Find Out What The Top Two Reasons Are That Make Property Inspections Absolutely Necessary!

It’s been a week now since the bank has accepted my offer to purchase Faust. Since that time, I have been able to talk with my contractor and continue negotiating the scope of work to ensure that I only perform what is absolutely needed to make the property clean, comfortable, and in move-in condition. I have been accused of having the tendency to overdo my renovations while others would stop short of what I like to do by about 25%. However, after reading several books by or about Donald Trump, I believe the key is to over deliver and under charge. This gives your client the WOW factor that makes it impossible for them to pass up on your product or service. And it will bring you endless dividends through the positive word-of-mouth advertising you will receive when treating people fairly.

HINT: (Side note) All of you contractors and other service providers out there beware! This practice of over delivering and under charging not only works for me selling real estate, it works for your business as well. How many of you feel like you are getting the best service for your dollar when you go to the store? Everything is self-serve. You can even do your own check-out at many stores now. You’ve seen them: “You Scan” check out lanes for those of us who just don’t want to smile at the cashier and say nice things that you don’t really mean. I was SHOCKED the other day when I went to fuel up and get a car wash. As I jumped down from my awesome, full size, 2005, 4x4 Dodge Durango SUV (I love that truck!) I was greeted by a smile and a handshake by the pump attendant. That’s right, you read that correctly -- PUMP ATTENDANT! He informed me that this was a FULL SERVICE station and that he’d be happy to pump it for me. “Regular or Premium?” he asked me. I could hardly believe it! I gladly handed him my debit card and said, “Fill ‘er up, regular! … And thank you, sir!”

I felt like a VIP! And that’s how your clients and customers will feel, too, when you over deliver and under charge. You will not only continue to make money, you will build lasting business relationships. Then there’s the word-of-mouth advertising that you will get as a result of your superior service. High quality, specialized service at an affordable price will guarantee that your customers will brag about you to the whole world. Think of it this way. If you go somewhere and get lousy service, don’t you want to warn everyone to stay away from “that guy” or “that place”? Why do you do it? Because you hate the person who treated you badly? Yes, but more importantly, you care about your family and friends and you don’t want them to make the same mistake you made.

On the other hand, if you go somewhere and get the royal treatment don’t you want to tell your family and friends about that experience too? Why? Because you are now in love with the pump attendant that filled up your SUV for you? Not really, but because you care about your family and friends and you want them to get a great deal, too. But there is a better explanation that is more self-serving that I think goes to our very core as people. We all want to be liked and admired. We also want to feel like we have specialized knowledge and can add value to our friends and family. That is why we tell them about that “special place” that we have found, or that “special inspector” who goes above and beyond and is so detailed in their inspection reports (like John McAuliffe) resulting in better discounts from the bank. That is why we tell others about this awesome contractor (Will Curry) who acts as a trusted advisor and who provides honest and reasonable prices to investor clients realizing the value of win-win contracts. Or that real estate agent (Jay Alasphemy) who negotiates for you with the bank to get the best investor’s price possible and handles all aspects of the purchase process so that things run smoothly and on schedule.

I can go on and on, but you get the idea. Treat others in business as you want them to treat you and you will make good, lasting business relationships. And when you do find those special people, share them with others and everyone will benefit greatly.

Now … back to my story….

Even if you are a seasoned investor and you know everything there is to know about property -- even if you are a builder -- you should NOT pass up the opportunity to have a qualified inspector inspect your investment property. There are two reasons for this that may not be obvious at first.

The first reason is that you may be too close to the deal to be objective. You are emotionally tied up and invested in the deal and you will try to make it work any way possible. That is why you want John to inspect your property. It’s his job to convince you NOT to buy this property. If you decide to buy it anyway, at least you are aware of every potential problem you may encounter when trying to restore the property.

The second reason is the least obvious of all, but the most important. You need John’s report as LEVERAGE when negotiating the final purchase price of the house you are considering. The more you can identify that is wrong with this property the better off you are when negotiating your purchase price. You can either ask for more money off the price or you can ask the bank to do a number of the repairs before you buy the property. Either scenario will work for you and will save you thousands of dollars in the end. Don’t overlook the benefit of a good, quality home inspection. (Call John!)

That’s what I did! I contacted John to come out and inspect Faust so that I don’t overlook anything serious and move ahead with this purchase not fully knowing what I am getting myself into. John met with me Friday evening at the property at 5-pm. John is very flexible in his scheduling to accommodate his investor clients. I crawled all through this property with John all the way up into the attic. (I did NOT go up on the roof as that is one of the two things I will not do. The other thing I will not do is go into a crawl space. In fact, I will not even consider a property on a crawl space - nor a slab, for that matter.) This is about a 3-hour process but John is very thorough and he will explain to you along the way what it is he is looking for and what he is observing. He talks into a small MP3 recording device making audio notes to be transcribed later into his full, detailed report. He also snaps a huge number of pictures to refresh his memory when writing up your report.

I should be receiving John's written inspection report by Monday. He discovered two things I feared the most and that I overlooked in my initial walk-thru -- the roof and drains need extensive work. The roof has four (4) layers of asphalt shingles on top of the original wood shingles, there is inadequate venting, there are several water entry points resulting in extensive water damage and .... [gasp!] there is evidence of MOLD!! (some of it even looks "black").

Due to the lack of running water on site, John couldn't fully inspect the drain system as he would like. But he did notice a lot of evidence of water issues due to a great deal of dampness all around the floor near the exterior walls. Also, he could observe that there was high, standing water in one of the drains. John was so concerned about this situation that he referred me to Mark Collins of Down Under Plumbing (313-291-7255) and suggested that I get that looked into more thoroughly before I wind up with a HUGE repair bill.

So, I called Mark Collins first thing this morning (Saturday) and he arranged to send one of his guys out to the property at 3-pm this afternoon. Now that is responsive service! Ed showed up just shortly after 3-pm after finishing up at a previous client site and Ed inspected inside and out taking the time to explain what he was looking for and observing. Ed was extremely knowledgeable and he taught me a great deal about the sewage system and it’s anatomy under the ground. While explaining his every action, Ed ran a small camera down the drain system and discovered extensive root infiltration causing slow draining (or non-draining) of sewage and rain water.

Ed explained that the best-case scenario would be to snake out the roots all the way to the city line at the back of the property and if the crock was not damaged, then we're only looking at a $500 service call for the snaking. The worst-case scenario would be a broken crock requiring the back yard to be excavated and the crock replaced. The worst-case cost in that situation would be about $5,000 or $6,000!!!!

Ed promised that a full report will be written up and faxed to me on Monday. Between John's report and Down Under Plumbing’s report based on Ed’s observations, I am prepared to ask the bank to give me a $15K concession so that I can fix the roof, the drain system, and remediate the mold. The other option would be for the bank to fix both the plumbing and roof themselves and perform the mold remediation.

I will explain to the bank that I have already invested significantly in this property (the bank’s property) by paying these inspection fees to uncover these deficiencies that they failed to disclose and that if they are not willing to grant the requested concession amount, I will have to walk away.

That’s BAD NEWS to the bank! They don’t want to hear the words “walk away.” They want and NEED to sell this property. Every day they have this property on their books is another day of property management expense and taxes. But unfortunately for them, I have now discovered these deficiencies and I have made them known to the bank property management. They would now have to disclose these items to the next potential buyer or risk being sued. Fortunately for me, the bank knows that when they disclose these conditions to the next potential buyer, they will run for their lives, shaking and sweating from their foreheads with anxiety and fear over the extent of the damage!

The bank knows that only the strong and the brave will stick this through and take on such a challenge. They know that only the seasoned real estate investor can help them out of their predicament by buying this property and fixing it up while also doing their small part to revitalize the city of Detroit in the process. This is a win-win-win proposal the bank just cannot pass up. They win by getting rid of this liability, I win by getting an opportunity to make a reasonable return for my efforts, and the community wins by getting a renovated home that is once again beautiful and charming bringing warmth and class to the neighborhood.

The bank HAS to accept my offer or the house will sit and continue to deteriorate. The bank could refuse my offer only to have to face another aggressive investor offering even LESS than I did. But if they grant the requested concession, they will get out of their liability and be done with it.

I'm in a strong negotiating position. Even if the banker reads this blog, he would have to agree with me and grant the discount. It’s a “no-brainer!”

Based on the findings, Will is re-working his quote to take into consideration the added expense to fix the roof and the sewage line. He is going to have new numbers for me on Monday so that I can submit his scope of work (without the numbers, of course!) along with the plumbers reported findings and John’s property inspection report.

I have decided that I will just gut the basement, paint the walls white and the floors battleship grey, and make sure the basement is clean and bright with a lot of lighting. I think that will save a significant amount on the renovation rather than finishing off the basement. I have to make sure there is no more mold present behind any of the dry walled surfaces anyway.

Come back soon … I'll let you know what happens as I move forward with this exciting project!