Quickest way to lose thousands in real estate
Want to know the quickest way to lose thousands on real estate? The answer is simple, pay top dollar for a house only to find out later that there are some serious flaws that have to be fixed in order to get what was just paid for the house. How can you protect yourself and your investment?
Many parts of the country are experiencing a very active residential market. With such an active market houses are turning more frequently and buyers a paying top dollar. Each subsequent owner seems to make some improvement to the house and wants to factor that into a higher price. Do these improvements really justify the higher price?
Just the other day I went over to some new neighbors who just moved in across the street. They were so excited to have just bought a house that had been totally remodeled. Right when I walked through the door I knew trouble was ahead for the new homeowners. How could I know so quickly?
As a private lender I personally inspect several hundred properties a year and have identified three areas that I always look at when valuing a property. These are critical areas for every home buyer/investor to observe before laying out their hard earned money for a property.
Want to know the easiest way to spot quality in a house, look no farther than the toilet. The humble toilet is an easy indicator of either a job well done or corners cut. A brief look at the toilet is a key indicator for me. Don’t worry you don’t need to take it for a test drive or get on all fours to get chummy with it. The toilet is an indicator of quality and commonly shortcuts are taken with the toilet which indicates shortcuts possible in other parts of the property. Many times the toilets are installed at the end of a job when funds are tight and the cheapest one is installed at the last minute and the owners/contractors think nobody will notice.
So what am I looking for?
Don’t worry I don’t have to get close and personal to evaluate the bathroom, with a quick glance I can tell. I am looking first does the price match the caliber of the home? For example in a 2m home one would expect a higher quality than a builder grade toilet that you get off the shelf from the end of a row at a big box store. I also look at age. For example, I toured a house that supposedly had been totally remodeled, I walk into the bathroom and see a toilet that weighs over a hundred pounds that was fresh out of the 70s. This definitely makes my antennae go up to explore how good the remodel actually was.
Why does this matter?
I recently inspected a multi-million dollar property in a major ski resort, it was recently constructed and currently listed. The borrower needed a loan for 1.5m. I walk into the house and glance into the bathroom; the toilet is a 75 dollar toilet. This is not what someone would expect at this price point. In the house above after noticing the toilet was out of line with the quality of the house, it was readily apparent corners were cut in many other areas. This tipped me off to investigate further where shortcuts are commonly taken as well. Ninety percent of the time when there is an issue with the toilet other issues quickly come to light
Unlike a toilet other items might present themselves well only to hide hidden flaws. The two other areas to look at are the tightness of the miter joints on the trim as well as the drawers in cabinetry.
After checking out the “facilities” I then look at the tightness of the miter joints on trim around the base of the walls and along windows. Loose or sloppy joints (or butted as opposed to mitered) is a sure sign of an inexperienced/ sub-par remodel job.
Along with trim, head over to the cabinets and pull out a drawer, are the joints butt joints or dovetailed. Many “remodels” will merely reface a sub quality drawer and the bones of the cabinet remain the same.
Unfortunately for the new homeowners across the street I was dead on with my assumptions on the house. When I walked into the house, they gave me a quick tour, supposedly the house had been updated but all three of the warning signs were there (bad toilet, but joints, and subpar cabinets that had been refaced). For the new buyers about two months after moving in they have found all sorts of issues (improperly fixed roof, leaks in one of the bathroom, etc..). it was readily apparent that the prior owners had merely “patched” everything in order to get the highest price. The three indicators are basically a warning sign for other quality issues throughout the house.
There is an old saying “home is where the heart is”. Unfortunately in today’s day and age the average time in a house is between 5-10 years. With this time horizon it is critical to look at a house as an investment as opposed to an emotional attachment. Whether someone is going to buy a house for a home or for an investment it is critical that they look at the three telltale signs to ensure they are making the best financial decision. By looking at the bathrooms, cabinets and trim, a buyer is able to spot trouble and possibly save themselves thousands over the long haul.
Written by: Glen Weinberg: COO/VP, Fairview Commercial Lending your trusted leader in hard money/non conventional lending
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