Need Help With Trubbled Deal.
Okay, well I need some help ASAP. I am going through a deal on a pair of Rehab houses and the repairs needed are much more then initially expected after I walked through the houses today with a contractor (Im a newbee, this is my first deal and I still have some trubble with rehab costs).
I had an inspection clause in the contract and Im gonna use that to either get outta the deal or renegotiate a lower price. But what Im unsure of is will they question weither I got a real inspection. Because it was only inspected by a contractor. Thanks for any help.
You might take some pictures and present the pictures to corroborate the work suggested by the contractor. If the seller questions the amount, get another contractor and do it again. Get estimates if you can and show them to seller.
Are you getting financing or buying with cash?
I have in my contract that I can have ANYONE inspect my properties. In some areas the contract or state laws dictate who can perform an inspection.
You should get together all costs (even those you calculated in) and present them all to the seller. A contractor bid is even better.
Lets use an example: $50,000 for the house. Estimated repairs before was $10,000 but it came in $20,000.
Take the estimate of $20,000 and say that you want them to fix these things or give you credit to do so. They'll likely balk and you can negotiate to maybe $40,000 thus giving yourself the needed extra money for the deal to make sense.
That's my take on things. Anyone else have any other ideas?
In oregon a contractor can do home inspections for several different things and I have done several over the years.
I think this is a fair nibble, what amount of $ are we talking about here? and what are the repairs needed? are they merely cosmetic or are they structural, to bring to code etc.
As a contractor-rehabber I would get the inspection done first from a contractor including bids for the needed repairs to submit with my offer.
I would not call this a deal killer on the face of it. Merely a chance to renegotiate. HOw are you pruchasing> how much>what repairs> and is the owner carrying the note?
Luck!
[addsig]
First off the properties (they are right next to each other) need major work, one has fire damage and the other has lots of rot and termite damage as well as a pretty bad foundation and a ceiling that at spots is only about 6' as oposed to the min 7'. They are basicaly gut jobs and need at the minimum of 50K in repairs.
Comps in the area show that the houses are worth about 55-65K each, its not a great area so its hard to find good copms. So I used 115K for both houses as my MRV, 55K for repairs, then profit, buying, selling, and holding costs put my max bid price at about 20K. Currently Im getting the house for 45K, due to my low inital repair costs my max bid was way off.
Im paying by means of a Rehab loan, and Im only gonna get about 60% LTV on an ARV of about 110-130 wich gives me roughly 66-78K to buy the house and repair it.
Basicaly I need to know if its all right if I just call the relator and tell her that the inspection was unsatisfactory, or will they ask for some sort of proff instead of taking my word? Thanks for the help so far, I hope with these specifics I can choose the proper path.
Jimbezy,
I would gather photos, your itemized list of repairs and their costs, I would then immediately send a "certified" letter either withdrawing your offer or renegotiating your offer. I would not negotiate verbally as the realtor and seller both profit from the sale going through and could claim you never notified them of any inpection problems and then could force the contract on its current price and terms.
hmmm at 45k per house, and 50k for repairs put you up to 95k which makes this a very poor deal for a rehab. IF your ARV is 115...
if i were to be in this deal... i wouldnt pay more than 25k-30k since they need so much repair. and yes, follow the advice of the persons above, get a contractor to write up something and take some pictures. if they have a cow about it then, sorry!! let them know that you dont even know that you'll be able to sell it for 115. and asking 45 for a house and make repairs of 50 on them aint worth your time. Move on.
but hey what do i know... i really dont, jus my opinion. and i'm being serious, i really dont know much.
[addsig]
Next time, you may want to put in "Inspection By buyer" this way, its you, and if your not happy, you can renegotiate.
[addsig]
I really just want to call the relator and say somthing to the effect of; "the inspection was unsatisfactory, for us to continue this deal the price will have to be negotieated down significantly or the deal is null and void" The biggest thing Im worried about is if they will ask from proff that I had an actual inspector do the inspection.
doesnt sound like very good profit margins to www.me.I would only pay raw land pric for a fire damaged www.property.Maybe wait on the next deal??
The contract specificly says; "Subject to buyer's approval of Preliminary report in writing within 5 days of receipt"
There's nothing wrong using a contractor to do your inspection. Suggest you tell the agent what you told us here. If you want to chat, I'm just up the road in Valencia - I'll send you my phone number if you want to discuss it more.
Dick Knox - Prudential California Realty
That doesn't sound like a good deal. Doing 50k in rehab alone sounds like what you would do on a 300k+ house not on an ify 115k. In my area I would just keep looking. There are better deals where you spend 5k on rehab and make more than that. (I'm making 30k on a house off the MLS with about 5k in rehab, materials only) But I cant see the property and it might be a good deal in that area but it sure dosn't sound good from here. You shouldn't have any problem canceling your offer, what are they going to do,force you to buy?? j/k
Good luck
Josh
Thanks for the advice and encourageing words. Yea the deal is not great, there are many more to be had in my area. But this is my first one, so Im still learning the ropes and I figure if I make 10-20K and I learn a lot it would be well worth it.
I have succsesfully pulled out of the deal and I will be getting my deposite back tommarw, thanks for all the help.
good move