Dealing with Point of Sale Violation in North East Ohio

If you are like me and purchase real estate in North East Ohio, you may be familiar with something called a City Point of Sale Violation list.  Some of us have learned how to control these, while others are simply detoured by the extensive and daunting list some municipalities present on assets. How do you deal with these challenges? 

The Point of Sale list in most cases requires you to place 150% of the construction cost into an escrow account, presenting substantial financial burdens for investors, tying up operational money. 

Although this is a necessary evil, to maintain a high quality of home stock within these communities, most of the country has nothing of the sorts. Dealing with this challenge on a daily basis is a cumbersome and difficult task. Considering that my annual purchasing habits trend around 300 units/yr. we had to implement a comprehensive system to manage these escrows, timing for release of escrows and insuring that my construction staff are aware of the needed work.

Majority of the time, the homes we acquire need work and will cover or overlap with the Point of Sale List, however, I do not want to place in escrow more money than necessary just to cover the Point of Sale. 

A simple solution is to prepare (2) cost estimates:

• (1) Actual Total Scope of Work and Cost
• (2) Actual Point of Sale Scope of Work and Cost 

I only present the actual point of sale scope of work cost, this tends to mitigate this cost burden. For full disclosure, I have the ability to cheat a little bit as we have our own construction division, so getting estimates and pricing is easy. If you do not have a construction department, you will want to work with an experienced contractor and their staff who are willing to complete this exercise of preparing two scopes for you. 

One thing I can speak to is that you want to be fair, honest and upfront with your contractor, build a relationship do not fish all over the city, eventually you will exhaust the sophisticated contractors out and find yourself with the C team and if experience has shown me anything is that you do not want the C team. Your results will be C results. 

So be direct, be honest, have a plan, be transparent with the people you work with, you want to forge a partnership that is mutually beneficial. Many of times we get calls from investors they are just fishing for estimates, be conscious of this activity, as the sophisticated guys that are willing to go out one or two times, they will not keep coming back out for you, if you do not give them the business. They to have a business to run and normally they are not in the business of spending hours ands hours writing dead end estimates. 

Finally, the more sophisticated your team, the more economies of scale you can tether in your favor and provide a win-win situation and build a viable team that wants to be your partner not just your contractor, they tend to want to go above and beyond as they want to retain your business just like you want to retain their quality workmanship.