that they’ve identified after digging in the records (research). And it can cost quite a bit to fix things retrospectively, especially when no architectural plans were filed (because no structural-work permits were applied for) and everything is covered up with drywall, etc.

Comments (110)

  1. So, long story short, they didn’t bother getting an inspector before they purchased the house, and now they want to rant about their mistake.

  2. Inspectors can’t find many of the issues they are talking about. This is a serious problem in DC and happens more than you would think.

  3. Completely agree… I bought a renovated home and while it was nothing like what the OP describes here, there were many short cuts taken, not the least of which was hiring a 3rd party inspector who they paid $1,000 to pass the house even though they should not have. I had a good inspector but there were many things there was no way he could have found over the course of 3 hours.

  4. Third part inspectors assume liability in exchange for $1000. I’m using a very good third party inspector, and it’s not necessarily a shady practice. (Not shadier than DCRA inspectors can get up to, at any rate.)

  5. Inspectors miss things and have different areas of depth. The ones I’ve used here and elsewhere have focused most on electrical issues, less on structural stuff.

  6. Proficient Reader

    Maybe if you bothered to read the entire post instead of skimming it…. “And the house inspector we hired before we bought the house didn’t stand a chance at finding the things they hid well behind new drywall, under gleaming bamboo floors, new carpeting, etc.”

  7. “And the house inspector we hired before we bought the house didn’t stand a chance at finding the things they hid well behind new drywall, under gleaming bamboo floors, new carpeting, etc.”

  8. And also please read the entire post before you go assuming things and being jerky.

  9. Sorry, I have a job which prevents me from reading entirely too lengthy blog posts throughout the entire day.

  10. Then you should read and comment later when you have time to actually comprehend what you’re reading.

  11. But clearly you have enough time to post on said blogs. And then continue to monitor the comments. And then post again. Just sayin’.

  12. Oh snap!

  13. So, long story short, you don’t bother to read articles, and now you want to rant about how important you are after making mistakes.

  14. But your job leaves you enough time to continually post comments?

  15. Hah, irony. You complained about someone not doing their due diligence, and then you comment without completing the post?

  16. He did get an inspection, your reading comprehension seems to be lacking.

    “And the house inspector we hired before we bought the house didn’t stand a chance at finding the things they hid well behind new drywall, under gleaming bamboo floors, new carpeting, etc.”

  17. It’s true. I bombed the reading comp section on the SAT. :(

  18. “And the house inspector we hired before we bought the house didn’t stand a chance at finding the things they hid well behind new drywall, under gleaming bamboo floors, new carpeting, etc.” Sounds like they did get one, but the cosmetics covered the issue. I can totally relate to this issue as my house unfortunately required all new plumbing and electric that was covered by new dry wall.

  19. Um…

    “And the house inspector we hired before we bought the house didn’t stand a chance at finding the things they hid well behind new drywall, under gleaming bamboo floors, new carpeting, etc.”

  20. Learned the term ‘fundamental attribution error’ yesterday and have been looking for examples of it in daily life- your comment fits. Thanks.

  21. I really wish people on POP would step off of this pervasive cynicism as a knee jerk reaction to every post. We are technically a community of people that live around each other, and there’s no excuse for initially communicating this in a thread where someone is obviously frustrated. There are more constructive and less rude ways of posting your opinions, and if you have no connection to the case, why would you berate someone during a period of misery?

    Step off the pulpit, I’m sure if someone got a chance to evaluate your life they’d fine more holes than a golf course in it.

    Sorry to hear about this, I often provide consultation to friends as they look for houses in DC because I like doing the work. It’s also worth it to get a good HUD consultant on 203k projects and to be involved at all points of home inspection. Even with my years of experience in renovations, project management, and in watching This Old House and Property Brothers, I still have contractors cut corners on me all the time, it’s always about being highly vigilant and learning the processes involved inside and out.

    I hope your case goes well, but more importantly, work to get the house fixed correctly so you can feel better, and move forwards toward happiness! Chances are that it will be a sound investment once it all comes together despite the setbacks.

  22. I think you are jumping the gun and being unreasonable. The article itself says that they DID get an inspection of the home before buying the house. The OP’s point was that inspector could not see problems that are covered up by drywall etc. These are egregious and dangerous infractions of code hidden behind walls and ceilings and cement. A home inspection will NOT be able to go deep enough to uncover such defects – that is the whole danger. Flippers can be be predatory and it sounds like these ones were – they carefully hid their shoddy workmanship.

  23. The Third Party Review system is an absolute joke. DCRA needs to overhaul the enforcement policies of the Third Party Review program and eliminate the bad actors immediately.

    As it stands now, the 3rd PR program allows former DCRA employees, many who were bad actors to begin with, to profit and defraud the very same offices from which they were removed. These crooks have insider knowledge of how to game the system and it’s criminal.

    And the crappy real estate speculators/contractors are covering up their misdeeds for profit and threatening health and human safety.

    My sympathy is with the original poster here. We’ve encountered similar situations in our community and found the penalties rarely change the patterns of bad behavior by these unqualified crooks.

    Any credible real estate developer, contractor, lender or Third Party Review company who values their profession’s reputation should want to see this problem addressed swiftly and with harsh consequences.

    Don’t settle until you know it hit them hard financially…keep up the fight!

  24. Inspectors are not psychic, nor do they have X-Ray vision. They can find obvious faults, but they can’t tell you if someone has illegally wired the house, because that’s behind the drywall. Ditto pipes, changes to load bearing walls, etc. The problems that these things create (i.e. sagging floors) take a while to show up, so if the work has just been done, your inspector will never be able to find it. These people explicitly said they got an inspection.

    That said, you should never use the inspector recommended by your realtor, because the realtor’s incentive is to get the sale done, not to refer you to an ultra-tough inspector who’s going to kill their deal.

  25. This is the longest post on POP I’ve ever seen. I couldn’t even get past the first paragraph. #AreThereCliffNotes

  26. Why do people freely admit to laziness and ignorance? “Couldn’t get past the first paragraph” isn’t something to be proud of. It’s a well written and salient piece, and you’re free to move on to pictures of kittens.

  27. + 100! This is an extraordinary effort and a real public service. Thank you for writing and hope it works out well (and soon!)

  28. I think most people are taking a quick blog break at work. I don’t think they can afford to invest the time its pretty long. I wanted to read it all but I’m switched back to work

  29. Sounds like the real estate agents are out in full force with this posting. No one wants to admit they are selling a (literal) pile of sh#t.

  30. We were in your shoes, but lacked the time, money, and legal know-how to pursue the flippers. We definitely got our money’s worth out of the home warranty we made them buy for us, though.
    Thank you for taking this on. You should set up a donation site, because you’re doing a real public service.

  31. The current DC housing market allows for less than a week to decide if you want to purchase a desirable home. This competitive market often eliminates the buyer’s ability to put contingencies in the offer, and limits the window in which pre-inspections can be conducted. The true moral of the story is that if you buy a desirable home in DC in this hot market, you are taking a huge financial risk along with the financial upside of making a good investment. The whole process with the flippers, sellers, title company, agents, inspectors, lenders, and appraisers is downright shady. It all stems from greed. I feel for this person and hope the issues are resolved timely. It’s the nature of the beast.

  32. Yup, totally. We bought a house in a hot neighborhood two years ago which had seven other offers (on the low side for a hot neighborhood). It was “renovated” but we knew it was crappy as it had been used as a rental for four or five years prior to us buying it. We figured it would be mostly cosmetic stuff. What we didn’t know is we’d be sinking an additional $150K + in renovations and dealing with water damage and severe structural damage that was allowed to linger and covered up by the flippers (Express Home Buyers). We didn’t buy directly from them as there was another owner in between so I don’t think we have any recourse. I really wish we could sue them though. The house as we bought it was incredibly unsafe and basically a ticking time bomb.

  33. Would really like to talk to you. We bought a house from Express Home Buyers, too. Can we chat?

  34. Well, you have the same name, so maybe you can chat at the next family reunion.

  35. Yes, definitely. How do I go about getting you my contact information?

  36. Are home buyers unaware of the permitting process in DC? where they can check to see if permits have been pulled and all of them have been closed? Hell I couldn’t even get the gas in my home turned on without the city putting a sticker on my furnace to state that they tested to make sure there are NO leaks.

  37. Some of us have never bought houses before. Some of us don’t have parents who have bought houses before. Some of us who have bought houses before have bought them in other cities where there is more time to make decisions and more transparency in the process. Thank you for sharing your knowledge with those of us who are still learning. Posts like this may keep us from learning everything the hard way.

  38. Yes, my thoughts exactly. We were rushed to get a roof over our heads by the time we moved from another state. And our last house purchase/ homeowning experience was NOTHING like it is in DC. We thought we had it figured out, the DC house being our second purchase. Nope.

  39. YOu can get a list of permits, but the online system is extremely vague. Even the written permit is extremely vague, and may not tell you what you actually need to know.

    As OP explained, they allegedly worked beyond the scope of the permit in many cases.

    So, for example, one might see “move interior walls” has a permit, but there’s no mention of those interior walls being load bearing, and the movement not adequately supporting the load. In addition, one can hire permit inspectors who aren’t from DCRA – I’m quite sure there are corrupt ones of those, given this is DC and it involves construction. Indeed, probably few of them aren’t corrupt.

  40. Thank you for posting this. Several times in the home buying process, I felt like it was literally me against everyone, even those who were supposed to help me and represent me (real estate agents who encourage buyers to waive contingencies that are there to protect them, mortgage loan officers who try to convince you to pay more for a house so as not to devalue the properties in the neighborhood, home inspectors who are more concerned with covering their own butts by requiring you to sign outlandish contracts waiving all of your rights AFTER they’ve already performed the home inspection that you have to pay them for), and the weak disclosure laws in this jurisdiction make it MUCH harder and scarier than it has to be.

    I fully support making seller disclosures much more comprehensive and meaningful, including a requirement that sellers disclose if anything is not up to code and if any work was performed without the proper permitting and whether any fines have been levied by the DCRA for unpermitted work. Shockingly, these are NOT required in DC. I also think that the suggestion that title searches also search for permits would help immensely. Neighbors are also way too hesitant to call DCRA when they know work is being done on properties without the proper permitting. It is really simple to just call it in.

    I had to walk away from a contract on a house that was flipped because we could tell the work wasn’t up to code, and we had no way of knowing what was behind the dry wall. The housing market in DC is insane, and I refuse to participate until the regulations and enforcement thereof actually protect buyers.

  41. The housing finance system in this country is STILL a disaster, 6 years after the Crisis. People are still buying homes they can’t afford. No one cares, so long as gravy train keeps rollin’ for originators, banks, securitizers, builders, real estate agents AND homebuyers (who want more house than they can afford AND a 30%+ return on investment in 3 years). It’s a house of cards and something is going to burst (again).

  42. As a neighbor to improper construction who called DCRA repeatedly over several months with little effect, I can tell you that DCRA deserves a lot of the blame. In the end, calling 911 was much more effective to temporarily stop them from working. DCRA refused to inspect the property until after I contacted my council member. It shouldn’t be that hard.

  43. I had the same problem with a flip next door to our house. They demolished a whole house on a Saturday night (down to a hole in the ground) with a “remove drywall permit” and DCRA did issue a stop work order for that, but subsequent calls were branded a “neighbor dispute” and they refused to come. At one point the shady contractor knocked on my door and told me that he’d already paid them off so I was wasting my time calling. The only way he would have known it was me calling is if they told him. We had been trying to lay low and just go through the city because we were afraid they would intentionally do damage to our property while we were gone at work in retaliation.

  44. In addition to the various pitfalls and shadiness the OP describes as needing reform, the level of corruption within the DC regulatory system is a serious and persistent problem. It’s frankly disgusting to see the baloney that DCRA folks will let developers get away with, and not hard to imagine that most of these shenanigans are the result of public employees being bribed.

  45. A couple of thoughts –

    1) I’m sorry to hear you got screwed by a scammer. That really, really sucks.
    2) Setting up numerous LLCs to reduce liability in commercial real estate ventures is basically SOP in every state in the US. Literally 99% of commercial properties downtown are “owned” by shell LLCs. Its much rarer in residential real estate, but if you’re flipping houses on a huge scale it makes sense and doesn’t necessarily indicate a fraudulent entity.
    3) Unless this company is routing things through foreign shells in the Caymans or bogus Delaware corporations, it shouldn’t be too hard to figure out who owns what in DC. I don’t know if that makes a difference for legal issues, but it should be easy enough to map out on your own.
    4) I would strongly recommend looking into the liability of your home inspector. Some of the issues may indeed be difficult to find, but if the problems are as widespread or as numerous as you claim, I would venture they did a piss poor inspection.
    5) your case # doesn’t work in the case search. can you double check it?

  46. I just searched for it and it came up fine. The company name is MICHAEL LOUDON CONSTRUCTION , LLC.

  47. Thanks. Clearly user error on my part.

  48. Don’t use the “B” when you put in the number and it should work for you.

  49. Don’t include the B at the end and it shows up.

  50. I failed the first time I did the search but it worked for me. Don’t putt the entire thing in the number box – put 2014 in the year, use the pull down and choose CA and the rest of the number in the number box and that should work.

  51. Yes it does; go here and punch in the number:

  52. Virtually all home inspectors in this area require buyers to “agree” to ridiculous terms like a one year statute of limitations (even though the common law provides for more – usually 3 years), limitation of liability to the amount paid for the inspection, and binding mandatory arbitration of any disputes to be paid for by the buyer. It’s usually not even presented to buyers until after the inspection has already been performed, and no home inspectors are willing to take these provisions out of their contracts because their lawyers or insurers have convinced them they need them (even though they are not required by law or by the insurers themselves).

    Good luck suing a home inspector for anything!

  53. Given that there are numerous homeowners in a similar situation from this one seller, why can’t you all get together, share legal fees, and bring a class action (or perhaps it’s not even class action if it’s a small enough group?

    Piercing the veil is likely to be a common issue, and will basically be the same analysis for all of you. Individual damages will be a different matter . . .

  54. It wouldn’t be certified as a class action for a bunch of reasons, including the (likely) small number of plaintiffs. And you probably couldn’t just join the individual cases, because of the different LLCs that owned each flip job. It’s a shame, because economies of scale would really help out here (but of cours, that’s one a the reasons for this setup – to avoid liability and class actions).

  55. Getting all the permits from DCRA for a basement renovation has felt like climbing Mount Stupid, but at least being my own GC means I know the work is getting done right.
    Condolences to the OP, and thanks for the lengthy description of how things can go wrong and some information about some bad actors. Caveat emptor, but hopefully justice will be served.

  56. Why we need a strong governmental regulatory enforcement both criminal and civil.

  57. Let me guess, your house is blue/grey and has a red door? When I was looking, I checked out one of these houses, and it was horrible. It was pretty obvious that it was poorly done though. Maybe they have gotten better at hiding it.

  58. What a nightmare. Many of my friends who bought places that were “flipped” have had issues galore – leaky roof, leaky windows, foundation issues… all of them had home inspections. Builders need to be held accountable for this crap.

  59. I’ve watched a few flips happen on my block recently with fear for the future owners. Covering rotting wood is just the tip of the iceberg and seems to be par for the course. I expect that in 10-15 years a lot of these newly flipped homes that sold for 700k plus will be in serious disrepair and a scourge on our neighborhoods.

    My house is not gutted and at times I look at the endless list of wanted upgrades and the many oddities of a 100 year old home and wish I’d bought a gut job, but then I see the work these guys are doing and hear these stories (and this is hardly the first) and am grateful that I bought an unrenovated house.

  60. Sadly, it is becoming harder and harder to buy an unrenovated home because all the flippers buy them with cash offers and no contingencies. In this market, normal home purchasers don’t have much choice.

  61. Agreed. I am anon above and I should have added that I am infinitely grateful that my partner and I made (what was at the time) the financial reach to buy in Petworth back when that was not the case.

    It also makes me absolutely stubbornly determined not to sell my house in this market, even if we could now afford an upgrade because I refuse to let my perfectly liveable, lovely if quirky home be gutted by a bunch of jerks.

  62. The market is getting crazy again. I give it another year, maybe two, and we’re going to have a dip. Right now is a risky time to be buying. Feels like 2006 all over again.

  63. it’s dipping now.

  64. Doesn’t seem like it. YOY transaction prices are still in the positive. Usually inventory surges right before a dip but DC inventory is still roughly the same as a year ago. Some suburban areas have seen a surge in inventory recently. PWC has an almost 100% increase. Anytime you have a surge like that, brace yourself for falling prices.

  65. Things have slowed down a bit. I am in the process of looking for a house and there are a lot of homes sitting and flippers/developers are lowering prices. Had one instance where the flip was so bad and my realtor sent the a long list of what was wrong to the flippers realtor. She didn’t even deny any of the problems and said they had other homes we could look at. As you can imagine I stay as far away from their homes as possible

  66. This is one more reason to buy a gut job and fix it up yourself… It’s stressful, but at least I know where my skeletons are.

  67. + 1000, assuming you have the skills. For those of us who do not, I would still rather have the person renovating being paid directly by me and at least somewhat subject to my supervision.

  68. I agree. That’s what I did. I bought an unrenovated house that was in mostly good shape and upgraded/renovated as I went.

  69. DCRA is a complete and utter joke. Completely agree there.

    I have to say, however, the other half of the battle is having a good… nay, GREAT home inspector. Any inspector worth his/her weight in salt can find a lot of the stuff folks here have listed. Load bearing walls and columns being removed is a huge huge huge red flag that you really can’t hide. Something like that is basic.

    Sorry to hear this has turned into a nightmare for you.

  70. Any recs?

  71. I am constantly getting “I will buy your home for cash, no inspections” notices because I bought my house enough years ago that the assessement from the city is such that what they could get after flipping means my house would be quite profitable. They don’t know I am not some low income old lady who is desperately looking for cash. Their entreaties make me laugh and/or roll my eyes. These are the same people that are selling these flip jobs.

    I always do my librarian thing and do a bit of poking about on the the names/companies. One company does a much more professional job and has a much nicer approach with an envelope and nice paper. One guy sends out an oversize postcard and a few weeks later the same postcard but just smaller print. Oh and sometimes he varies the colors like he thinks he is fooling someone. His always say “limited time” with a UPS PO box as the return. This dude just makes me laugh cause it is just so cheap and obvious. Some guy in Virginia seems to think using the cursive red ink font and the fake looks-like-real-yellow-ruled-paper would fool anyone. He got an eye roll for that trick with an “oh please.” One guy had a very glossy but shallow web presence. It was so hard to find out anything on any of these. While my SCAM Meter was clanging for all of them, that last one had it clanging like an air raid siren.

  72. I also recently bought a flipped house, but (thankfully) didn’t have the same significant problems these poor folks had. But I did find out that like them, my inspector (and my contractor), when they were looking at the house prior to me buying it wouldn’t have seen that the building flipper didn’t insulate the basement bathroom (so busted pipes last winter) and that they didn’t put any insulation in the back of the house!

    When I sought legal counsel, I was stunned that even though the house wasn’t up to code (and a DCRA had said it was), the lawyer said it didn’t matter. Not meeting D.C. Building Code isn’t enough to win the case. Now I wasn’t looking to make money; I only wanted to recoup my losses. But who wants to run that chance?

    Subsequently, I have found out about geothermal gadgets that will tell you about insulation, and that you can have an invasive inspection (so you can hopefully see the pipe problems), but there’s no penalty for those bad actors who do these kinds of terrible and shoddy work.

  73. Some people only want a completely renovated home, they have no interest in a fix up. I want to do the fix, I want to know what is behind the drywall, I know what is behind every wall in my house. That is how I sleep at night

  74. +100 Plus you can do cool stuff to your house that developers/flippers are not willing to ever do.

  75. Hell to the yes!!

  76. Responsible law enforcement may not be your best argument for retrocession. Have you ever read anything about the PG County police? Two years ago the county had to pay 3.6 million dollars to 10 people who had been beaten or falsely arrested by police there.

    There are problems like these everywhere. DC has no more or no less problems than a larger city anywhere. Want to know how a big city would fair in Maryland, then look at Baltimore. Also, check out the corruption problems in VA. DC government has its problems but so too does everywhere else.

  77. I was in the market to purchase a home last year and we saw a number of homes flipped by this company. They all look the same, greyish blue on the outside and a red door with a large glass insert. We were going to put an offer into one of their homes, but our home inspector said he would not recommend it, as the visible work they had done was complete crap and if that was crap, he assumed that the behind the walls work would be even worse. I wish you luck on your lawsuit!!!

  78. Yup – the corollary to the bathroom theory for restaurants. (If the bathrooms, where they know customers go, are dirty, what do you think the kitchen/food storage facilities look like?)

  79. I think your suggestion “Speeding up and simplifying the process of applying for building permits so as to entice flippers not to skip the permits or cut corners” is one of the most important here, because there are instances in which following the letter of the law is absurd.

    For example take the “Replacement of not more than 1 plumbing fixture, on a residential, commercial or industrial project.” This is something for which one needs a permit. DC graciously allows this to be done on a postcard permit, and although you do not need a permit for “Repairing of defective faucets or valves, provided alterations are not made to the existing piping and fixtures,” if you want to replace, say, your kitchen faucet, you’d need a permit.

    And even though it could be done on a postcard permit, ONLY LICENSED MASTER PLUMBERS can get plumbing permits of any sort. Which means, not a homeowner and not a handyman.

    So following the rules to the letter, in order to change a kitchen faucet, you need a DC licensed master plumber, who will probably be charging at least $100/hour. You’ll pay more for the plumber than for the faucet. Judging by the display and sales of kitchen faucets at Home Depot, I suspect this requirement is often skipped.

  80. The mechanism by which a normal homeowner who is not in the real estate business might become aware of the existence of this or similar requirements does not exist. Gutting a house or building a pop-up is a different matter altogether.

  81. and it doesn’t ensure quality by requiring a master plumber. We had a nightmare with our flip house, and found the master plumber. He first said he did the work, but when we asked questions he admitted the GC just “used his number” and he “didn’t know who” did the actual work. He came and looked at the damage and I believe he had barely ever been to our house before. That is straight up fraud.

  82. It’s a lot of work and not for everyone, but this is why it pays to buy your own fixer upper, and GC the work yourself so you can make sure it’s done right.

  83. Many of these “reno” homes are over 100 years old. I think we will be seeing more of the same of this story in years to come.

  84. can someone explain this three year limitation on latent defects is that a DC law

  85. A house on our block that recently sold for twice the pre-reno price was flipped very quickly. They built an entire 2 story addition without permits. Then they built a car port in the rear which contravened lot coverage zoning rules. I called DCRA and reported them before the house sold. Nothing happened. I guess the new owner is unaware of this.

  86. Sadly this bad construction thing is all over – just watch Mike Holmes on DIYNetwork……

    What is very annoying as well is that most people can’t buy the project house because the flippers get there first and get the house because they have all cash which makes the transaction easier/quicker for the seller.

  87. I also toured one of the houses the OP’s flipper sold back in the early spring. It was a beautiful home on Cap Hill, it looked fine to me. But a real estate agent I know (not the one I was working with) told me that this company was know for cutting corners.
    That gave me pause….. but we did not end up bidding and it solf for full asking price (close to 600k).

  88. Last year spring my agent also steered me away from one of their properties in Cap Hill East/ Atlas. He didn’t come right out and say that the flippers did or were known for shoddy work but he talked me out of the property every step of the way. Luckily my husband just didn’t like the “feel” of the house so we looked elsewhere. But now looking back on it, I’m fairly sure my agent knew more than he was saying.

  89. This is basically my story as well. I dont know what to do about it either.

  90. Get a home warranty. They cost around $500 for a year, which, for most houses, would be a ripoff as they don’t cover the really big stuff like a new roof or a full re-pipe, and they don’t cover routine maintenance. But they do cover that sewer pipe blocked by construction debris, the busted pipe from lack of insulation, the incorrectly-installed appliances, the curiously non-functioning outlets, etc. And you’ll only need it for the first year, maybe two, while you discover all the corners the flippers cut and fix them one by one.
    / Voice of Experience

  91. Thanks for the info. I actually had one and they did not cover jack sh*t. I would pay for them to send someone out, and curiously they never covered ANYTHING. I tried to get them to cover basically everything you mentioned but nothing. So I did not renew b/c I thought it was yet another scam. Home warranty my ass!!!

  92. Our home warranty was a joke too, and it seemed the people they sent out had no clue what they were doing. We had no control over who would answer a call, the warranty company just sent whoever. We had to pay a deductible so we were always paying idiots $50 to say they couldn’t fix something or it wasn’t covered. But we did have all of hte problems you mention (sewer pipe blocked, incorrectly installed appliances, etc)

  93. agree, home warranty is a scam. think about it for a second. would YOU offer a $500 policy that would cover an endless array of shoddy workmanship and problematic appliances, without playing any role in the construction, sight unseen? if you think about it that way, the only way a home warranty company could stay in business would be to write policies with so many loopholes and restrictions that no one could ever mount a claim.

  94. Nooo, like every other kind of insurance, they stay in business by selling a lot of policies to people who never file a claim. Think about it for a second. Would YOU offer $500 a month medical insurance that would cover a million-dollar heart transplant? Of course you would! Because most people don’t need heart transplants, and plenty of people don’t need much medical care at all, and you the insurer aren’t paying anywhere near the market price for services anyway. Am I seriously having to explain how insurance works?

    Perhaps you didn’t do enough research and bought a bad policy from a bad company. Perhaps the industry has changed in the eight years since I had one, and the policies are less comprehensive now. Mine saved me thousands of dollars fixing bad flipper work.

  95. 1. It is pretty common to create an LLC for every project, that way the liability of one project doesn’t mix with other projects, so that in itself isn’t uncommon.

    2. Perhaps you can’t expect an inspector to catch everything, but if the place was as bad as you said, they should have caught some of it. Inspectors are supposed to test outlets and voltages around the house, dig into the mechanical systems, crawl into the attic (if possible) etc. There is some liability there.

    3. Lastly, you blew it when you said you checked permits. By your own admission you found the permits and acknowledged the permits were for minor improvements, not a full gut of a house which is what you knew you were buying. That would have been my first question. “Hey, I see you only have a permit to build a porch, but you said the house was gutted, where are the rest of the permits?”.

    Buyer beware… good luck in court. Having seen a few of these cases go through the court in the past 10 years, I can tell you that there is little chance for any meaningful compensation.

  96. Stuart Crampton

    Thanks for the thoughtful comment, Billy, re: our letter.
    About the permits, it was only in retrospect that we came to understand that the permits obtained by the flippers were not the right permits. We didn’t know they took down load-bearing walls/columns until this year (after hiring a structural engineer), almost three years after we bought it, because the floors became increasingly bouncy. We also had our real estate agent ask them in 2011 before buying the house if they got the proper permits and they lied to us and said they did. Sorry if all that was unclear. I understood that LLCs are set up for protection, but when they’re used to perpetrate fraud, that’s not common, or at least it’s not supposed to be. Re: the other point, the inspector checked a lot of things but he cannot see through walls, cannot see asbestos, is not a structural engineer, etc. (Our letter was already long, and there are a lot more details to the case / situation, but we didn’t want to bore people more than we already may have done. The main purpose was to serve as a warning).

  97. Good for you for suing them. I had to do the same thing a few years ago to the flipper who did my house. Was lucky I have legal plan at work that covered nearly all the cost, unbeknownst to the flipper, and was able to sue his sorry a$$ for my roof that he lied about and said was new and was leaking like a sieve. He had the nerve to show up with two lawyers. Spent huge amount of money fighting me on it and had no clue I had no legal fees to pay for. Went to mediation to settle and they were real defiant about what they were and weren’t going to do. That is until they found out I could do this for a very long time and they would have to pay their lawyers out the nose. They were very angry when they found out they had paid their lawyers nearly 5X what they could have written me a check for to replace the roof and they still had to write me a check to me. Word of advise to all, check for permits at dc pvis and talk to the neighbors. They saw the work being done and they can tell you if it was shoddy or not. While I was going through all my issues my neighbors told me he had not done the roof right.

  98. Are there any restrictions on how many houses “flippers” can purchase within a year or 5 years? It seems to me that they seem to be buying up many of the houses that otherwise people can purchase themselves and renovate at a lower cost. Just curious how this is effecting the market for affordable housing.

  99. We bought our complete renovation last year then found out the AC was not to code and the house was not properly insulated. Trying to go through the DCRA site to uncover what permits were taken out, how the work was approved, and why our home inspector didn’t catch these things was extremely frustrating. We naively thought that if the permits and inspections were done, all was right when we purchased the house. We’ve had to sink money in that we weren’t expecting to because it was a “completely renovated” home. Its disturbing to hear what you all are going through and I applaud you for putting the word out and taking these guys to court!

  100. I know there are many horror stories and reasons to be cautious about flips, but I had a great experience. I bought a house flipped by John Formant, who is well-known in the DC realty community for doing top notch work, and the renovation and finishes were all well done. Moreover, John really stands by his work and for the next year he sent his team to fix problems whenever they came up (and gave me his cell phone so I could call him directly). When the garage door was having problems, he sent his guy over and ultimately they replaced the transmitter. When I had a leaky toilet, his plumber came to fix it and even put in a new toilet But beyond the little fixes, John also agreed to put in a sump pump and replace the basement tiling when I started having problems with flooding in my basement — which he certainly was no obligated to do. So I sympathize with the OP, and it is definitely an argument in favor of extreme caution. But there are quality flippers working in DC and I’d argue that it is worth paying more of a premium for properties from these companies.

  101. I definitely appreciate hearing stories like this. Terrible situation to be in but hopefully stories like this make people more cautious in a crazy housing market.

  102. I just looked up our home on the DCRA permitting website, and don’t see any permits for our renovation done sometime around 2010. Anyone know how far back those online permit records go?

  103. They go back years and years. 2010 would definitely be in there.

  104. Thank you for such a salient and well-written article. My husband and I have purchased two flipped houses in D.C. and can relate to many of the points raised in the article – though our experience was not nearly so bad. Our first flipped house had multiple problems mostly with electrical/wiring. A short list of issues were found by the inspector (e.g., the dryer wasn’t vented to the outside) but most were hidden behind walls and only became apparent after problems surfaced (for example, the electrical wiring wasn’t grounded and for some reason lights just stopped working in various parts of the house). We vowed never again to buy a flipped house – but when we moved last year, we sold our house too quickly and were then priced out of several houses, so out of desperation – after not having a place to live for two months – we purchased ANOTHER flipped house. This one, too, has had issues. The list of recommendations and policy changes was spot on. I’d like to help advocate for some of these policies, so please let the popville readership know if there is an organized effort to push for them.

  105. The flipper’s name is Jay Gulati, 9924 Potomac Manors Drive, Potomac, MD 20854. Unsurprisingly, his house doesn’t look like it’s rotten at the core or unsafe.

  106. This is so frustrating and I feel for the homeowner. As a GC myself it makes me so angry that there are so many people out there willing to con people by completing unpermitted work, and in turn giving the rest of us a bad name. I hope you succeed in bringing this man and his company to justice.

  107. Stuart Crampton

    When we wrote that Dear Popvill letter we didn’t know what to expect. But we really appreciated all the encouragement, words of support, constructive criticism, insights, and best consumer practices that readers shared. We were properly motivated by all the good ideas, etc, and so we spoke with two council members’ offices/staffers today, and they were really helpful. Two of them had actually read the Popville letter already (Popville must be required reading for the council). We’re aiming to go meet with them next week to discuss challenges, opportunities, and ideas for legislative reforms and will see how it goes / try to keep you posted.

  108. MiddleOfNowhere

    Thank you for posting this story. We had a problem with a condo that we purchased a few years ago, and found out that the city laws did not protect us in any way – that we fell through a huge loop hole that benefits developers. We consulted lawyers, tried to go to court, etc but our resources ran out. I wish you all the best of luck, and thank you for pursuing this. I hope by doing this, you will help foster change, and your unfortunate situation will protect someone else in the future. The best of luck to you and your family.


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