What comes first?

Question

Hi CLE market & RE investors,

As I continue in my newbie status an area of confusion is the order of the buying process after doing the number crunching analysis & choosing some properties to compare for offers.

At what point (and costs) does a city or private certified house inspector check the house? How and by what process are repair, rehab costs analyzed? Would you send your contractor/repair crews to quote costs? I imagine this happens before an offer, or does the offer have contingencies added to it about these costs? I’d prefer to know all these costs and have the metrics calculated ahead of an offer and make the offer with it being on the table for a short period of time so my offer isn’t then shopped.

I believe an offer has contingencies just like a contract, but I don’t fully understand what goes on between the offer & the contract (which has its own contingencies).

Thanks for reading and considering my questions!

Kevin

Adriaan Sierra · Answer

I wouldn't optimize on the fronts you are worried about at the moment...

A very thorough report would cost less than 1K and can flag out problems that would cost tens of thousands of dollars. Optimizing your bidding strategy can save you a few Ks as well, but I'd argue you are better off paying full price at a great location rather than saving on this margin at a D neighborhood.

I wouldn't worry to much about making those type of mistakes, you probably will make a bunch of them, part of the learning curve. Just make sure you buy at a right place and you understand the risks, what would make you be underwater and avoid those risks at all costs. That's what comes first. People that don't do that front and center don't stay in the game.

Bob Stevens · Answer

I have never used and inspection co. Just need to walk with property with someone that does deals. When there are contingency's that weakens your offer.

When I am presented a property, typically within the hour or two one of my guys ( I live in FL )  walks it. I than make the offer cash as is, Close typically in two weeks or less...... Just connect with someone doing deals, learn then apply what you learn

Good luck

Eliott Elias · Answer

Spend some time to actually think about this. What should come first in your head?

Kevin L Owens · Answer

Thank you @Hamp Lee III, @Bob Stevens, and @Adriaan Sierra and everyone for the replies!  Well, what really came first, the chicken or the egg?

I like that @Eliott Elias makes a good point, what within my concern makes is common sense? what comes first...? To me, it's important to gather as many costs as possible ahead of an offer, then make the appropriate offer in such a way it isn't shopped.  As @Adriaan Sierra indicated, add contingencies to an offer after guessing at possible repair costs.  I don't think I would want to deal with an offer-shopper anyway because such conduct is indicative of a non-serious seller anyway.

Now, if I could think through all of this on my own I would certainly not be asking.  What might make sense to me as a novice could be an expensive mistake.  For me to get inspections done ahead of an offer is an expense.  If I do not make the purchase I can't recover that expense.  Can I then deduct that real estate investment expense from my 1040 (I think that is the Schedule E) or would I need an LLC for my real estate investing business and take the deduction there?

Thanks everyone!

Hamp Lee III · Answer

At what point (and costs) does a city or private certified house inspector check the house?

After you have an accepted contract during the inspection (or option) period.

How and by what process are repair, rehab costs analyzed?

A home inspection is a thorough assessment of a residential property by a trained professional to identify any potential issues or defects. It typically covers areas such as the structure, exterior, interior, plumbing, electrical, HVAC, roofing, insulation, appliances, safety features, and may also include environmental concerns. The home inspector provides a detailed report to the client with findings, observations, and recommendations for repairs or further evaluation. It's important to note that a home inspection is a non-invasive visual inspection and may not cover inaccessible or hidden areas. Additional specialized inspections may be recommended if needed.

Would you send your contractor/repair crews to quote costs?

You can ask contractors to assess the property during the inspection period, but you want to be very selective. Some contractors will charge you for coming out and many may not want to go on random sites to provide quotes for properties you may not move to purchase. Just make certain your money and contractor’s time is well spent.

I wish you all the best.

Adriaan Sierra · Answer

We usually make offers with contingency on what a house review will show up.

Usually the review focuses on big ticket items (roof, siding, etc) which would affect the price of the house. With that review our team (realtor, PM, us) make the best guess for what repairs would look like and we update prices based on that.  If the new terms are acceptable to both parties you move on to the next phase.

Obviously you don't want your offer to be shopped, but there is not much to do on this end (you could also make an explosive offer yourself, if you so desire). My two cents there is that people are too focused on the price contest aspect of the buying a house. You could optimize that margin to some extent, but that is not where you want to put your efforts. Focus on what prices would work for you and make sure you do not go above that.

Bob Stevens · Answer

LMAO, , still laughing, And Im the one who is told ," BOB you are too direct. "

What comes first?

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