If you sense motivation, then now is the time to invest in a trip all the way out to the property, which could be down the street or on the other side of the state. It depends on where you’re marketing. Set up a time that works for them to go and see it, and if possible, be ready to sign the paperwork the same day.
You want to make sure that you’re signing with the personal representatives themselves and not their brother-in-law or an agent or somebody else meeting with you because you only want to make one trip. You also need to know that they mostly purchase Indy homes and apartments
If you can make an offer and get it signed then and there, then that’s going to save you time and keep them from reneging or dragging their feet if you try to get it done through e-mail or fax.
When you meet with them, the first thing to do is build a rapport during the walkthrough of the property. This is where you get the rest of the information that you need in order to estimate the repairs, which helps you estimate what to offer.
Here’s a tip: Do not beat them up about the repairs that need to be made or focus on the negatives. If the property needs any repairs, just blame it on today’s picky buyers.
Sometimes they’ll understand that people don’t want that outdated shag carpet and wood paneling and things like that today because they’re not being built in new homes, which are desired by many retail buyers. If they don’t understand that, then there’s no point in haggling. Just factor it into your offer.
You don’t need to even mention it at all. Often, they’ll be almost apologetic and point out things to you along the way that need work. So, don’t do anything to provoke defensiveness in them because they often meet that with resistance, since they know you’re trying to get a lower price. Bring a property walk-through form or checklist to note items as you go and make sure not to miss any of these things.
Start with the outside. What does the exterior look like? What kind of siding does it have? Is it brick, vinyl siding, stone, aluminum siding, or something old that might need to be replaced? Is there some kind of wood siding that’s going to have to be replaced or painted over or put sheet rock over? I would absolutely do that. Today that’s what buyers want. How does the roof look? Are they regular shingles or some other kind? Are there any missing parts? Is there any kind of work that might be needed there? Will it need some landscaping outside – high grass, weed whacking, shrubs? A new mulch bed can do wonders for maybe $500 or so. Sometimes new driveways are needed. Does the foundation look okay, or is it cracked? Basically, you want the house to have curb appeal when it’s done or people are never going to go inside to take a look at it in the first place.
Now, once you do go inside, let them take you on the grand tour, whatever direction they want, as long as you see every room. How do the interior walls look? Do they need to paint? Here’s a hint: they almost always do. The carpet is usually worse than they say. If a seller says, “Oh, the dog has been making a mess on this carpet for ten years, but with a little shampoo, we’ll get it right out.” That rarely or never works. There’s almost always some residue left behind.
So, if the carpet looks the least bit dated or has stains, plan to replace it. It will really pop for those retail buyers when they come in to buy it later on. Is there central heating and air, or are there window units? Window units and baseboard heaters are going to turn off a lot of people. So, factor in upgrading the heating and air system into your estimate, along with fixing any plumbing or electrical issues.
Are there any exposed pipes? Does the plumbing look good? Is the electrical system modern? You’re not going to catch all of this during your walkthrough, but it will come up during a closing inspection or repair, or your contractor might notice something that you don’t.
Also, take note of any miscellaneous items along the way, such as lighting fixtures, ceiling fans, dishwasher, washer, dryer, or refrigerator if it’s common in your area that those come with the house.
Notice whether they’re missing. If they’re ugly, you can consider just throwing them out or having them cleaned. Next, make a ballpark estimate of what all of these repairs are going to cost. Here’s how you can do that.
At first, the best way is to have a contractor go in there with you and tell you what they believe it would cost for every line item such as paint, carpet, electrical, roof, landscaping, etc.
Then, compare that to what you believed it would cost. The second best way is to show pictures to a contractor after the fact. Give them the details. Let them know the size of the house over the phone. Send them some photos, maybe give them a walk-through later on. However, if they can be there at the same time as you and the personal representative, then that’s the best way to go. Now, to make your own repair estimates, here’s a simple rule of thumb for paint, which most houses will need. Take the square footage of the house and multiply it by two dollars.
That’s typically what it will cost to have someone come in and put new mud on the walls and sand it down and apply the primer and new paint, or two coats of new paint, unless there’s something more extensive involved.
Do the same thing with the carpet. Take the square footage of the house, multiply it by about two dollars, and that’s what it’s going to cost. If you call three carpet companies, and the cheapest one says that they can install new carpet and padding and haul all out the old materials for $1.79 or $2.25 per square foot, then now you have a new rule of thumb. You’ll want to keep using that same company over again so that you can predict these things.
The same goes for all the services that you hire out. Replacing a kitchen is going to cost $3,000–$5,000 or more.
Now, people get $20,000 in kitchen renovations all the time. You don’t need to do that. Unless it’s in a high end area, even some new countertops from Home Depot can go a long way.
The same goes for bathrooms: $3,000–$5,000 for that. Central heating and air for a regular sized house might cost $5,000–$6,000, maybe less than that if it’s a smaller house like 1,500 or fewer square feet.
It will cost a lot more for all of these things if you have a large property or if you call the big fancy contractor with the enormous truck and signs everywhere in town or the carpet company with the biggest showroom and the biggest ads. They have to pay for all that overhead somehow.
They’re going to charge you more. You can often find people who have been around but don’t have an expensive place, or maybe they’re just getting started who will do it for a lot less if you shop around.
A roof will probably be $5,000, and $1,000 in landscaping can go a long way. Anything else can be figured out on an as-needed basis just by getting quotes from somebody who is in a position to do the work for you. Then, once you think you know what the repairs will cost, add 20 percent more to that number, just in case something goes wrong or you’re way off so that you have a buffer on your repairs.
Be very conservative when making offers to allow room for error, but remember that even this is a ballpark estimate. It doesn’t have to be exact because you are bidding 75 percent of the property’s value minus the repair costs. So, if you look into that on a given deal, it’s a lot of equity, a lot of safety for you right off the bat. So, even if and when things don’t go as planned, you can still factor that in and make money on the deal.