In this video, investor, Jenna Hoover, talks about a hard lesson that was learned when dealing with a seller's relatives and how it could have been avoided.
Jenna acquired this property from a seller who had inherited it. During the course of negotiations, she quickly realized that there were lot of items left in the home that meant something to them, and that there were a lot of relatives involved in the deal.
Jenna got creative, offering them the chance to get the items from the home that they wanted to keep, and informing them that she'd take care of the rest. She even offered to store some of the items in one part of the house until after closing, giving them extra time to get what they wanted. (See more on how she acquired it here)
That's where it all went wrong.
Sometimes, a great negotiation tactic is to be very accommodating to the seller's requests, and to even proactively look for ways to ease their transition from the home. This is especially true when it comes to inherited properties, where there are typically a lot of emotions involved.
However, as Jenna learned, you don't want to be overly accommodating or lenient in your negotiations.
After Jenna had closed on the property, and let the relatives come in to get some of the items that they wanted, she received a call from her contractor.
Some of the relatives had actually physically removed a window air conditioner unit that had been built into the window. The removal not only damaged the plaster on the wall around the window, but left the window wide open during winter. They simply removed the unit, left the home, and never informed anyone.
Thankfully, Jenna's contractor was at the property and caught the issue before it could do too much damage to the nearby bathroom and plumbing.
Not having many options for recouping any damages, Jenna had to look to gain the only thing you can from situations like these...
Jenna quickly found herself re-evaluating whether or not she should ever be as lenient as she was with these sellers. She decided that moving forward, sellers would be required to remove their personal belongings before closing on the property, and that she would be more detailed about what stays with the property when it's sold.
Now that they have full possession of the property, and all the personal possessions have been removed, Jenna and her team are focused on demoing and remodeling the property.
Some of her original plans, like race track wiring throughout the home, have changed as well.
Race track wiring, also known as Raceway Wiring or Channel Raceways, is a cost effective way to run new electrical wiring throughout a home. This is an option if it's allowed in your area and makes sense in the market. It's not something that you would do in a higher end home, but in this home, it was a viable option to save some money.
However, after Jenna's contractor did some research, they found that it's cheaper to remove old hardwood floorboards and run electrical wiring that way. Since Jenna is carpeting over the hardwoods in this property, this option made the most sense and they moved forward with this option.
As a real estate investor, it's important to always be open to changing your original plans for a property. It rarely ever comes out exactly as you had planned, and there are great opportunities to adjust the plan to save money or add to the after repair value of a property.
The other important thing to note is that a good contractor that looks out for you, as much as you look out for them, is worth its weight in gold.
Jenna Buys Houses; Revamp Realty
Terms used in this video:
Features mentioned in this video:
Key take aways:
- Be aware of what is allowed or not allowed in your market
- Make sure you price match your materials to save on material costs
- Some banks won't finance a home that has Knob and Tube.
- One or two electrical outlets per wall are changes you are going to want to make to update an old home.
- Local code will generally dictate how many you should have per wall. Check with your local regulatory agencies.
- If you are going to carpet over old floors or they aren't salvable, you can sometimes pull floor boards to run wiring to save on re-wiring costs.
- Market your project constantly, even before it's done. You never know when you are going to find a potential buyer. They can see the potential and that you're doing it right at each step.
- Real estate is a people industry
- Sometimes it's difficult to appease everyone
- Have the seller take the things that they want before closing, not after.
- Having the seller or relatives come later can delay the project.
- Be clear in your deadlines and what is to be taken/left.
- Ensure you have a clause in your contracts that says that anything physically secured to the property is sold with the property unless otherwise noted.
- Don't be too lenient with the seller/buyer. You have to protect yourself and your business as well.
- Make sure you have a contingency built into your budget for problems that might arise.