A mentoring student asked about a property that he found and called. He was dealing with the homeowner directly and also the seller agreed to a professional inspection. Where the rats had infested particular areas of the property, the student noticed rat droppings. The property was vacant so the rat and damage existence was very noticeable. The property was in good condition along with the estimated rehabilitation was about $30,000 to $40,000 to make the property into a case.
Open listings in the place and comps were in the mid $200,000 range to low $300,000 range. The seller was asking $260,000 and after back and forth discussions, the seller accepted the pupil the $125,000. of ‘s offer If you’re not thinking the following, you should be, “How did the student get such a low price?” The reply is very simple – by understanding before he started the dialogue process, the most he would pay and not offering too high a price to start.
The killer for most newbie investors is the fact that they fall in love with a property and its particular potential. So the seller agreed and signed the contract as well as the pupil called a firm that he was referred to by someone to do an inspection. Next the student called us in a panic and said the home inspector professional believed the property should be demolished!
The other surprise was as he thought even though it was built in the late 1980’s, that the property was not and framework building CBS. According to the inspector, the termite destruction was extensive the property should be torn down and reconstruct using CBS construction. The pupil was panicked and was very concerned whether it was even a deal. I was shocked the damage might have been extensive.
I asked a series of questions about the wealth of droppings and wood damage and became more and more skeptical concerning the inspection report. The termite damage to the rafters and beams wasn’t that extensive, after looking myself at the damage in the property and the internal wall damage was minimal and may be fixed easily – if it was needed. That’s unexpectedly food for thought as a tear-down became a remodel with some extra work!
So I asked myself, why in the world would a professional inspector give a report that the property was likely better demolished and reconstructed? Let’s first assume that he believed it to be authentic, if so, he’d have based it on the exact same construction that I saw and I suspect I’ve seen more properties in relation to the professional inspector, while I’m not a licensed property inspector.
With the review report in hand (tear down), the pupil went back to the seller and renegotiated with the seller for a lesser cost. The result was that an inspection report both saved the student plenty of money and kept him from walking away from a great deal. I asked myself the question of the real motivation of the inspector as I ‘m assuming he was qualified to make the appraisal of damages.
She was angry with his original review report and turned his offer down. In summary, always make sure any inspection you’ve done is by a credible source and apply the report to your edge. I get review reports for each property I sell at retail so that the purchaser’s inspector doesn’t frighten the buyer with a report that simply warrants his fee.
I then use these review reports if a major defect exists, I reveal to the buyers in a disclaimer addendum and as a check list to correct minor problems.
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