Best practices for getting bids on a potential property

[Rob Terpilowski]

Hello BP,

I am looking at a number of distressed properties to potentially purchase and rehab, and am wondering what is the accepted practice for getting bids on the property, as far as what point in the process do you get a contractor out to the site to provide a bid?  Ideally, I'd like to get bids before I place an offer in order to have a good handle on the rehab costs and place my offer accordingly, but on the other side of the coin, I could potentially place offers on many different properties before having one accepted, all the while I'm getting bids from contractors for which the job for them doesn't materialize.

Or, do I visit the properties myself and with my agent, make an very rough estimate of rehab costs, make an offer based on the estimate, and then bring contractors in for bids *after* getting the property under contract, then potentially renegotiate the offer price if the bids come in higher than estimated?

Thanks,

-Rob

[Matt R.]

@Rob Terpilowski when you get potential contractors involved would depend on how set you are on the deal and how certain you think you can make the numbers work, I would think.  It also depends on how skilled you are at assigning a rough budget.  If you're comfortable enough to get within 10-15% of what it's actually going to cost, you probably don't need to get a GC out there right away and you can wait until after you're under contract to get actual hard bids from GC's.  When you're ready, here are some good DO's and DON'Ts when getting bids:

DO

Write out a detailed scope of work that outlines exactly what you want to do.

Clearly define what (if any) materials you will buy and what the GC will supply.

Get multiple competing bids.

Check GC references, call past clients of theirs and possibly even ask to see their work.

Closely analyze each bid and ask a lot of questions on things that are not spelled out.

Ask each bidder for an anticipated schedule for the work to be completed.

Ask each bidder about their desired payment terms.

Sign a contract/written agreement with the successful bidder.

DON'T

Waste people's time if you're not serious about hiring them.

Walk the job with competing bidders at the same time.

Assume that all GC's will see the work happening the same way.

Pay large sums of money in advance unless it's justified.  (DO Ask for receipts if it's for material deposits.)

Share competing bid information and "bid shop".

Encourage bidders to get into a bidding war.

Try to low-ball contractors.....they will try to cut corners or make it up with change orders a lot of times.

And finally, DON'T assume that "All Contractors are Crooks" or that "All Contractors Will Rip You Off".  Most of them are just hard working people trying to earn a living.  Usually, you only hear that bad stories about contractors ripping people off on the news.....not the ones who show up, work hard, and do a nice job.  Communicate with your contractor often, do your research, visit the project regularly, and pay all your bills on time, and hopefully you'll build a strong partnership/relationship that you're both happy with at the end of the project.

Good luck!