Links & Resources Mentioned:
Episode 13 Transcript
Welcome to the get rich, slow podcast. This is the stuff we and our expert guests Wish we knew a decade ago to get the most out of our financial life will provide you with insight into wealth building activities and practices that can expand your net worth exponentially. get insight from top professionals who will reveal how to build wealth the long way, work smarter, not harder, and identify your financial blind spots. With over 25 plus years of experience as licensed real estate professionals and a long track record of winning for their clients. Robin Adrian will teach you what it takes to be an everyday real estate millionaire.
Welcome back future millionaires to the get-rich, slow podcast. I’m Adrian SHERMER with my co-host, Rob Delavan. And today, morning, good morning, Rob. Today, we’re gonna be diving into a bit of post-contract, real estate talk. So you know, we’ve talked a lot about getting qualified and what it takes to get into a home loan. But this is kind of more talking shop on the back end. And what happens after the offer is accepted? Yes, this is a fun topic. We’ve as we game out our episodes, the concept that we’re working with is okay, what are we working on today or this week? Or how do we put you know, in that process, how do we kind of pull back the curtain of what’s happening in our industries, and then obviously, all of our guests and that sort of thing, who have all of this incredible expertise in their lanes, trying to do the same thing. So in this what we’re trying to do is, is show you what the second step of a contract is for a real estate purchase. The first one is, of course, getting into contract negotiations, all of those details, separate episodes. This one is okay, now we’re in contract. And we generally have an inspection period. And the inspection periods going to be between five and 10. business days typically, although I have seen on some super hot properties in the Portland metro area in the last few months, were not healthy for the market, but we’re seeing some waivers of inspections. Or they’ll say we’re not gonna ask for any repairs. But they’ll do an inspection anyways, just for that reason, which is kind of a BS way of saying, Oh, I’m not gonna ask for anything, unless I find something. So anyway, that’s a strategy. And now you’re about to explain why people want an inspection waiver. Right. And really, they’re just trying to compete at that point, they’re desperate, having an inspection within the contract is a healthy thing for a healthy real estate market. And in 2006 and seven, when we were overheated, and the bubble burst, yeah, inspections were routinely waived, and that was not a sustainable thing. And obviously, the market between 2008 and 2011, bore that out, a lot of people lost a lot of money because they were buying stuff that was junk, and they couldn’t afford to fix it, and so on. So not today’s topic. Today’s topic is okay, we’re in the inspection period, and we’re working through the process. And the process is you get an inspection, and then you list out itemized repairs and then figure out how much those repairs cost. And this is part of that concept of, we get bids for everything. I have a gal that works within our office, she’s also an interior designer, her name’s Jen, and she goes through and gets bids for all of the things we ask for. And that way, we’re not just throwing crap out there and saying, Hey, you know, this, this pipe repair is gonna cost, you know, 2500 bucks, we’re saying it’s gonna cost exactly x. And we’ve got a collector ready to do it if you’re exactly and they will fix it for x. So that way, you know, we’re not blowing smoke up somebody’s ass saying, you know, whatever it is. So in this case, we were in a contract for a small condo, on the southwest side of Portland, with and very low sales price. We’re talking like $145,000 we very rarely do this. Yeah. This is where we see more pushback on these sort of things if, you know, big picture.
Exactly. And it’s funny you say that and by the way, this is an Adrian doesn’t know this, but it’s a joint client, him and he’s doing the loan, but as a lender, he doesn’t see any of this stuff because lenders don’t want to see all of the problems with a property. Frank. Yeah, he has problems. So this little condo purchase, we end to back up a little bit more We prefer to have these conversations actually over the phone, where we can talk and work on figuring out a collaborative solution with the other side. And then if they’re bought into it, they’re going to go to their client and say, Hey, this is reasonable. Well, rarely are we able to do this, check out one of our other episodes of hiring the best people. What’s happening is, that we’re professional negotiators by trade. That’s what a real estate broker is. That’s where we make the money for our clients. That’s where we justify our fees. That would be crazy. Otherwise, if we weren’t bringing value, in multiples above that, and this is that process, and this broker on the other side is a professional negotiator for his client. Although he doesn’t release I don’t think he knows it. Because he’s not approaching it that way. So where we’re at is are takers, right? Yeah, exactly. Genetically, there are right? Real estate agents who are order takers. And when you’re doing your first or second transaction, you’re probably an order taker. What’s that? Mr. Mrs. client, you want this? Great, that’s exactly what we’ll do. Right? And then you gain the knowledge, and then you gain the skills. And then, you know, unfortunate, it’s hard to distinguish that out in the open marketplace to tell who’s a good, shrewd negotiator. You can’t have a demo negotiation with your real estate agent. But that’s why you can’t rely on you know, a bit more info about the person that you’re working with,
right, and hire the best people. But again, you won’t know. I mean, you’re nailing it exactly here, Adrian these are the kind of questions
No, you can ask, Hey, we’re gonna get some evidence.
Exactly. And I always tell people to ask my competition, what is it that you do that you get paid for? What brings the most value? And the answer is, that I’m a professional negotiator. But I’m going to get off that soapbox here. And I’m going to tell you
the money’s in the margins. I mean, exactly every bit counts, but a margin of 510 percent of a purchase price at 145,000. And not that big of a deal, right? versus 510 percent of a million dollars. Okay, you’re starting to get into a big deal. But still, there’s value there. And these are real dollars. So I’m just going to read through with some commentary. And I’m sure Adrian, you’ll have some points here of just a quick back and forth via email because we couldn’t get ahold of the guy. After all, he wouldn’t answer his phone. And I’ll try to keep my expletives to a minimum answer his, um, his phone. Yeah. So and by the way, credit where credit’s due. This is Rachel, who is one of my lead agents. And she is the lead buyer’s agent on this transaction, and also happens to be my little sister. So she says, she sent over a repair addendum requesting several items totaling just under $12,000 was $11,978. For $145,000, condo purchase. And this is us representing the buyers, and we’re asking for those repairs to be done at that price point. Yeah.
So we get a typical email? Well, this particular complex, is typical, because it’s pretty rundown.
There’s a lot of for depends on the owner, right? Yeah, but it depends right here. And then it’d be something our audience has heard before deferred maintenance. You know this is a common thing that we catch up on. It’s just, that this isn’t like a car that gets inspected every year. You know this is a home that someone has to live in, and sometimes little pieces of damage, add up or something can be pretty big. A furnace, for example, is a great one. It’s still warm in the house up, but maybe it’s not safe or it’s not, you know, up to code. Pulling out old fireplaces. I mean, I could go on and on, but right. 10,000 and, you know, that’s a What do we got at that point? It’s, well, it’s 70% of the houses. Yeah, I mean, it’s big. And most of it was plumbing there was it seemed like every single pipe underneath the sink or underneath the house, or the condo was leaking. I mean, it was a few $1,000 worth of worth water is super, super, super water, just water will just eat a house up, right? And then there were some h vac issues, there were roof issues, there was mold in the attic, there was mold in the crawlspace I mean, all these things, who goes in their attic who goes in their crawlspace and help us out they sell the home and you know, I mean smart homeowners do but frankly even most people, even myself, I don’t do as much maintenance as I should on my properties. Now, we still have things scheduled periodically, but almost no one does that. Anyway, so jumping into this email is we said over this, this repair request for $11,978. And the response was, I’m chatting with my sellers and see if I can get you a response. But I highly doubt that you’re going to go that they’re going to go for all the requested repairs. So I’m going to stop there. When he refers to that as a, that’s his client. He’s responded and already said, without even talking to them, that there he highly doubts they’re gonna go for these requests for repairs. So what he’s doing is he’s said he’s trying to reframe and set up an expectation that oh, well, this isn’t gonna happen. You’re gonna get much less than this, you know, basically $12,000. Then he continues, I’m sure your buyer understands that he is buying a condo for 145,000. And he is requesting this 12,000. Yeah, yes, a portion of that is additional. But this is nearly 10% of the purchase price. This is not a new condo, as he knew when he walked into the unit. I’m not sure where the sellers are going to end on this. I’ll be
okay. So he makes multiple accusations audits there. And he’s accusing, you know, your seller knew, or I’m sorry, your buyer knew that this place had maintenance to do.
And this is that was his concept, right? It’s, in the boilerplate, right? offer roses, etc. You know, we see it even in the ABA, I love this. And I see it on there. It’s like, seller to make no repairs, it’s right to meaningless. You know this is a negotiation until the keys exchange hands. Exactly. Well, and it’s especially meaningless because there’s as is, but it also says the buyer has the opportunity to do inspections. Yep. For x period of days. Yeah. And what’s the purpose of that is to find the unknowns because the buyer put in a contract and competed to get into this contract to purchase this property. And it was competitive. And we were able to get into a contract based on our back and forth and frankly, the highest price that was offered. Yeah, well, they’re saying, well, this isn’t going to happen. They should have known. That’s basically what he said, Well, did my buyer crawl into the crawlspace? Are they mold experts and mildew, or are they prayers? Are they electric? are you wasting everyone’s time? Exactly. There you go. So Oh, I’ll quit. I mean, a good agent should be Rob you’ve listed him out. Everything that you listed was a health and safety issue. Your buyer isn’t saying, well, I wanted to plant and countertops will you pay for those on the way out? Perfect, perfect segue into Rachel’s response. Nice. Hi, Chris.
This is the beauty of it. Right? I love Rachel knowing she’s a professional negotiator. Hi, Chris. I can understand your seller’s emotional response for sure.
Keeping them grounded and managing their emotions is the hardest part of our job. And she says comma, right, exclamation point, and question mark. Basically, Hey, bud. And I probably shouldn’t have said his name, but I won’t say his last name. Hey, bud. Yeah, this is hard. And yeah, your job is to make sure that your sellers get the best possible deal. And emotions are a big deal. And basically, everything you already said in your email response was an emotional response. Let’s get to logic. Our buyer knew that the condo needed cosmetic updating when we walked through, right, Adrian, like tops. Yeah, unfortunately, we did not see or know about the myriad of health and safety issues that are hidden from the eye and found during the inspection. Please ensure your sellers, please assure your sellers that we are only asking for deferred maintenance and dangerous items that cannot be ignored. And not a myriad of cosmetic issues that totaled a much larger dollar figure to repair than the bids we got for the items we need to be addressed. She also used the word need addressed. Yes. Yeah. After she said, these are negotiable terms exactly cannot be ignored. for lending you maintenance for the record. I mean, an appraiser is not going to let any of that stuff slide either. Generally speaking, although they will let more slides unless they sit there because they’re not checking electrical outlets to make sure that they’re, you know, actually, you know, polarized properly. And not a shock hazard and all that, you know, appraisers don’t do all of that but light switches though, and they’ll look for the look for moisture buildup. I’ve seen appraisal contingencies for you know, hey, what’s that weird spot on the ceiling? We need you to either show who you paid to repair it up sub right up or you need to get someone up there to you know, it’s stuff like that, you know, it does come up. Right? And it’s so so you’re right, it does. And these are health and safety items. She continues, I know the price point of the sale is low. She’s addressing his concerns. And she put in quotes sucks for you and I write with a smiley face laughing emoji, of course, right, as he’s saying, and she’s acknowledging is, yeah, the commission isn’t very much. He’s saying that, well, I’m not gonna get paid very much interested in the time and you know, exactly. But unfortunately, the licensed contractors don’t care about that, and their cost to do these repairs of the same as they would at a much higher sale price point. Yep. I hope you and I can collaborate and keep this together for our clients. I know there’s a lot of time and hard work into coming up with solutions. Remember addressing his low commission that he’s complaining about coming up with solutions to get these things done and not have your sellers have to pay directly out of pocket on both our parts? Regardless, I understand and appreciate your time spent on this one. And, you know, all my best and Rachel and all the things underneath all powerful things. Yeah, one of them being that she’s a master-certified negotiation expert. And it’s right in her email, which is not an easy designation to get it takes a lot of time and effort to get through that. The other agent is certainly not that. So yeah, done. This, this concept of she addressed all of the points that he said, they were all emotional, she’s bringing him back to the logic of contractors don’t care what your price point is. To fix the leak. It’s gonna be $1,000 on 145. Right, in a million-dollar home or in a $50,000 home. Yeah, if you got a leaky kitchen sink, it’s pretty much the same job. So
Exactly. And all I mean, and we’re talking I mean, some of the toilets were leaking they were moving if you sat on them. I mean, it’s it can get most so
expensive, so fast, and dangerous. It’s almost a higher risk and a cheaper house because, you know, it’s like buying a cheap car, right, you get a fender bender, and you total the thing, houses actually can effectively get totaled at a certain point, you know, there’s, there’s a point where you could have enough structural damage where it’s like, well, maybe we should just plow this thing over because it’s not worth trying to patch this up.
It so it probably would be helpful for me to run through a number of the things just for the audience teacher this Yeah, um, so the back door sliding glass door didn’t lock $196 big deal, it doesn’t lock we didn’t know that
there was a couple the windows that were cracked and broken $525 moisture levels on the floor around the washer and dryer. And to tear up and replace I don’t have a price point on that. Let’s see here. Several electrical items that were let’s see here, cruising down to this one I had it open 11 $100 that GFCI protection replace 14 outlets that were almost functioning throughout just the electrical panel was improperly wired and wasn’t labeled at all. Just you know, white conductor conductors were used as hot so somebody would say oh, well this one’s not hot because it’s white you know and they touch it and they get shocking things like that.
Let’s see the exhaust duct for the clothes dryer needs to be replaced it was just venting hot moist air and just next to the wall $140 there was mold remediate
a common issue ventilation issue is what a dog pile that becomes because it’s just it’s a problem that is selfly exacerbating you know exactly what you see in the black mold in attics where a tube fell down and then all of a sudden the entire attic is now filled with like kitchen grease. Exactly. a fine mist of kitchen grease all over the walls like what 100-ish?
Yeah, you made it sound appetizing a fun Yes. The shower pan was leaking literally when everybody anybody was taking a shower. Underneath the shower. It was leaking part of the water.
Just every drain. deck boards were rotten. You could put your foot through them. The guardrail on the deck which had about a six or eight-foot drop on the other side was wobbly and part of it was missing.
There was water damage underneath almost every sink. Just all of these different items, that just basically all the appliances weren’t working, like the washer and dryer weren’t working properly. The dishwasher did run the refrigerator was leaking, just on and on and on. And, you know, 1500 1100 500
and I gotta ask so that we have a frame of reference, is this place priced way under the market? It was not, and it was competitive. And I mean, it’s it didn’t look great when you moved in, but it seemed liberal, livable, and habitable until you start uncovering all these items. So, yeah, I mean, I guess Stay tuned, maybe we should do another episode in a few weeks to see if if this thing either just falls apart, or we were able to salvage it and, and get it done. But I just want to convey to the audience the importance of negotiation, this process, it matters to have a great inspection. I mean, look at all those things that are looked at underneath, if you had taken an inspection waiver that this person would have had to find out the hard way. And one of the big takeaways for me, Rob on this too, is, you know, even if you’re not at this period in a transaction, if you’re thinking about buying a home, understand that this is what’s a good analogy, maybe like buying a car from a dealership, my brother just got a car from a dealership back, he told me they were paint chips, they fixed the paint chips, they replaced the key that they broke, that wasn’t you know, told, disclosed upfront, it’s not even if someone’s doing a for sale by owner, it’s not like, you know, you can buy a piece of junk car from someone and just sign off on the title, it doesn’t matter if it’s even registerable. But, you know, there is a there’s a standard for housing, and a lot of it is health and safety, it’s for good reason. But you’ve got to remember that effectively, every house that’s on the market, its value is on the assumed presumption that it is up to code that it is safe, that is not a violation of any health or safety concerns, that there isn’t mold that there isn’t a concern of, you know, going through the floor or the decking or whatever it might be. So there is there’s a level, you know, and if your house is not that this is also on that agent for not setting expectations up front with their sellers, it doesn’t matter that it’s a cheap home, it has to be safe, and it has to be livable, and it has to work. And it has to not be you know, a maintenance pit. Because it isn’t like he used car, you know, this houses, you know, houses last forever, as long as you come up, it’s supposed to a appreciate, it’s considered Real Property rather than personal property, which depreciates? Yeah. And the idea is, you got to have the inputs throughout the process to do that. In wrapping this up the last piece, you dropped that that point there of this seller, just so everybody knows, disclosed none of this. Now, most sellers just basically say, Well, I don’t know, I’m not a professional, I just own the home. And that’s how they get away with it. But unless otherwise disclosed, which is a tactic, if you say, Hey, you know, there is an issue in the attic, we’re not going to take care of that we think it’s roughly going to be X amount of dollar, right? Let the market you know, and that’s a total negotiate, right, saying, I’m not going to deal with an old roof, you know, you’re gonna have to deal with it, Mr. Or Ms. buyer. And so be it. Yeah, but that’s disclosed upfront. And that’s something that, okay, can’t be asked for on the back end, necessarily released in good faith. So just there are disclosures, there are disclosure laws, but you can’t rely on that you have to have the inspections. And you have to have somebody willing to at a certain point, if we can’t negotiate through and get the vast majority of this taken care of, then we will recommend that our buyer walk because instead of buying a $145,000 place, he’s buying 155 or $165,000 place, and at 155 to 165, he can get a different product that doesn’t have all these issues. So you might as well go up in price without having to deal with all of that.
So definitely just a little, and this is super important to your investment. I mean, we talked about this a little bit in a couple of other episodes. But, you know, as you mentioned, it’s not that much money at the core of things, right $10,000. If we’re talking about becoming millionaires on this podcast, this doesn’t seem like that much money. It can make a huge difference, though, because you might be only putting three or 5% down so these negotiations can also represent a theoretical doubling of what your initial stake is in the property. And especially if you’re making a purchase and you have mortgage insurance. You know, the same thing if there are improvements to the home if the home is in exceptional condition music ownership of it, you’re more likely to get to that 20% equity point where you can drop mortgage insurance. Then if there’s a bunch of deferred maintenance, that starts sliding out from under the cracks, that becomes more apparent as the house gets older, then you’re spending money to not improve the home, you know, but it’s like, if you bought a new car and the clutch went out immediately, you know, or, you know, they cleared the check engine light and the hope didn’t come out on the test drive, and then you’re halfway home and the things billowing smoke, you know, you could go back, you could sue the dealership, same thing here, you know, you can’t do anything after the transaction effectively closes. That’s why we got to get up in there, make sure that we check this out, very, very effectively use the right people use a great inspector who’s doing stuff like checking every outlet like that, you know because not everyone does. And then you can have a more secure investment. But you can make money on that because you’re not losing money when you got to go fix it two years later when it becomes a real problem.
Exactly. And you mentioned, that we do need to wrap up, but you mentioned using the inspector, right? And we’ve talked in previous episodes about the best people. Well, my inspector happens to be seen doing inspections, quick shout out.
Yep, absolutely. I use them. I learned so much about homeownership. But he’s an electrician, a licensed electrician. So it’s you know, and he’s not working on electrical on our homes, but he’s bringing that body of knowledge. So the point is, use the best people that know what they’re doing. We’re intentionally going through this process. And if it means we walk away, so be it, but get to the point where we’re creating value for our clients. Otherwise, you know, these $10,000 swings one direction or another, yes, add up over 510 15 transactions over somebody’s 40-year working life investing life. And, you know, again, that goes back to Hey, those everyday millionaires, right? So anyway, the last episode, we talked about what was a $30,000 mistake 40,000
might not even know about it happened a handful of mistakes the time it’s crazy. And you just don’t want to be. You don’t want to be on the wrong end of that. Absolutely. So awesome. Thank you for joining today.
Yeah, thank you very much. We’ll see you guys next time on The get rich slow podcast.
Thank you for listening to the get rich, slow podcast. If you like what you learned, please subscribe, rate and review so we can grow wealth for even more families.