Foreclosure Estimate Advice

Tom M

I have a client that want to move into a foreclosed property. They brought me in to give them an idea on what it will cost to get the place in shape and livable. The prior owners trashed the place on the way out and it appears the guy did alot of half azzed remodeling on his own. Besides the created damage the house is in line for a new roof, garage door & apron, doors and a boiler. The client of course needs to itemize what it will cost to fix inorder for the bank to drop more money. So how should I lay-out this estimate? We have natural lifetime repairs, damaged everything else and whats not damged is either unfinshed or non code compliant. Should I just list all repairs needed with a general cost? This is a ballpark estimate since no material selections are being made.

Im thinking rough lump sum per item then totaled into a realistic guesstimate. Its my deal if it goes through and the bank needs to realize legally some things are required no matter who tries to buy it.

Max Nomad

For what it's worth, I'm relatively new to the construction world but I'm not new to business and doing estimates on big jobs with many hidden contingencies and pitfalls. That said, "Guesstimate" is a very scary word to use in this case. If I were in your shoes I'd do a solid, fair estimate on everything that needs to be done -- room by room and itemized if necessary -- and not cut any corners on my labor costs. With that house, it's not what you see that is potentially the problem; it's what you don't see that's gonna be the root of all sorts of unexpected $$$ headaches.

You might be gung-ho to win the contract but let's face it... the bank just cares about doing what it takes to get the house back to code and presentable enough to dump the property on someone else. They might try to shuck-n-jive you on your estimate to chisel it down. Just don't be that contractor who suckers into taking that job at a loss.

Just my half-a-nickel. Good luck with it...

Tinstaafl

I think I'd break it down into two or three categories. Obviously, code compliance is one. Closely related is "livability", which is pretty much common sense.

After that, what's left is fairly optional and needs consultation with your client and/or the bank. The bank is going to want the property in saleable condition in case they need to foreclose again, while the client is going to have his own set of priorities as to what he can live with for now.

It's never easy...

Tom M

Max I understand what your saying but this is a bid and no one is asking for an exact price. I have be a little high for the obvious fact the bank will counter bid. They will check to see if the amount work needed to make this place sellable is realistic. I would also have to believe that they have a heavy burden right now as it is and if they have an opportunity to unload some dead money they wont bully prices too much. I dont want to put 40 hours of estimating into a project that I may never get back or the client never pursues.

My thoughts are similar with Tinstaafl on livibility, C. O. Compliance and conditions for selling ability.

We Fix Houses

This thread is definitely going in the right direction.

You're right on the beam.

As I was reading down the thread, I said to myself about the estimating time, etc, etc. I'll price myself out of the work at $55k and Julio will be in there working for $29k.

Figure what the priority is and narrow the bid and scope so you can get right to work when they need you. Once your inside, you'll make it up on the changes or addl work. Get that first check coming in.

Grumpy

I'd give them a list of all repairs needed, a lump sum price and some contingencies for unknowns like rotten wood or bad plumbing/wiriing after you open the walls.


However I don't think you should figure your price like this, just present it this way. Another thing is maybe before you go to all the trouble ask them what they have in mind for a budget as well as for them to prioritize anything that is most important. No use working up a price to compeltely gutt and remodel the place if they only have $30k to spend, know what I mean?

Bodger

That has been my (admittedly limited) experience so far on the foreclosure fix-up scene. The banks I have spoken with have referred me to the listing agents. One of the was with Re-Max, and she expected me to sign a lien waiver, advance all materials and labor, and wait until the house sold to get paid.
And I know for a fact that the work went to the Julios after I told her no thanks. I guess she figured that if they were going to have to pay out anything in advance, it might as well be as low as possible, and that would exclude a licensed and insured GC.

Max Nomad

Between the Julios and the "we'll pay you when the house sells" banks and listing agents, these are exactly why I'm not that in favor of doing rough guesstimates for the job.

If I guess high, it increases the chances that some unlicensed Jackleg gets the job.

If I guess low, I risk the banks and/or listing agents expecting me to stick close to that number -- and from pat experience, phrases like "Don't worry I won't hold you to it" has a way of going out the window when a price issue is revisited by these people.

I'd much rather do a solid estimate (maybe not 40 hours worth) but something close enough to where I can present it to the bank/agent/whoever and then move on to working on something else. Maybe a call a week or two later and leave a voicemail but that's it. To me, once I've presented an estimate or a proposal to the potential client, I forget about it and move on. I try not to dwell on it because if I'm still second-guessing my price then that's a hint that I may need to put more effort into the accuracy of my process -- especially if I'm finding the labor hours or material costs underbid.

Ultimately, if the client is going to choose to work with you, they'll call back. If the price comes up as a point of contingency, 9 times out of 10 that means you've basically got the job but they want to negotiate a better deal (which is to be expected). With that in mind it's hard to negotiate wisely if your numbers were just a ballpark guess in the first place.

Anyway, nuff of my rambling... I guess it's all a crap shoot anyway.

Tom M

Yep all just a crap shoot anyway. I am listing defects and remedies with a cost range of minimum to potential cost for notable items. I give them an idea on what thier looking at and I'm not held to a number. My client can argue with the bank on thier bid to lower the cost with them given what the potential cost can add up to. I'll keep the minimum confortable off the bat.

RidgeWalker

I would not touch it with a 10 foot pole as all they will do is use the estimate as a negotiation tool to get the home for cheaper and then find some one cheaper then you to do the repairs. Your wasting your time.

philner

I think to do the estimate/proposal right is going to take a signifigant amount of your time. I do a good amount of forclosure rehab, and wouldn't get involved in this situation unless I was compensated for my efforts and experience. I would come up with a fee for the estimate and scope of work which was refundable if I got the job. Then I would do the scope properly and put in the effort to do an accurate quote. One thing to keep in mind is that once you do a certain amount of work on a building(50% of assessed value in Mass.) you need to bring EVERYTHING up yo code.

buildpinnacle

Have to agree with Ridgewalker, but mostly from experience when the 'flipping game' started. It's just moved from rich oil men to banks sitting on houses. They all want the houses lipsticked for $15-$20 per sf. I can't tell you how many I bid for $45-50 grand and sat down with them to hear 'the job is yours for $17k...just make it look nice so it will sell'. They do the reverse 'add-on/change order' by coming in after you give them a lipstick on a pig scope and prod and prod and prod. It's just not worth it. Better work out there in my opinion. After 10,000 bids, I did one and swore to never again.

wellbuilthome

I'm with ridge walker on this one . I will only work on a foreclosure with a buyer. and i bid 2 ways The first way is to bid to make the house livable and thats it . Then i sell them a full blown remodel with new kitchen ,baths bacement remodel ect ive done a few of them . I have one to do in the spring for around 60 gs

Burby

I purchase foreclosed homes, fix them up, then sell. One a 1922 bungalow I purchased a few years ago, I got attached to and still living in today.
Some of my customers with some real estate and or appraisal experience decided to get in the market of doing this as well. The market is full of foreclosures and some great deals. In the past I also got to accept several jobs from a bank in Ga. All the homes had been reposessed from builders, & some foreclosures as well. I would either fix them to a certain point for sale or just build a realistic estimate for the bank to have at time of negotiations.
Foreclosures, especially with the amount the banks have today, they don;t really care to spend time on debating this item or that item. They have their appraisor appraise the property and they compare this to what they have in the property. From here it is listed. They try to get appraised price but will consider bids for a length of time and worst case accept just what they have into the place. As the banks get more & more properties they will list properties closer to what they have into them as apposed to trying to make a dollar.
But back to the estimate, either who ask me to submit a bid, there is a fee for this and how ever detailed or close they want to be it can be done, but for a "price".
A free estimate, is that "a free estimate" limited time spent & no more.
If you have no selections to work from, why spend any more time than you should? Is your time not valuable enough that it is not worth money?
A 10 minute walk thru is more than enough to come up with a "free estimate". I don;t think your customer would want any more than that, if so, maybe you need to move up to customers of another income bracket.
Many years ago, as I am sure so many have learnt as well, it don;t matter if a customer has 1 project or 100 pojects that they promise you or lead you to believe they will give you, the only ones that count are those they "do" give you. Once you "give" a customer of your time, they will "expect" you to always give. Some fail to appreciate what is given, they use this to take again.
If they don;t feel they have to pay for your time to build a detailed estimate, that is typically enough for me to thank them for calling & wish them the best. You could charge them and if they decide to hire you afterwards, credit the amount back towards the overall cost of the job.
Good luck & Happy Holidays