Author Topic: New Home Freakout Thread: Saga [latest: incomplete repairs/loan docs]  (Read 4702 times)

dragoncar

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Ok, I'm in contact for a new home, and I've been posting willy nilly all over the forum with my regular (daily) freakouts.*  Anyways, I thought I'd start consolidating them here so as not to totally spam everything up.

So here's my latest freakout:  the inspection report came back saying the house has aluminum wiring (branch circuits).  This was a surprise to me, since it was built in 1980, long after the dangers of aluminum were known.  Moreover, the inspection report says the wiring is "serviceable ... installed in accordance with current practices."  So in the back of my mind, I'm remembering that I've heard aluminum wiring should be avoided like the plague.  So I start researching...

... as you can imagine, the internet is full of misinformation, hyperbole, and bunk.  I can barely get a straight answer.  I've heard that pre-1972 installations have a 55 times higher risk of electrical fire (but I can't find the base probability, but also aluminum risks get worse over time because they have more cycles of expansion/contraction and more opportunity to oxidize).  I've heard that aluminum wiring in branch circuits was banned after a series of fires in 1974.  I've heard that that's garbage because the national electric code still allows new aluminum wiring installations.  I've heard that new aluminum installations are banned in many jurisdictions, but can't find any particular code or ordinance that says this, particularly in California or Contra Costa County.  I've heard that post-1972 wiring is a better alloy with much reduced risk, and that properly rated CU/ALR termination devices (like outlets) greatly reduce risk as well.  I've heard that the only failsafe way to mitigate risk is to replace the wiring.  I've heard that pigtailing/COPALUM termination connectors can help.  I've heard that some insurers will not insure houses with aluminum wiring.  I've heard that some will.

So what's the truth?  Does anyone here have a knowledgeable opinion on the subject?  My next steps are: (1) verify with the inspector exactly what he checked and why he thinks it's acceptable, (2) possibly schedule an electrician inspection who can evaluate and give me a quote for replacement, (3) check with California insurance companies to see if this will affect insurability or rates.

How do I evaluate this risk?  If the electrician comes back with a $20k quote, do I try to renegotiate price?  Do all the work up front?  Just resign myself to annual spot checks of my outlets/fixtures?  Refuse to purchase the place?  My inspection contingency is rapidly expiring.  And once again I'm freaking out.

We bid on this place at a price that assumed it was in top condition, and now we are finding potential life-safety problems.  I'm not sure my wife has it in her to continue looking for a house if this one falls through (maybe that's best).  I know sunk cost shouldn't factor into this, but we are already a few thousand into the whole for inspections and other such costs.

*For example:

http://forum.mrmoneymustache.com/ask-a-mustachian/no-cell-service-at-home/
http://forum.mrmoneymustache.com/real-estate-and-landlording/house-vs-townhouse/
http://forum.mrmoneymustache.com/real-estate-and-landlording/market-timing-home-purchase-(primary-residence)/
http://forum.mrmoneymustache.com/real-estate-and-landlording/mortgage-rate-rollcall/msg350871/#msg350871
http://forum.mrmoneymustache.com/welcome-to-the-forum/solar-panel-installation/msg354144/#msg354144
http://forum.mrmoneymustache.com/ask-a-mustachian/any-mmm-farmers/msg331123/#msg331123

Prior freakouts include hillside slope stability and unpermitted retaining wall constructions (jury's still out on that one, as no inspectors could find drainage pipes, but the contractor swears it "drains under the wall").
« Last Edit: August 14, 2014, 02:33:11 PM by dragoncar »

escolegrove

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Re: New Home Freakout Thread: Saga [latest: aluminum wiring]
« Reply #1 on: July 28, 2014, 02:41:12 AM »
First Step BREATHE!!!!!!!!!

Buying a house is stressful but you are making it a whole lot more stressful than it needs to be! (trust me I have bought 5 houses personally and coordinated another 4 for my parents(that was stressful lol). Do you have a realtor and inspector that you trust? If there answer is yes. Trust them! there is a reason they make the big bucks.

That being said, I don't know anything about wiring. I would call your insurance company, talk to an electric friend and hopefully someone on this from can help. I can talk about real estate. Take everything step by step! Depending on the loan type (FHA and VA) they may kick it back saying it needs to be fixed. In that case than YES, you can go back and renegotiate. At any time in the contract if something comes up you can renegotiate. If it is a loan requirement there is a good chance that the seller will work with you because if your lender requires it there is a good chance another.

Addressing your daily freak outs! Houses aren't perfect. they break have issues gain, lose valley and unpredictable. You will do the best you can and things will STILL happen. If you like the house, area and price than go for it. Talk to your peeps, take their advice, process it and move forward. There are things you want to freak out about, but if you freak out about everything your team won't take major things seriously. (i.e. boy who called wolf).

Good Luck! You got this!!!

Milspecstache

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Re: New Home Freakout Thread: Saga [latest: aluminum wiring]
« Reply #2 on: July 28, 2014, 04:53:10 AM »
I just built a house and we used aluminum but only from the main feed power company meter to my breaker box.  My electrician explained that aluminum is always used there.  Other than that I don't think you would want to see it.

In your case I have heard of different mitigations applied successfully, several of which you mention.  I think your best bet is to find a good electrician and then get his recommended path and bid.

DOPOLI

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Re: New Home Freakout Thread: Saga [latest: aluminum wiring]
« Reply #3 on: July 28, 2014, 08:31:05 AM »
We bought a 1969 house with aluminum wiring and had it remediated with the Copalum method. Basically, the electrician replaces the connection points and outlets with copper- the spots where a fire is most likely. The cost was around 7.5K for 1800 sq ft. (I think this also included replacing the main breaker box, which did not meet code.)

Complete replacement of the aluminum wiring would have been prohibitively expensive.

I would have been cool with keeping the aluminum wiring, but my wife was totally freaked out by the fire hazard:) Plus, we've lived in other places with aluminum wiring, and have dealt with periodic issues with the outlets shorting out, etc. We decided to get it fixed upfront.

DoubleDown

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Re: New Home Freakout Thread: Saga [latest: aluminum wiring]
« Reply #4 on: July 28, 2014, 10:19:14 AM »
@dragoncar: I'd like to point out a separate angle to this discovery, and that is resale value and ability to sell. My guess is that when you contact qualified electricians, they will essentially second what the inspector said: Definitely substandard and short of ideal, but "serviceable." But no matter what they say, your own experience shows you what the reputation of aluminum wiring does to a potential sale. You almost certainly are going to encounter that one day when you try to sell. It's going to turn buyers off, it will make selling more difficult and you will possibly have to eat the cost of replacing it, or take a discount on sale price.

Sorry for the discovery, but you are wise to pay attention to the sunk costs fallacy and not get too wrapped up in the money you've sunk into inspections. Look at this way: Your inspection money was not lost, it did exactly what it was supposed to do.

Personally, I'd ask the sellers for a discount on the price to replace it (I'd ask them to pay half of the estimated cost, splitting it with you), and see what they say. If they balk, then your agent can politely point out that they will likely face this situation from the next buyers to come along. If they still refuse, you can decide how to proceed (either a counter offer, take it as is, or walk away). But it certainly does not hurt to ask.

Also, that aluminum wiring is likely from the Mark III series of leukemia generators, so watch out. (joke from other thread for those saying "wtf?")

dragoncar

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Re: New Home Freakout Thread: Saga [latest: aluminum wiring]
« Reply #5 on: July 28, 2014, 10:23:22 AM »
First Step BREATHE!!!!!!!!!

Yes, I knew I wad going to have to do that sometime.

Quote
Do you have a realtor and inspector that you trust? If there answer is yes. Trust them! there is a reason they make the big bucks.

I trust them both to give me information they believe.  However, I don't trust them to properly evaluate risk of fiery death in electrical systems.  I'm not sure who I would trust with that, probably not an electrician.  Those people can tell you if things are installed correctly, but it's not like they are doing research into long term system longevity.  The people doing that are possibly legislators who write the building codes (perhaps), insurance companies, and consumer groups.  As mentioned above, there are mixed results from these groups.

Quote
Addressing your daily freak outs! Houses aren't perfect. they break have issues gain, lose valley and unpredictable. You will do the best you can and things will STILL happen. If you like the house, area and price than go for it. Talk to your peeps, take their advice, process it and move forward. There are things you want to freak out about, but if you freak out about everything your team won't take major things seriously. (i.e. boy who called wolf).

Yeah, believe me I realize no house is "perfect" and I'm not looking for that.  If termite comes back with section 1, I'll ask seller to fix.  No biggie.  If the balcony railing is loose, I can fix that myself. 

Many of these issues I have enough information to assess.  I know how to read a title report to understand the obligations imposed by easements, etc.  I can say "there's X risk the retaining wall will fail, and if it does, the repairs will cost Y".  I'm OK with that risk after structural told me the wall is not holding up the house, just some landscaping.

In the case of electrical, as an engineer and a lawyer, I know just enough to freak out, but not enough to adequately assess risk.  I can see why aluminum is inferior, and why it can only get worse over time.  Thus, the fact that the house has survived 34 years does not comfort me that there will be no future problems.  Nevertheless, more research shows that the post-72 wiring is indeed a much better alloy (old alloys would break after 4-5 flexes). 

But I still wonder why a modern builder would use aluminum to begin with.  It has no advantage besides price, many downsides, and makes me worry about other cut corners.

For the record, I'm not worried about multi-stranded aluminum in street feeds, just the romex branch circuits running behind inaccessible walls.

Thanks Snackdog for the reference, I will probably see if he can perform an inspection.


edit while I type:
@dragoncar: I'd like to point out a separate angle to this discovery, and that is resale value and ability to sell. My guess is that when you contact qualified electricians, they will essentially second what the inspector said: Definitely substandard and short of ideal, but "serviceable." But no matter what they say, your own experience shows you what the reputation of aluminum wiring does to a potential sale. You almost certainly are going to encounter that one day when you try to sell. It's going to turn buyers off, it will make selling more difficult and you will possibly have to eat the cost of replacing it, or take a discount on sale price.

Sorry for the discovery, but you are wise to pay attention to the sunk costs fallacy and not get too wrapped up in the money you've sunk into inspections. Look at this way: Your inspection money was not lost, it did exactly what it was supposed to do.

Personally, I'd ask the sellers for a discount on the price to replace it (I'd ask them to pay half of the estimated cost, splitting it with you), and see what they say. If they balk, then your agent can politely point out that they will likely face this situation from the next buyers to come along. If they still refuse, you can decide how to proceed (either a counter offer, take it as is, or walk away). But it certainly does not hurt to ask.

Also, that aluminum wiring is likely from the Mark III series of leukemia generators, so watch out. (joke from other thread for those saying "wtf?")

Really good advice.  I am indeed aware of resale issues, but I think knowledge of aluminum is waning -- nobody else I've talked to about this was aware of potential problems, including my realtor, wife, parents, and inlaws.  Of course, once I mentioned it they quickly found information online.  So I could totally see the next buyer completely ignoring this and other issues.  That doesn't mean I should ignore those issues, but I'm not sure how strong of a bargaining position I'm in.  On the other hand, our contract is for over asking price, so I think a revelation like this warrants some further negotiation, and splitting the cost seems like it could gain more traction.  Would it be better to start asking for full cost and negotiate to splitting?

Another question:  Should I spend more money for an electrical inspection and quote now, or first ask my realtor to probe the sellers' willingness to negotiate?  They already want to negotiate purchase of their furniture, and are apparently buddies w/ my parents after half a day of inspections (I couldn't attend).
« Last Edit: July 28, 2014, 10:28:55 AM by dragoncar »

DoubleDown

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Re: New Home Freakout Thread: Saga [latest: aluminum wiring]
« Reply #6 on: July 28, 2014, 11:52:00 AM »
Really good advice.  I am indeed aware of resale issues, but I think knowledge of aluminum is waning -- nobody else I've talked to about this was aware of potential problems, including my realtor, wife, parents, and inlaws.  Of course, once I mentioned it they quickly found information online.  So I could totally see the next buyer completely ignoring this and other issues.  That doesn't mean I should ignore those issues, but I'm not sure how strong of a bargaining position I'm in.  On the other hand, our contract is for over asking price, so I think a revelation like this warrants some further negotiation, and splitting the cost seems like it could gain more traction.  Would it be better to start asking for full cost and negotiate to splitting?

tl;dr: I'd ask for half, I think it's a stronger strategy (and fair). If they counter offer or tell you to pound sand, then you can consider next steps.

Long version: I'd ask for half, because I think it's more likely to get you traction as you suggested, and less likely to have them tell you to take a walk. It tells them you're fair and reasonable. The wiring isn't faulty, just kind of substandard (I know you already realize they could, reasonably, tell you they're not interested in fixing it or giving you a discount because it isn't a defect). I would have the agent put it to them this way: My clients have obtained opinions from inspectors and electricians, and find the situation with the aluminum wiring unacceptable. It should be replaced as a safety issue. We're suggesting that the cost be split; we think that's fairest for everyone. My clients are not willing to pay for replacement on their own, but they are willing to have the work done themselves after they've taken possession of the house so that it won't hold up the sale.


Another question:  Should I spend more money for an electrical inspection and quote now, or first ask my realtor to probe the sellers' willingness to negotiate?  They already want to negotiate purchase of their furniture, and are apparently buddies w/ my parents after half a day of inspections (I couldn't attend).

I'd exercise the inspection contingency first, right now, since you're getting close to the period expiring. That may also reset the clock on your contract depending on how it's written. I wouldn't probe their willingness, I'd put it in writing as an amendment to the contract. That sends the message that you're serious, and that you might cancel the purchase if they balk at meeting you half way. I wouldn't spend any more money on inspections or quotes, first I'd see if they're willing to play ball, then you and the sellers can get some quotes if you have an agreement.

Whatever you do, good luck!

kendallf

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Re: New Home Freakout Thread: Saga [latest: aluminum wiring]
« Reply #7 on: July 28, 2014, 12:27:39 PM »
I have a house with aluminum wiring (built in 1974).  The main circuits in the house have been trouble free.  I think structural stability and a good installation are key in this.  If your outlet boxes, etc. were installed sturdily, wiring was connected to CO/AL rated fixtures, and the amperage/wire size rules were followed, I wouldn't worry. 

The only problems I've had were with a couple of circuits where I added copper wiring to add lights (fluorescent lights for the garage).  I used the CO/AL wire nuts but I've had a couple of those fail.  As long as they're in junction boxes it doesn't seem to be a big deal, I just replaced the wire nuts.

I'm currently doing a bunch of renovation work to this house with plans to sell it when I'm done.  I'll report back (too late to help you, of course) when I get to that point.  FWIW, the house across the street, built the same year and also with aluminum wiring, just sold a few months ago.  No problems with the sale or with the new owner's insurance. 

dragoncar

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Re: New Home Freakout Thread: Saga [latest: aluminum wiring]
« Reply #8 on: July 28, 2014, 12:57:31 PM »
Update: Heard back from the inspector.  Branch circuits are COPPER, feeder is aluminum.  Duh-doy.  I still maintain he filled out the form wrong:

"Branch circuit conductor material: Aluminum"

AFAIK, branch circuits are considered wiring to outlets, not feeder lines.  Then again, I should have been there in person.  But we couldn't schedule on a weekend and I had to work.  :-(

Thanks for tuning in, kids.  The city is safe... for now.  Tune in next week for dragoncar's next BIG FREAKOUT.
« Last Edit: July 28, 2014, 12:59:34 PM by dragoncar »

dragoncar

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Re: New Home Freakout Thread: Saga [latest: contingencies/repairs]
« Reply #9 on: July 31, 2014, 11:45:41 AM »
Good news, everybody!  Things aren't going smoothly.  We submitted a request for repairs (including section 1 items, anything that is more easily fixed at the same time as section 1 items, and items that were hidden defects not apparent at the time of offer).  The sellers want to wait until they get the appraisal report, which could be a few more days, but the contingency is supposed to expire today. 

Now, to me, I don't see why they would need the appraisal report first.  They are now aware of my inspections and will have to give them to any future buyer, who will also be requesting similar repairs.  If they are worried about renegotiating price if the appraisal is low, well they can take any repair concessions into account during those negotiations. 

My realtor wants to ask the seller to extend the inspection contingency.  This also doesn't make sense to me.  If they want out of the contract, they can just say no and issue a demand for me to remove contingencies, then cancel the contract if I don't perform in 2 days.  If they don't want to cancel the contract, who cares if we officially extend the contingency?  I'd rather put pressure on them to make repair concessions now, before the appraisal.

Appraisal is a wildcard, because the area is hard to comp.  It's unincorporated, but literally 1 parcel from a working class city, 6 parcels from a nicer city, has the address and zip code of a fancy-ass city, but the school district of the working class city (which has better schools than the nicer city).  If you go half a mile south, everything is the same EXCEPT now you are in fancy-ass city school district with crazy good schools.  So there are houses within 1/2 mile that sell for hundreds of thousands above and below our price, three different school districts, and 3 different cities.  It could come in high or low....

waltworks

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Re: New Home Freakout Thread: Saga [latest: contingencies/repairs]
« Reply #10 on: July 31, 2014, 12:42:57 PM »
How long have the sellers had to respond to the repair addendum? If you're springing it on them with just a few hours/a day left, that is kinda lame, since they may need time to discuss what to fix/what it'll cost/what to offer you. I've dealt with buyers who think that this is a way of exerting extra leverage but it can backfire - you want to give everyone time to come to agreement, not continuously create a crisis. You'll have another opportunity (or not) to press for concessions if the appraisal comes in low.

The only reason to wait for the appraisal (IMO) would be to consolidate all the wheeling and dealing. But since you (presumably) are paying for the appraisal, that's not really in your interest.

-W

dragoncar

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Re: New Home Freakout Thread: Saga [latest: contingencies/repairs]
« Reply #11 on: July 31, 2014, 12:58:58 PM »
How long have the sellers had to respond to the repair addendum? If you're springing it on them with just a few hours/a day left, that is kinda lame, since they may need time to discuss what to fix/what it'll cost/what to offer you. I've dealt with buyers who think that this is a way of exerting extra leverage but it can backfire - you want to give everyone time to come to agreement, not continuously create a crisis. You'll have another opportunity (or not) to press for concessions if the appraisal comes in low.

The only reason to wait for the appraisal (IMO) would be to consolidate all the wheeling and dealing. But since you (presumably) are paying for the appraisal, that's not really in your interest.

-W

They've had a couple days and the appraisal was performed Monday so it should come back soon.  I think it's fine to wait for their response, but really they should just agree to everything I ask for.  So much easier that way :-)

Grateful Stache

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Re: New Home Freakout Thread: Saga [latest: contingencies/repairs]
« Reply #12 on: August 02, 2014, 08:02:44 AM »
I'm in the exact same boat, Dragoncar.

Just had an offer accepted on our 1971 dream home. Initial sellers disclosure came back with aluminum wiring. Not sure what the extent of it is until the home inspection on Friday, but I might be joining you in your minor "freak out."

Please keep me posted on your happenings, and I'll do the same if you like. This is good information for the community.

Cheers and best of luck.

dragoncar

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Re: New Home Freakout Thread: Saga [latest: incomplete repairs/loan docs]
« Reply #13 on: August 14, 2014, 02:39:46 PM »
Time for an update.  Appraisal came back OK.  Sellers agreed to most of our requests, so we removed contingencies according to the CAR form.  Looking back at it, this form sucks (should say remove contingencies subject to our approval of the work, but this one just says we remove contingencies if seller agrees to repair).

We asked for termite reinspection, and this morning found out one item was poorly repaired, and two were not repaired.   Not sure how to handle this -- if this item was done improperly, what else wasn't fixed correctly?  Today is also supposed to be our walkthrough for closing Monday.  So... what's the move here?  Wait for them to fix it and reinspect, delay closing (lose my rate lock)?  Escrow holdback of funds needed to repair ourselves?

Next up: loan docs!  I was very proactive/responsive with the bank, but they seem to be having trouble getting things done.  Supposedly we had commitment last week, when I removed the contingency.  But now they seem to be dithering about when they can get the documents into title for the sellers to sign.  I'm guessing it'll all work out, but I'll be pissed if I lose my rate lock (only lasts until mid next week).

I have no regular contingencies, so I don't really know what happens to my earnest money if this falls through due to sellers not completing repairs properly.  It's super frustrating.