Matt and Jill Spaulding were hunting for a new home in the spring of 2022 when an internet ad for a spectacular $1.6 million, four-bedroom, three-bath property in a Long Beach neighborhood caught their eye.
“Stunning remodel!” gushed the listing published by Redfin, Truila and other real estate companies. “Pack your bags and move in. Almost everything is new. There is so much to love about this home.”
The Spauldings, who moved to Southern California from San Jose, toured the 2,530-square-foot home offered by Newport Beach house flipper RS Real Estate Plus and were, indeed, smitten.
The lush lawn, remodeled kitchen and bathroom, recessed lighting, fresh paint, new roof and other upscale amenities checked all the boxes for the young family. The Spauldings quickly offered $100,000 above the asking price and, within a month, closed the deal.
Dream turns to nightmare
However, the ink was barely dry on the escrow papers when it became clear that a nightmarish money pit lurked within the walls of their dream home.
Bathroom lights flickered, an army of subterranean termites marched along walls and the ceiling oozed a mysterious red liquid from the debris-clogged drain of a malfunctioning air conditioning system.
Jill Spaulding, 38, said that even more troubling was the asbestos, mold and fungus throughout the house and an improperly installed water heater that vented dangerous carbon monoxide directly into the floor of her and her husband’s bedroom.
“This story is so much worse than a bad flip or a contractor cutting corners,” she said. “It is a story of our family being exposed to many toxic health hazards that we may be dealing with for years to come. Quite frankly, we still are not sure how we are still alive after our hot water heater situation.”
For about two months, the Spauldings shuttled between hotels, Airbnbs and rental properties because they didn’t feel safe in the home. Since May 2023, they have been renting a house in Los Alamitos.
“The lack of stability and being constantly moved to unknown places affected my children’s sleep and health and had psychological effects,” said Jill Spaulding. The children are now ages 5, 3 and 7 months.
Lawsuit: Problems concealed
The Spauldings have filed a lawsuit alleging that the home’s many structural problems were concealed by Raafat Salem, chief executive officer of RS Real Estate Plus, and Lisa Richmond, a broker with its affiliated company, RS Prime Properties.
“The amount of hardship that this flipper and his businesses have created for our family cannot be put into words,” Jill Spaulding said. “The effect this has had on us physically, financially and emotionally is indescribable.”
The Spauldings are suing Salem and Richmond, along with their Realtor, Anne Hulegard of RE/MAX Estate Properties in Redondo Beach, for negligent misrepresentations and fraud. The suit requests that the court rescind the purchase contract between the Spauldings and RS Real Estate Plus and order restitution of $1.6 million plus interest.
They allege Hulegard was aware of RS Real Estate Plus’ massive unpermitted construction work and failed to notify them despite disclosure documents from Salem stating there were no modifications.
A Southern California News Group search of Long Beach Planning Department records found no building permits issued to RS Real Estate Plus for renovations at the Spauldings’ home. It was unclear whether the company faces any citations or fines.
Flipping houses since 2018
Founded in 2018, RS Real Estate Plus states on its website that it pays cash for homes in any condition or location and can close escrow in as few as seven days.
“We’ll handle all repairs, inspections, etc. after we purchase your home,” the company says. “We’ll factor this into our offer, of course, but it saves you the money and the headache associated with getting your home ready to sell.”
RS Real Estate Plus’ Facebook page includes photos of remodeled homes in Fountain Valley, Corona, Huntington Beach, Placentia and Anaheim. Recently, the company purchased a five-unit apartment property in Fullerton for $1.5 million, according to Marcus & Millichap, a commercial real estate brokerage and capital markets services firm.
Salem and Hulegard did not respond to emails and phone calls seeking comment on the Spauldings’ suit. Richmond, reached by phone, declined to discuss the lawsuit.
Jesse Thaler, a Huntington Beach attorney representing RS Real Estate Plus, RS Prime Properties and Salem, said the Spauldings’ accusations about their home are baseless.
“RS Prime Properties, RS Real Estate Plus and Raafat Salem have denied all allegations made against them and are confident the evidence will reveal that there was no failure to disclose and/or false information provided concerning the home sold in Long Beach,” Thaler said.
Family felt pressured
Jill Spaulding also alleges Hulegard urged her and her husband to complete escrow even as their home repeatedly failed inspections.
“She just kept trying to pressure us to sign the closing documents even when it wasn’t passing our home inspection and I had refused,” Jill Spaulding said. “So my husband and I delayed our closing because of it.”
After three attempts, the home finally passed inspection. However, it became clear once the Spauldings moved in that many things still needed to be repaired.
The right side of the yard flooded even when the sprinkler system was turned off, a handrail fell off the stairs and a bathroom shower stopped draining.
“We had a plumber come three times to fix it,” Jill Spaulding said of the shower. “He stated a foreign object was put down the drain by workers, and that, if it happened again, we would need to open pipes through the floor.”
Water damage from the faulty air conditioner required the reconstruction of walls and ceilings in an upstairs hallway, walk-in closet, two bathrooms, laundry room and garage.
When the Spauldings returned a few weeks after moving out to mow the lawn and collect new clothes, they noticed the roof was sagging.
Inspections reveal defects
They hired Construction & Consulting Services in Los Angeles, which determined two load-bearing walls had been removed without proper permits and inspections.
“Failure to maintain beam and their physical elements in conformity with the code regulations may occasionally result in a structural collapse and even injury,” the company warned in a Dec. 29, 2022, report.
The report stunned the Spauldings, leaving them worried and feeling deceived.
“The disclosures that we were given stated that there was not anything structural done without permits,” Jill Spaulding said. “We also were told that everything was done in a professional manner and that they worked with licensed contractors.”
Jereme James, a licensed general contractor and president of Builder Boy Inc. who was hired by the Spauldings, dug deeper, uncovering more than four dozen additional structural deficiencies during a Feb. 7, 2023, site visit. The problems listed in a subsequent 19-page report included:
- Bedroom windows that do not meet building code safety regulations.
- Several electrical items don’t meet current building codes, posing safety risks, and deviating from industry standards.
- Missing circuit breaker outlets in the kitchen.
- Loose wires, trash, debris and abandoned electrical, plumbing and framing items throughout the attic.
- Incorrect heating, ventilation and air conditioning drain lines.
- Undersized gas lines for the kitchen, water heater, and heating, ventilation and air conditioning.
- Improper beams causing the roof to dip
- Missing insulation and an improperly installed irrigation system.
The report also includes numerous photos of the structural deficiencies.
Jill Spaulding estimated it would cost about $545,000 to complete all the repairs and make the house livable, a price tag she said is out of reach for her family.
“Our home insurance paid to do a bunch of work from the air conditioning leak, but otherwise we only paid for a few things,” she said. “So instead the house just stays there and we drain our savings every month paying for the mortgage and rental.”
A cautionary tale
The family suffered another setback when Matt Spaulding, 40, who works as a security manager for an aerospace and defense firm, was asked by his bosses to take a lesser role with the company because he had been out of the office so frequently to deal with problems related to the house.
“The stress and time spent worrying and dealing with this situation has affected both my career and military reserve career as well as my physical and mental health,” he said. “It has furthermore challenged my family financially and has denied us all the use of what we thought was going to be our forever home.”
The Spauldings worry whether they will ever be able to financially recover and hope their experiences serve as a cautionary tale for others.
“Flipping has become the norm and television shows have glorified it,” Jill Spaulding said. “It is imperative that homebuyers are aware of all the potential issues that can occur from construction. They should make sure all work is permitted, and extensive inspections are done by specialists they can trust.
“In just over a month, we were rushed into the biggest investment of our lives, and over two years later we still can’t get out.”
