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Why Calling Code Enforcement Is Crucial

Last week I had 7 bids get accepted, and I’ve been working through my due diligence process on them. One of the critical steps in that process is calling local code enforcement to see if there are any outstanding liens or code violations. On one particular call this week I learned some things about the property that I would not have been able to learn otherwise.

But first, why is it important to call code enforcement about liens and code violations? Liens will show up on an O&E report, but its always a good idea to double check by calling. I also want to know about violations for a couple of reasons. If there are violations, then that is a clue that new liens may be popping up soon after I buy the note. Its also an indication that either the borrower isn’t maintaining the property, or worse, they are no longer residing there and the property is vacant. I’ll also have a realtor drive by and take pictures to verify the home is occupied, but the code enforcement information provides another important piece of the puzzle that gives me more certainty about the status.

The call I made this week was on a property that the seller listed as “owner occupied”. The home is located in a large city, but I got lucky and reached a person who was responsible for that specific neighborhood. He was very familiar with the home and spent about 10-15 minutes telling me all about it. Some of the tidbits included:

  • The borrower moved out sometime in 2016
  • A squatter was occupying it for a while after that
  • The squatter had a dog, and the inside is pretty trashed
  • There are admin citations on the property for a total of $300
  • There are other fines for $1034 for cutting down weeds that were 4 feet high (the neighbor complained once the weeds reached the 4 foot level…)
  • The home was broken into at one point, and the police arrested a guy named Skip
  • Later the home was broken into again by a friend of the borrower
  • A lot of junk had been left on the front porch, but it was stolen
  • The outside structural “doesn’t look extremely bad”
  • One of the top windows was boarded. Someone cut a hole in the board, and there may have been people in there smoking crack.
  • There used to be a wooden shed on the property, but it is no longer there
  • At one point some people were living in tents in the back yard. They were taking pieces of wood from the shed to burn to keep warm. Eventually there was no more shed….
  • The utilities have long since been turned off
  • This is a CFD and they tried to reach the CFD owner numerous times but they could never get anyone on the phone and they didn’t respond to letters (interesting that they still had it listed as owner occupied)
  • The plumbing and wiring probably hasn’t been stripped (finally a positive sign….)
This has obviously been a problem property in the community, and the gentlemen I spoke with was extremely helpful. Unfortunately there is no way I can close on this note.

The main lesson here is how much you can learn by actually talking to people. Pulling O&Es and other data from online also needs to be done. But don’t underestimate the importance of talking to people who are actually out there on the ground.