Investor Mistakes that Can Really Bite - Contractors

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Real Estate Agent with Excellence in Real Estate Tm @ Allison James Estates & Homes

Investor Mistakes that Can Really Bite - Contractors
by John Occhi REALTOR
Realtor Consultant to Foreclosure Investors

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I thought I would start a series of articles that if they only help one real estate Investor or just one Hemet homeowner than I will be satisfied. The series will document mistakes that I have made and mistakes that I have seen my Real Estate Investor clients make when purchasing real estate in Hemet California and other parts of the state as well.

This first article is inspired by a recent event that I choose not to get into. Let's just say that communication is a critical element to any...scratch that EVERY real estate investment deal. Without effective communication, it is a case of the blind leading the blind...or worse yet a "He said - She Said" scenario.

He Said - She Said

In this case, I am referring to hiring a contractor and having the contractor put in writing exactly what they are planning on doing; what materials they are planning on using; and how much they plan on charging you when the job is done.

Lets examine this one step at a time.

What Will the Contractor Do?

Each step is just as critical as the next, so lets just say that it is extremely important that both you and the contractor know exactly what needs to be done. Describe in detail each phase of the project and avoid ambiguous words when negotiating with a contractor just as you avoid ambiguous words when negotiating the purchase of a home from the home seller - be precipice.

What does it mean to refinish an antique claw foot bathtub? Is it paint on surface? Is it a one step, two step, three step or more process? How will nicks be handled - painted over or filled and sanded to a flush surface?

You can see how ambiguous a term like "refinish" is and how much one method over another can have a dramatic reflection on both the finished product as well as the finished price!

What Material Will Your Contractor Use?

Again, just as critical as each of the other negotiating steps -without a clear call out of parts and materials you are leaving yourself wide open for cheep and shoddy work.

You shouldn't need an example, but what the heck... The work order calls to tile the kitchen floor. Does it call out the size of the tile? The tile material? Designer brand? Color? Grout color? Layout pattern? . . And how much overage do you need to buy and then who gets to keep the extra materials at the end of the job?

It is more than common to talk about different scenarios when discussing a bid. It is not uncommon for many of those scenarios to be just that, "talk". When you agree on an action - write it down. When you agree on a particular product - write it down.

This Will Cost "HOW MUCH"?

There is nothing worse than a job coming to an end and the contractor wants to be paid and he gives you your invoice for a bit more than you expected. You tell him this is not what you discussed and planned on.

This happens when the work exceeds your greatest expectations or when the contractor is lucky you don't turn him in to the State Contractors Board for shoddy work- he wants more than you thought you agreed on.

If you consider yourself a successful Real Estate Investor or even just a good business person you should definitely know that any agreement for money needs to be in writing. This is why each of these three areas is so critical and interdependent on one another.

So, the best way to avoid these costly and time consuming mistakes (not to mention the energy they suck right out of you) what you agree to with a contractor needs to be put in writing and make sure you include exactly what will be done and exactly what materials the contractor will use in your real estate investment project. Then, make sure you both agree on a price and then why don't you both sign it and avoid the heartache and confusion down the line.

Hoping to make your California Real Estate Investment...
A Pleasant and Profitable Experience,

John Occhi, Hemet CA REALTOR

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Until Next Time, Have a Blessed Day,

John Occhi, ePRO & Five Star Certified REO REALTOR®
www.JohnOcchi.Com
Hemet - San Jacinto Valley, CA
The Excellence in Real Estate Team @
Allison James Estates & Homes
2281 W. Esplande Ave, #102-B
Next to "Starbucks"
San Jacinto CA 92582
(951) 654-5550

Excellence in Real Estate,Team Log,John Occhi,www.johnocchi.com,hemet,san jacinto,CA

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This blog and the contents written here is the intellectual property of John Occhi, San Jacinto Valley REALTOR® in the South West Riverside County region of the Inland Empire of Southern California.  The views and opinions expressed are just that - views and opinions of John Occhi and those who comment.  Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.

This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0.  Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions.

I am proud to be a full time REALTOR® who is proud to be a contributing member of the ActiveRain community.

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Show All Comments
Rainmaker
1,608,755
Joe Manausa
Joe Manausa Real Estate - Tallahassee, FL
Tallahassee Real Estate
Great post, lots of good advice
Jul 19, 2007 10:23 PM #1
Rainer
188,704
Laurie Manny
Long Beach CA Real Estate - Long Beach, CA
Good information John, you are right, nothing beats communication.
Jul 20, 2007 06:53 AM #2
Rainmaker
312,510
John Occhi
Mason Real Estate - Temecula, CA
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate

Laurie Manny - Good to see you again, it's been awhile.  Yes you are right - communication is critical to everything in life, isn't it?

 Joe Manausa - Thaks for the nice words Joe.  Hopefully this might make someone think twice as they negotiate their next project.

Jul 22, 2007 08:32 PM #3
Rainer
400
Thomas Caetano
SOUND REALTY - Kirkland, WA
This is great advice, nevertheless most investors I have come across do not have the "intestinal fortitude" to speak their minds and prefer sometimes to appease the contractors so as to avoid as much conflict as possible. You have to be strong and determined in your goal to have an end product that meets ALL of your expectations. This means that you should have a firm hand while communicating your intent to the contractor, while using tact of course.
Jul 23, 2007 04:58 PM #4
Ambassador
1,025,257
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

Start a series for localism...  hmmm, great idea!

Excellent post, too.  The pen is mightier than the sword, especially when it provides evidence of who said what!

Jul 30, 2007 12:16 AM #5
Rainer
12,282
John Occhi
Excellence in Real Estate Tm @ Allison James Estates & Homes - San Jacinto, CA
ePRO, Five Star Certified, Riverside Cnty REO Expert, 951.443.6259

 Thomas Caetano - I agree.  These guys have no problem negotiating deals in the hundreds of thousands of dollars...and more.  Yet when it comes to a $30 or $40K rehab - they are like putty.  The good ones will be there and take on a small portion of the product themselves so they can keep an eye on what is going on.  I know this is not always practical or possible - but it is a good way to do it right.

Hoping to make your California Real Estate Investment...
A Pleasant and Profitable Experience,

John Occhi, Hemet CA REALTOR 
Realtor Consultant to Foreclosure Investors
Mission Grove Realty

Jul 30, 2007 02:13 PM #6
Rainer
12,282
John Occhi
Excellence in Real Estate Tm @ Allison James Estates & Homes - San Jacinto, CA
ePRO, Five Star Certified, Riverside Cnty REO Expert, 951.443.6259

 Margaret Woda - I like it to, but I don't think I would ever go that far.  I have written an article and sent it to my contractor, with his name and company all over it - letting him know that if the job he started and got 95% through 3 months ago was not finished in 3 days that the article would be posted to my blog - and I included Google links to show how popular my blog is with the SE's - guess what, on day 2 the finished job looked great!

Now go figure

Hoping to make your California Real Estate Investment...
A Pleasant and Profitable Experience,

John Occhi, Hemet CA REALTOR 
Realtor Consultant to Foreclosure Investors
Mission Grove Realty

Jul 30, 2007 02:16 PM #7
Rainer
12,282
John Occhi
Excellence in Real Estate Tm @ Allison James Estates & Homes - San Jacinto, CA
ePRO, Five Star Certified, Riverside Cnty REO Expert, 951.443.6259

I received a comment confirming that the most "expensive" part of any job you have contracted for is the change order." Here you open the door for the contractor to charge you anything he wants. It is much better to have the job fully described in the original contract to avoid this pitfall.

Hoping to make your California Real Estate Investment...
A Pleasant and Profitable Experience,

John Occhi, Hemet CA REALTOR 
Realtor Consultant to Foreclosure Investors
Mission Grove Realty

Aug 19, 2007 06:10 AM #8
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Rainer
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John Occhi

ePRO, Five Star Certified, Riverside Cnty REO Expert, 951.443.6259
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