Brandon Nelson
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Fear the Face Value
Last week, I helped some buyers tie up a property that all other buyers had been scared away from. There are problems in the crawl space, and the listing agent had two bids from two different contractors. One had bid $20,000 for the repairs. The other had bid $30,000.
When the listing agent shared these numbers, I kept a straight face and slowly nodded my head. But inside I was smiling. Laughing, even.
This house was built in the mid 60s — a VERY solid era of contruction, and from my days as a builder and a Bellingham home inspector, not tpyically prone to such things as complete crawl space reconstruction.
My buyers tied it up, and the home inspector went through the crawl space. And I went through the crawl space. And when I came out, I still had that smile on my face.
Yes, it needs some work. Localized work. Half the rim joist and sill plate, a couple beam ends, a couple new post & pier assemblies. Oh, and a couple hundred dollars worth of 6-mil visquine and some pipe wrap. Five grand, tops.
For $30K, this house could’ve been lifted right off its foundation, rotten material replaced, then moved by semi truck to the other side of Bellingham, put down on a brand new, poured concrete, reinforced, seismic-strapped perimeter foundation, all the pipes and wires hooked back up, all the sheetrock cracks and finish repairs done, and the keys handed to the new owner. Bam, done!
But buyer after buyer had taken the astronomical bids at face value and walked off, no further interest.
I heard a similar story from another RE/MAX agent today. She had a client willing to “take a risk” on a value-priced house with a known defect in the septic system. The repair was estimated to cost “fifteen to thirty thousand dollars.” No other buyer, for months and months, would “take the risk.”
But this agent and her buyer researched a little deeper, because the repair estimates were so ridiculously high. It’s like going in for an oil change, and having the 20-year-old running the shop tell you “You’re looking at about ten grand for that today, sir.” You just KNOW something’s off. WAY off.
The agent and her client brought in their own, known, highly-experienced and highly-regarded expert to check it out. Miraculously, a couple zeros disappeared off the earlier estimates. It was a minor glitch in the system that presented much more dire to the amateurs who’d looked at it earlier. And for $300 it was resolved. It’s been working fine ever since.
The point of the story is this: prices and values and repair estimates and diagnosis of defects vary as wildly as the number of people in any given line of work. There are great contractors who bid jobs in hopes they WON’T get them, for various reasons. And there are plenty of times that any of us, ALL of us, are just w-r-o-n-g!
Fear the face value of things. Dig deeper until you’re SURE. You may just be looking at a diamond laying in plain sight, where dozens have gone before you and stepped right over it.
I like this…thanks for the insight. We here in California are in a very competitive market for first time homebuyers in the lower price ranges. I had an opposite experience recently: we had an offer accepted on a HUD home. We reviewed the HUD supplied pest report which spelled out about $5,000 in repairs. I told the buyers that a contractor will in general give a more competitive bid. We hired our own pest inspector and home inspector, and they painted a picture which was much more dire. In our case, we opted to cancel and move on…
Noel, so much of this business has to do with keeping your expectations in check until the facts are KNOWN. As an agent, I’m constantly trying to do a better job of that for my clients, whether the end result is that the house is better or worse than anticipated. Thanks for the comment!