When I get a house under contract do I get and inspection and an estimate from a contractor?
YES! of course.Would you buy something without knowing the total price of what its gonna cost? Plus it helps for you to negotiate even more.For example,you get a house under contract for 100k,the comps are saing its worth 120k but it needs 2ok worth of repairs,then this is clearly no deal.I like to buy atleast 75% ARV or less.Besides,when you get a written estimate from a contractor then you can go back and say that this is what it will cost and you got proof to show your buyer(or lender) what the total cost will be.If you have a deal already then post some #'s and we’ll see if its worth doing,good luck!
What else do you pay for? So far we have a title search and inspection. That would cost a total of $1000. So how much money will it cost. It seems like a gamble, but I guess not if it is a true deal.
I would get an “Option to buy”,put a small amount of earnest money down,then advertise and locate buyers.Get the option for about 60 days,once you find a buyer then get as much down on the deal as possible.This will let you know how serious the buyer is,and let them know that its NON REFUNDABLE! Once you get a contract signed with the buyer then proceed with title search.
Until you become really skilled at the rehab costs, always get an estimate or two. The more rehab, the more estimates. Contractors don’t charge for giving estimates, pay attention to the numbers and learn what the general costs are. I never pay for a title search, I work with a local title co. who lets me use their software program to pull property reports. If there is a title issue (IRS lien, property taxes, etc.) they can usually be corrected before closing. Write up a good purchase and sales agreement and include addendums to protect yourself to get out of the contract if need be.
Don’t spend money you haven’t made yet!
thanks.
Now I have a question. Does this apply if you’re planning on creating a purchase agreement and then selling/assigning the contract to an investor? For instance, I find a property and make an offer. The offer is accepted, so I make a purchase agreement with option to assign it to someone else. I then find someone who will take this contract and do all the closing himself, so I’m no longer in the picture (kind of like “bird dogging”). Will I need to get an inspection and contractor estimates still? Or will that be the responsibility of the investor who I assigned the contract to?
I’ve never heard of a wholesaler getting either inspections or contractor quotes. It might apply more to simultaneous closings rather than assigning the agreement thought. Normally when you assign the contract, you no longer have equitable interest and the new buyer will have the option of getting an inspection and contractor quotes per the original purchase and sale agreement. Essentially the new buyer becomes you in the agreement. If they are unhappy about something found in the inspection or a few high quotes, they can renegotiate the price with the seller. You just accept the assignment fee and move on with life.
First of all you don’t have to get a contracor quote,but the more ammunition that you put in the deal the better (especially when dealing with investors).I had a property owner call me the other day about there house.I asked did it need any repairs and they said yes and told me it would total about 10k.I get to the house and look at it and it is a minimum of 30k.I get a contractor to give me a quote and he says 40k( most will give free quotes).So now i have ammunition to go back to the owner and say here is what its gonna be and i need to see if we can renegotiate your asking price.The lower you get the price down,the better the deal for you and the investor.Yes the investor can go back and renegotiate but why not go ahead and get this done where it will be a solid deal? The more legwork you do for the deal,then the more you’ll have and the more investors you’ll have lined up that will deal with you.
If it helps you negotiate a better price, go for it. Most experienced wholesalers can eyeball repairs and don’t need or use contractors for quotes or inspectors. I would never buy a property relying solely on what a wholesaler told me the repairs would be from some contractors quote. Sellers sometimes try to pull that to by giving you a quote from their brothers GC company with an estimate that it will only cost $2,000 to fix when it’s more like $20,000. My company is at the stage now where we don’t just except any bid for a job and pay any invoice. We know what a particular job will cost. We hand that number to the contractors and say something like “Meet it or beat it”.
But if a new wholesaler doesn’t know how to estimate costs or inspect a property, I would recommend they find someone who does before they sign their name on anything. If you can’t convince a seller the property is in worse shape then they think, those tools might help. I wouldn’t accept any renovation estimate from a wholesaler or wholesaler’s contractor for anything more than a ballpark figure.
That’s a good point. That is why I don’t see the point of doing a title search if I am assigning the contract. That title mayhave a lein on it between the time I run my search and the buyer runs his.
Thanks for your answers. It certainly helps me get a hold on things better. It would be good I suppose to find a contractor that will give a free quote, so I use it in my arsenal with the investor, as a ballpark figure only (to help in negotiating with the seller). But for the most part, it will ultimately be up to the investor to handle on that in the end, since he will be assigned the contract and may have his own process for preparing to close.