Do you like your real estate deals to include large potential profits, emergency easements, a mystery water supply, and Poltergeist references? Well, buckle up! This story is right up your alley.
This was a property where the sellers contacted us from a direct mail letter we sent in February. They were interested in selling their home, but wanted to buy a new home and were concerned about having 2 mortgages and having to move all of their things out before having the new place lined up. The house itself was in good shape, it just needed some cosmetic work and outside repairs on the deck/porch area. We decided to give the owners a cash offer with the option to stay in the property for up to 2 months after we closed on it, they would rent it back from us during that time while they looked for a new house.
This house was a little tricky to comp, since it was in a more rural area than we typically buy in. It also had propane heat, a septic system and a well for the water supply. More on that in a moment. Another really unique thing about the house was that it was built in the early 1900’s, but the foundation was only about 20 years old. At some point, a previous owner had moved the house to its current location and put it on a new foundation. After the sellers’ new home was completed, they got everything moved and we got possession of the house.
We could tell after spending time walking through the property that it could be a $240-250K house with some repairs, paint and updating. The problem with doing a full remodel to try and obtain top dollar on the retail market, is that it would likely take about $30K in additional costs in order to make an extra $10K in profit. It also carried quite a bit of market risk during Covid-19 uncertainty, plus a potential inspection/repair contingency risk if the buyer ended up going FHA or VA financing with a whole house inspection. The good news was, the house was completely livable though and not in bad shape at all. We decided it would be a perfect house to wholetail because the end buyer could be either an investor or a DIY homeowner who could take their time updating as they went along. We ended up listing the house at $214,000, as-is, and to cash or conventional buyers only. Let the showings begin!
Within 2 days of listing, we had 24 showings and 2 offers. One was at our asking price of $214K, and one ended up coming in $5K over asking price! Holy crap! OK, this was an awesome turn of events, especially during the zombie apocalypse. We congratulated ourselves, high fives all around because we were so smart and uncovered such a great deal. But wait, there’s more!
Most of the houses I have bought over the years have been in or around Omaha and Council Bluffs and connected to city utilities. I think I have maybe bought and sold 3 or so houses with a well and septic system, total. Most of the time, I am really not all that worried about the well and septic thing, since you can usually just treat a well with chemicals to make sure the water is drinkable, and you can have a septic repaired or replaced (worst case scenario). I mean, I even grew up in a house with a well and septic, so this stuff is just not that big of a deal, right? Wrong. Dead wrong.
In hindsight, this was one of my all time most boneheaded oversights in 15 years of buying and selling houses (and that is saying something). When we first met the sellers of the house and did our initial walkthrough, I remember asking about the location of the septic system, and I also remember looking for the whereabouts of the mast of the well casing sticking up in the yard, but not being able to find it. I thought maybe it was just somewhere in the back yard, not a big deal, I’d just ask about it later. As it turned out, much later.
The buyers of the house requested a septic inspection and well water test as part of their purchase contingency, which is 100% normal and expected. The buyers ordered the well test, which reminded me that I never found out where the well was located. When my phone rang with the well testing guy on the other end, he proceeded to tell me that the cap on the top of the well was missing and needed replaced, and that his water test results would take a few days to get back. I say, “Ok, please replace the cap. Also, I was never able to find the location of the well, where is it?”. He replies, “It’s in the cemetery.”
In my head, I say “What in the actual f*&k?”. What comes out of my mouth is silence. For what must have been an awkwardly long time. He says, “Hello?” “I’m here.” I say. “I just don’t understand what you just told me. What do you mean it’s in the cemetery? Do you have the right address?” He assures me that he does. He then tells me that there was a caretaker of the cemetery there when he was doing the well water sample, and she did not seem too thrilled that he was driving his truck down to the well location to access it. “You might want to give her a call. She did not seem very optimistic about the house even being able to get a mortgage on it because of the well situation.” The well repair guy was very nice and informative to me, and obviously informed the buyers of the lovely setting of their drinking water supply. I now gave this deal about a 1% chance of not falling apart. Our agent soon calls and says that the buyers are willing to proceed with the purchase, but only if there was an easement drafted to allow them access to the well.
I was about to get an introduction to what we came to refer to as, “The Cemetery Mafia”. When I call the cemetery caretaker, the conversation starts out pleasant enough. I explain that we recently bought and are attempting to sell the house down the road. She tells me that she has been expecting my call. “This “well situation” has basically been in limbo for years. I have no idea how the previous owners even got a mortgage on the place since the well is smack dab in the middle of our cemetery.” I say, “About that… We have accepted an offer on the house, and the buyers understandably want to be able to access the well in case it ever needs repair or maintenance. So, I was hoping we might be able to reach an agreement on an easement that would simply allow them to access the well to do maintenance or repairs on it.”
This is the part where the conversation takes a turn. She tells me that her and her two relatives make up an association that is responsible for looking after the cemetery, managing the sale of additional plots, digging graves for the funerals, and the overall maintenance of the property. She informs me in no uncertain terms that the President of the association (her uncle) and she are very concerned about allowing any type of easement that would further prevent the sale of additional burial plots, as well as the possible financial liability should the well be damaged and flood the cemetery. I had to admit, I was completely out of my element here. I try to reason with her. “But, but… Surely there must be a way to work this out. I mean, it’s their only access to their water supply!” I blubber. Well, she wasn’t having it. “Unless there is a way for the buyer to assume the financial liability if the grave sites flood, we are not going to agree to any type of permanent easement, especially considering the fact that this prevents us from selling additional plots.” We both hang up unhappy (me especially).
I am convinced that there has to be a logical explanation for this, and that there has to be an “implied easement” or something, since the well has obviously been around for a long time and people have a right to access their water supply, damnit! Time to do some more research on this well to see if I can find a secret easement or something. Feeling sleuthy, I call the Nebraska Department of Natural Resources. Nope, no record of the well being registered in that location. Sarpy County Assessor office? Basically laughed at me. Well, shit.
Up to this point, I have been handling 100% of the communications with agents, contractors, utility companies, sellers, everything – not to mention the multiple other projects I had going. So, I ask Brandon if he can reach out to the attorney at our regular title company to get crackin’ on drafting an easement that we can hopefully convince our Cemetery Friends to agree to and keep this deal alive. We decide that even if our buyers back out, this is obviously a problem that is not going away on its own, so we might as well bite the bullet and get an easement drawn up.
At this point, time is ticking on the closing date, and we still need the buyers to agree to either accept financial liability for the well flooding the graves if disaster struck, or figure out some other way to satisfy The Cemetery Syndicate. In what was basically a last-ditch Hail Mary, I call my friend Tony, who is an insurance broker in Council Bluffs. I do my best to explain the bizarre situation, asking him if any type of insurance product exists that would insure the homeowner from their water supply flooding a graveyard. Tony does some checking and gets back to me, explaining that, sure enough, a simple rider to a homeowner policy will provide the exact coverage the buyers would need to insure them in the event their well water causes some long-deceased cemetery residents to begin doing water aerobics. Well, hot damn! This deal might not fall apart after all!
I excitedly call Angie, our agent, to let her know the good news about the insurance thing, hopeful that she can pass along this information to the buyers’ agent and get us some good news. I snap back to reality when Angie says, “I’ll find out, but where are we on the easement situation?”. “Uhh… It’s got to be close to finished by now, Brandon talked to the attorney about it like 2 weeks ago. I’ll check and get back to you.” I say. I start thinking about it, and realize that Brandon has not asked me one question about specifics on the well location, the legal description, measurements, nothing. This is where having zero experience in easements comes into play.
Brandon calls the attorney to follow up, and he basically says to Brandon, “Oh, I’m glad you called. I had a note to get back to you and ask some questions about the easement. When is your closing again?” Answer: ONE FREAKING WEEK AWAY! So, to recap, Brandon had assumed the attorney knew what he was doing and the easement was taking shape, I assumed Brandon was on top of it, and the attorney assumed it wasn’t urgent and basically filed it under “Who Gives a Shit”. Thanks for nothing.
At this point, it is almost comical how inept I have been throughout this process. I don’t know where else to turn, so I scramble and call my parents’ (and occasionally my) long time family attorney. Larry answers on the first ring, as usual. “Larry, I have a little situation.” After debriefing Larry as best I can about my epic failure as a real estate mogul, he informs me that he has been drawing up complicated easements for the Council Bluffs Water Works for over 20 years and could handle it in less than a day, no problem. He proceeds to ask me some questions, lets me know that we need some language and a sketch for the easement, and we hang up. After giving myself several facepalms for not calling Larry in the first place, I get ready for my next call.
First, I call Angie to let her know that we have an easement drafted and are going to hopefully get the Association folks on board with signing it. If we can accomplish this, will the buyers (pretty please?) agree to sign it and get the insurance policy rider? She gets back to me after checking with the buyers’ agent with the thumbs up. Finally, some good news! Now, the hard part.
My next call is to The Crypt Keeper. I enthusiastically explain that I have great news, I was able to solve the financial liability issue via an insurance policy, and that my attorney was working on a draft of the easement! Isn’t that exciting? She is underwhelmed. She wants to meet us with the other Association Overlords in person, at the house and the cemetery, to review and discuss the easement. Meeting time: 5:30 PM, Friday, June 19. Closing date: Friday, June 26.
Once a well is treated with chlorine to “shock” it, the entire system has to be flushed out to remove the chemicals so that the water is safe to drink again. The well ended up being treated the day before our upcoming meeting, which timing-wise worked out well. Unfortunately, you can’t just turn on the water and leave while it runs, because the well might run dry, causing the pump to burn up. For his role in the easement debacle, Brandon was now relegated to a timeout at the house, running each faucet for several hours while the chlorine slowly was removed from the 1/2 mile long water line. Thank God for smartphones.
As the time for our meeting approached, I roll into the driveway and go inside the house to see how Operation Slow Drip was going. There was still a chlorine smell on the running faucet, and there was one or two more to go, so he would have to come back tomorrow to finish up. As we are talking, we hear a car and truck approaching, so we head outside to meet our nemesis (Nemesises? Nemesi?).
I was actually pretty nervous about this meeting, since it would likely decide the fate of our Flip or Flop dramedy. In reviewing the draft of the easement that Larry the Lawyer had prepared, they had a few changes to the language, but overall were agreeable to our proposed easement. They wanted to make sure the easement was properly recorded, along with a sketch of the location of the well, which they provided (above). They then took us over to the cemetery to show us where the well was located, and give us a little history lesson.
“I still do not understand why any sane person would drill a well for a house several hundred yards away, in the middle of a freaking cemetery!” I exclaim. It turns out, they explained, that the man who drilled the well actually had it connected to multiple houses along the road. It was called a “community well”, and evidently is a thing after all. Eventually, the other houses on the drive dug their own wells and disconnected from the community well, leaving our house as the sole remaining home being supplied with water from it. “He tried two other test wells on your property, but kept hitting bedrock, so the cemetery well was his solution.”, we were informed. Bizarre. It was like the Wild West out here with rogue well diggers roaming the countryside hoping to strike an aquifer.
Armed with newfound hope and my cemetery sketch, I hit the road home with plans to fire off an email to Larry as soon as I got home. True to his word, he was able to get the final draft of the easement put together on Monday, emailing me a copy. Now I needed to get signatures from the Association, which posed a problem because the President was in central Nebraska until Wednesday. He also does not have a printer/scanner so I will need to drive hardcopies of the easement to him (I am not making this up, I swear). I leave them in the mailbox, which he picks up when he gets back in town, then I drive back to pick them up after they are signed.
For those of you scoring at home, it is now the day before closing, and I still do not have everything agreed to by the buyers. After emailing the final, signed copy of the easement to the listing agent, I now had to impatiently wait for a response while the buyers review it. Fortunately, bourbon helps with passing the time. After drinking about 3 fingers worth, my phone rang and I hear the sweetest sound: “The buyers have removed their contingencies and are ready to close tomorrow.” Halleluiah! More bourbon!
The Friday closing happens without a hitch, and the Red Ladder boys ended up making a sweet profit of almost $40,000. I contemplated putting my share toward some ‘Property Law for Dummies’ books and continuing education on how to not be a moron real estate investor. Sadly, I may have just bought more bourbon instead and stayed uneducated so that I could provide you, my loyal reader(s?), with more cautionary tales.
P.S. – In an attempt to negate all of my previous slander about them, I should mention that these ended up being absolutely wonderful people. They were doing selfless work as caretakers of a non-profit association, only hoping to carry on and preserve a neat little cemetery established 150 years ago. Their point of view and concerns were 100% justified, and they were simply doing their job to protect a gem of a neighborhood landmark.