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18 May Ep. 40 This Week’s Real Estate Update-Death Disclosures, Open House Cameras, Inept Gas Company
In this episode, Realtor Adam Kruse and Realtor Shannon St. Pierre share their most interesting real estate stories from this past week. Do deaths need to be disclosed? Can open houses be filmed by security cameras? Is the local gas company making mistakes on purpose so home owners have to pay for multiple inspections?
Email questions to PODCAST@HermannLondon.com
WHAT’S INSIDE
1:03 Shannon is trying to find new investors outside of the St. Louis area. Shannon showed a California couple properties all weekend long.
1:56 Did Shannon have a way for the California couple to keep track of the St. Louis properties they liked?
2:35 Why is the California couple using the buy-and-hold strategy to property ownership? What are the challenges to a buy-and-hold strategy?
4:00 What are the challenges of buying $5,000 homes?
5:25 How do Realtors cut through the monotony of looking at houses all day long so that buyers don’t get bored? Should a Realtor take breaks between houses? Should the buyer rate properties as they look at each house?
7:50 What kind of criteria do investors look for in a property?
8:30 Now that the California investors have met Shannon and gone on a tour of St. Louis, can Shannon now just send them the numbers and let them look at properties on their own?
9:27 Do sellers have to disclose a suicide? Do seller’s have to disclose a suicide if there was an insurance claim afterwards?
10:44 Does the history of a death travel with the property and does it have to be disclosed?
13:14 An agent got a lead that a seller only wanted what they owed on their house but it ended up being too good to be true.
14:23 What would cause a house to need $60,000 worth of foundation repairs?
14:49 What happens if a seller’s agent accidentally mentions that a tree fell on the house but it wasn’t in the disclosure and the inspections have already been done? Can the buyer back out and do they get a refund on the inspections?
16:59 What is a mutual release?
17:38 Is the local gas company missing problems on purpose to get home owners to pay for multiple inspections?
18:58 What is a flame disturbance?
19:21 What are those stars that are found on the sides of brick houses that are all over the city? What does it mean if the stars on the sides of the house are missing?
21:00 What is an abandoned conduit line?
25:40 Adam has a listing on a home and part of the agreement is that the seller will finish the basement. The buyer’s agent has not been very good at setting expectations.
29:30 How can a buyer’s personal life affect a sale?
33:12 Adam had a 1 week window between tenants and had a surprise during the final walk through.
36:44 Adam has a seller that wants a bodyguard at every showing to protecthis stuff. If there is anything of value, should it be moved out? Should an agent be at every showing to protect the seller’s stuff?
42:20 How are smart lockboxes and cameras helpful during showings if you are worried about security?
44:02 Adam had a 4-plex in Benton Park West he wanted to buy but once he ran it through his Golden Spreadsheet none of the numbers worked out. The $150,000 property brought in $2,150 in rent each month but the down payment was 25%
47:20 How does the Golden Spreadsheet for property investing work? What is ROI, months to get down payment back, gross rent multiplier, cap rate, market appreciation, cash flow, equity, comps, and a diverse portfolio?
49:58 Hermann London had a new agent meeting to help the newest agents get comfortable asking for help and training and so they will hold each other accountable.
53:42 Contact Shannon St. Pierre at 314-583-0070 Shannon@LivingTowerGrove.com
TRANSCRIPTION
Adam: live on the rooftop of the Hermann London real estate group in beautiful downtown Maplewood it’s the st. Louis realtor podcast with your host Adam Kruse live from the rooftop of the Hermann London real estate group it’s the st. Louis realtor podcast and I’m your host Adam Kruse we’ve got one here with me my co-host Shannon st. Pierre it is a beautiful day may 2nd 2018 this is episode 40 and today’s episode is called
Shannon: this week in real estate
Adam: so this episode we’re just gonna talk it’s just Shannon and I you get the two of us and we’re just gonna talk about what is going on in our crazy weeks we just plan to have this episode about ten minutes ago and I filled up two pieces of paper Shannon what’s going on with you in real estate this week
Shannon: so this week I had so my two challenges are investors from the outside
Adam: investors from the outside of st. Louis
Shannon: outside of st. Louis
Adam: okay
Shannon: so I had a both new newer clients for me so this California couple I’ve been talking to for about a month they came in this weekend and we from Saturday morning from the time I picked them up to till Sunday night 11:30 looked at property
Adam: wow you were looking at property at 11:30 at night
Shannon: by that point Sunday evening we went to dinner to discuss all the properties
Adam: okay
Shannon: but yes I slept no not at all
Adam: so they came in town they met you online or something I guess
Shannon: yes
Adam: they came in town they stayed at a hotel
Shannon: sometimes it’s funny…we met at online
Adam: we don’t you know we’re both married we don’t get to do online dating but we get to meet people online still I guess…when you were going to all these properties if you don’t mind me asking
Shannon: Yes
Adam: did you have some way for them to somehow keep track of each house and like rate each house or something like that
Shannon: so nothing formal and I guess that’s kind of the question so I had sheets obviously the printouts for each of the properties I had scheduled anyway and we walked the property’s kind of pointed out things that maybe of you know concern or that might come up in an inspection report I might need fixed their strategies buy-and-hold so it’s just a it’s (2) always interesting you know when people are newer to the investment game they do have a few properties they’re buying some over in Kansas City st. Louis is another market that they’re honing in on
Adam: okay
Shannon: and it’s I think when you’re newer to rentals you want to tend to fix things up… when you don’t have to
Adam: right…they wanted to be as nice as the houses in California
Shannon: right and so it was um it’s interesting to kind of tell people to come back down a little bit but then it’s a challenge also to guesstimate what repairs will cost like how much is this roof
Adam: right
Shannon: is that roof what are new gutters what about landscaping what would it cost to do all you know all new flooring and I’m like I can give you a range
Adam: yes
Shannon: you’ll see online [???] I don’t know
Adam: I thought who you’re gonna hire what kind of flooring…whatever right
Shannon: right so and it also depends on what kind of flooring what are you talking about like is it smarter maybe to go with tile because it’ll it’s a little bit more durable in a rental but it’s a little bit more expensive than say linoleum squares or something of the sort so that’s always a challenge and then not to mention its we have this huge market for investors from the outside looking in at st. Louis and we seem very affordable they were so insistent she’s like but I want to look at these five thousand dollar properties ten thousand dollar properties they keep seeing online and I’m like we have those we absolutely have those I don’t think that that’s your market that’s because they give me their criteria so based on that criteria that’s not gonna fall within your criteria and she’s like yeah but for $5,000 I’m like yes except for you will be putting 75 into it at the minimum
Adam: then it’ll be worth 30
Shannon: yeah
Adam: so did you drive them to any of those properties [???]
Shannon: I did a hand too as much as she would not take my advice you know I by the time Friday came about before they arrived I’m like she’s not letting it go enough that I was I was like I’m adding a couple of these to the list
Adam: which okay so just to be clear you’re not saying that you have a problem selling someone 5,000 our house you’re saying
Shannon: it didn’t meet her criteria…yeah that all I am saying 5 to 10 thousand dollar properties it doesn’t meet the criteria on any level doesn’t even come close I can’t squeeze out any
Adam: because they don’t want to have to do a bunch of rehab
Shannon: right and they right and it’s kind of a priest for more than what they’re putting into it
Adam: it’s really interesting when somebody comes into town or even someone that’s from town and they want to look at so many properties because you gotta really have this like stamina a to keep going and then there’s got to be some sort you guys have to like do something to take breaks or to to kind of cut through the monotony right because what from my experience you’ll go and go and go and the next thing you know we’ve looked at 8 houses already today and then on the 9th house we’re like we open the door we walk through we leave we drive to the next one and we’re not even thinking about it anymore it’s like or just have to go to 17 houses today and we’re just looking at you know but you’re I had one client a long time ago that made this spreadsheet and on the I guess the side of the columns of the spreadsheet was everything that was important to him you know house the garage house the kitchen how many bedrooms house the loot house the viewer all that stuff house to live house the view like that and then across the top was all the addresses that we were going to and then so for each house we went to he would rate each of those things kitchen that’s an 8 out of a 10 backyard that’s a 7 out of a 10 he did that his wife did that and he gave me a sheet and I did it too and so then when we took our break after a few houses we would go and he’d be like okay which property has the best score you know and then I think they ended up buying the one that had the highest score quote unquote from from us
Shannon: that’s interesting so then from that experience did you actually create any kind of form or sheet when you are working with investors and you’re looking at 30 properties and you have to squeeze them all in because they’re
Adam: yeah
Shannon: flew in specifically to do nothing but look at properties
Adam: I (2) mean I still have the spreadsheet I did recreate his spreadsheet and I think it could be used but it’s gonna have to be kind of different for each person his column was like how’s the backyard how’s the kitchen these people’s column I guess is going to be how much is the rent you know how much worker we gonna have to put into it those two things mainly I mean how’s the neighborhood or whatever but those are the things that they probably care more about and I think the big part of your tour was probably more like just showing them what st. Louis is all about showing them what it has the different areas what you can get for the money right I mean they’re not gonna buy 30 properties they’re probably buying a couple at most
Shannon: right so I think their goal was 20 properties total so 10 in Kansas City 10 here in st. Louis and that may be skewed one way or the other maybe based on what they can buy and I think that the that’s the other challenge is that investors have these really strict criteria sometimes 70/30 plus it has to meet this rent factor the rent divided by what they purchase it or have or all in for and then that certain factor so it’s it can be an extreme challenge
Adam: well it would’ve been great if they would have bought ten properties as weekend right but more likely this trip if it was the first one was about learning about st. Louis the different areas meeting you kind of getting comfortable with you and then you really learning their formula and what they want and what they like and that type of thing and so probably next time they won’t even have to come in you can go hey guys check out this house it’s in that neighborhood that you loved you know maybe do like a video walkthrough with them…right
Shannon: right
Adam: and they’ll be like I get it because I’ve been there I’ve seen it and now they can buy them
Shannon: and that’s pretty much it so it’s a husband-wife and so at the end he’s like so I think I think you understand where we’re going what we’re trying to accomplish in our criteria and so if she comes back in you guys could probably worked you know work together so she only half of the team might come back in both of them but eventually it would just get down to the numbers
Adam: all right so I’ll give an update if you don’t mind
Shannon: please do
Adam: all right so I had my update is more like all these updates are more like just weird things that happened and stuff that come up you know it part of the reason I love real estate is because I’ve been doing it so long but new stuff comes up every day right
Shannon: all the time
Adam: and so this week one of our agents asked us he said if someone is selling a house and there was a suicide there do they have to disclose it I said no they don’t Missouri’s what we call it non-disclosure State and you don’t have to disclose if a death happened in the house and he said but what if they had got insurance claim because of it
Shannon: yes
Adam: and I was like well I mean think about that and so we he we pulled out the sellers disclosure statement and there is a part of the sellers disclosure statement where you have to disclose if you’ve ever had any insurance claim and what it was for and so in this case I’m guessing they made an insurance claim to kind of come in and clean up or whatever after the suicide and so now if his client buys this house when she goes to sell it any time in the future and she’s filling out the sellers disclosure statement she is gonna have to disclose yes there was an insurance claim and you know because they had to clean up from a suicide I’m not exactly sure like exactly what she’ll have how much details she’ll have to give but she will have to disclose it and I think it ultimately it will definitely come out to the new buyer that there was a death in the house
Shannon: okay so question on that because I heard that agent talking in we kind of bantered back and forth and so now if so if the new buyer buys the house and does every time a buyer buys a house they have to fill out whatever past information past claims even though it was a previous owner like it doesn’t so specifically I guess that was kind of one of those things is it specific to that particular owner at that time or every previous owner if it was disclosed in previous disclosures
Adam: well first of all I’d like to say I’m not attorney and every situation is different so if you have something like this come up anyone who’s listening consult an attorney or you know contact us and we’ll try to talk through it based on your situation but my interpretation of that at this time Shannon is that this buyer knew about the insurance claim so when she goes to sell she should disclose it because she knows about it I would think that there’s no duty on her to go and do some sort of research somehow and find out about any past insurance claims right but if she knows about it she should disclose it right…just like it s so as a dog ever lived in a home well if you had a dog you have to say yes right
Shannon: right
Adam: but in my opinion if you knew the last owners had a dog the safest thing to say it would be yeah the people who lived there before me had a dog that was 12 years ago but they had a dog…right
Shannon: right
Adam: but I don’t think it’s on her to somehow research the history of the home and if anyone else has ever had a dog before that
Shannon: right
Adam: that’s what you know kind of thing
Shannon: so then the that brings up that question because then we kind of went down a whole different road and this is not what I advise but the way so the other options for that current seller does not fill out the sellers disclosure
Adam: She could [???]
Shannon: you often see [???] necessarily filled out and so then the next owner because it’s not written anywhere doesn’t technically have the information… it has long
Adam: yeah I mean…I think that that’s true if she goes to sell and they say oh no no sellers disclosure statement will be provided right I think that’ll raise red flags for the buyer especially if this is like a traditional real retail type of deal
Shannon: yeah
Adam: but no I don’t think that there would be necessarily a duty for her to disclose that like to go out of her way to disclose it like a latent defect you know like she should disclose if there’s mold or something like that but yeah I guess that is a way for her to get around it I guess it because they’re not asking specifically and then so she doesn’t have to answer that specifically
Shannon: okay so what else get
Adam: let’s see oh we had an agent who thought they were gonna go and buy a house like they got a they got a lead for this guy who wanted to sell his house and all he wanted was what he what he owed on it right and what he owed on it seem like a kind of a load number and so her and I did all this like research and back and forth and prepared for the meeting and did the comps and I drove by the house and we did all this stuff to kind of get ready for this meeting that she had and what she was planning on going by and buying the property and doing a rehab and you know all that kind of stuff but it was just so interesting because the whole thing seemed like a really good deal and not quite too good to be true but a little bit too good to be true because the house was in a really popular area of town and (2) it was like the seller was you know a an attorney like they should have known exactly how good the market is and all this kind of stuff so it seemed like wow this is a really good deal and maybe too good to be true right and it was just she went there and was all excited and found out that there was like close to $60,000 in foundation work that needed to be done so the house was great everything’s cool but then you got out of the basement and it’s like oh my gosh that obviously just ruins the whole deal
Shannon: so what was wrong with the foundation like cracking or you just meeting
Adam: I didn’t I don’t know I didn’t ask her that too deep I called her after the meeting to see how the meeting went and she said oh no we didn’t put an offer and foundation needs tons of peering I guess so there’s lots of settling that kind of thing happening I don’t I didn’t go into details about the specific problems along those lines I guess along the suicide lines that we were just talking about we we had a another agent who wrote an offer on a property and did his inspections they got they paid and did their inspections and then after their inspections the listing agent basically without meaning to I guess disclosed that there had been big damage to the house in the past and this tree had fallen on the house and it caused a bunch of damage to the roof and the bricks and stuff and so the bar buyer is saying I never would have bought I never would have put a contract on the house if I knew about that because there’s like some sort of structural problems and B I definitely wouldn’t spent my five hundred dollars on inspections that’s just what they spent under whatever instructions they got and so A). I definitely went out of the deal and B). give me my money back for the inspections because you should disclosure
Shannon: how did she find out that
Adam: the listing agent just kind of it just kind of came up in conversation where the listing agent mentioned it
Shannon: okay…it was a seller disclosure
Adam: it wasn’t on there
Shannon: but there was a sells out not just a seller disclosure but actually filled out [???]
Adam: there is seller disclosure…there was a filled out sellers disclosure and nothing about this had be mentioned
Shannon: insurance claim or anything
Adam: I don’t think so I’m not sure about the insurance claim maybe there was no I didn’t get into that detail about it but the fact is there was a huge problem that happened
Shannon: but there were repairs made and it does ask you kind of in that
Adam: yeah
Shannon: format
Adam: yep and they didn’t disclose it I think there was still problems too actually so maybe some repairs were made but there were still problems and the point is if you know about something you should disclose it right and as agents if we know about something we should really encourage the seller and probably and maybe require the seller to disclose it on the sellers disclosure statement
Shannon: but and I can totally understand the frustration from the buyer because they just put up five hundred dollars you know yeah for an inspection
Adam: well we’ll have to see how that goes I’m encouraging the our agent to try to get that money back and I mean I think ultimately it’s hey either give us the money or we’re gonna have to take you to small claims court and
Shannon: have you ever had a scenario like that in the past where something was not disclosed that should have totally been disclosed
Adam: yeah I’d have to think about any specifics but that I think that that remember the case where the people had written like kind of snuck wording into the mutual release about how the sellers had to pay the inspections and they kind of like basically tricked the seller and assigning this mutual release that said that they would give him $700 that was all because of something like that that they should have disclosed something that they didn’t disclose so that kind of thing comes up we were dealing with gas the gas company I guess I don’t I try not to name names on the on the podcast but we’re dealing with the local gas company
Shannon: a local gas company
Adam: a local gas company is there more than one I don’t know but I’ve had this problem with them in the past where they come out they do an inspection they find problems you know my client pays someone to fix the problems they come out to do the gas company comes out to do the re-inspection and they find different problems
Shannon: yes all the time every single time
Adam: the quiet pays someone to fix those problems the gas company comes about again and this is what I’m dealing with now on one of my listings and it actually turned out the third time the gas company came back they said oh actually that leak that we keep talking about is actually outside of the house so we’ll pay to fix it so the gas company is paying to fix the leak but forget the fact that they charge the guy for two inspections and he had to fix a bunch of problems that probably weren’t even like necessarily needing to be fixed you know I guess they needed to be fixed in some way if he had to pay to fix them but I think what happened was they said there’s a leak they didn’t necessarily tell him where and so our client basically had a gas company come out and they kind of like found some work to do I think it’s sort of what happened and now they’re debating about something that they’re calling a flame disturbance which is something to do with pilot light or the heat exchange or something like that and they’re each my clients HVAC company is saying there’s no flame disturbance but the gas company is saying there is and there might he might have to buy a whole new furnace even though the HVAC company is saying there’s nothing wrong and so we’ll see what happens with that
Shannon: [???] lot actually he said she said they said and you have all these opinions in there and so the we I have a I have the buyer we have a contract on a house we did the inspection just last week we turned in the inspection notice the inspector called out you know those stars you see on the side of the house so I mean I didn’t really know a lot about them other than you see them sometimes you just don’t apparently it’s kind of a whole structural thing it’s how they built the house they tie into the wood joists it’s what ties that wood the floor joists into the bread so there’s different methods to doing
Adam: that it’s kind of like holding the sandwich together right
Shannon: yes you know because if Brick house and you see him all the time in the city the joists are just gonna run into the brick wall and you’ve got it kind of attached it somehow so it’s just kind of like there’s a few different ways during the building process but it the inspector is like oh you have two holes there you’re missing stars the (2) stars those are those should probably be there so we employed with structural engineers we actually do that we kind of conversed with and consulted with to determine on if they were truly structural what we have to do what is the fix and go around and around and I mean both me and the listing agent spent hours upon hours and now not to mention our fees that are gonna come into play for these structural engineers and then I show up at the house today and I I’m standing there with the contractor he goes those aren’t holes for the stars do you see that plate at the end of the corner of the building because they all have to be in line that’s where the floor joists are those holes are way too high those are from a abandoned conduit line they must have run some electricity at some point or phone lines or something of the sort and so it’s abandoned conduit line and I’m like hi I’m like oh my gosh it is way too high when you start looking at the perspective here’s the window then the holes just you know not even 12 inches below it can’t be possibly the floor and it definitely doesn’t line up with the (2) other plate that’s at the corner of the building and so we go around that are out and now though the biggest problem is I have to convince the buyer that those are not holes for stars
Adam: why do you have to convince them can’t the contractor just tell them that
Shannon: no because the inspector told them that so it’s like the word inspector is now going to override almost everyone including the structure
Adam: so we’d have to get the inspector back out and say here’s what the contractors saying do you agree or disagree
Shannon: yes so now we’re gonna have to get the structural engineer the inspector the buyer and everybody to stand there and look at whole and agree to what (2) it actually is
Adam: okay interesting so just to kind of give a little bit more info to the listeners I guess a lot of the brick houses I picked a big silly picture sort of like a big poll kind of like that goes from the one like the right side of the house to the left side of the house and on the end of each pole the pole sort of sticks out two inches or something on each side of the house on the end of each pole is like threading and then they screw this which is the shape of a star but it could be anything on to that and so then if the can you can all the listeners see my hands because if they could but then that allow that disallows the bricks of the house or the walls of the house to kind of spread outward
Shannon: ok so then that’s there lies the problem because there’s a couple different ways that those stars are used in the construction of these buildings and that was the initial we thought the tie-rod went from one end from one side all the way to the other that doesn’t that’s not necessarily
Adam: always the case
Shannon: and actually often not the cameras so think of these stars is more like anchors you know when you’re hanging a picture a really heavy picture and you put an anchor in the wall and it yeah so that’s kind of what these stars are is on the other side it’s just kind of this like an anchor holding just holding in the joists that end of the joist into that brick wall
Adam: okay
Shannon: they’re totally the one thing I learned today from the structural engineer is they’re absolutely independent of each other
Adam: interesting okay so remember that house I took a picture of me and the patch and the basement and there was this crazy basement I posted on a Facebook I don’t know if you saw it but in that house they had sort of like taken down the back half of the second storey and made this like two-story loft but those big wires were going across and so that was my first time ever seeing kind of like the inside of the wires and in that case it must have been the way I described it and in a lot of cases I guess it’s like you’re describing it
Shannon: like a tie rod so those are kind of the tie rod these were like more bolts and then it then the engineers like well no you don’t need a Michael so I think this engineer loves to go into the history and how it was done and then the I misinterpreted that it should have been done and needs to be done that way again but today the clarification came about he’s like you don’t need them now unless the wall is bulging
Adam: well that’s great to get everybody out there get everyone on the same page and you know put out put it to rest basically you know I’m glad you’re willing to do that as an agent versus just trying to like come to the quickest solution and you know the easiest thing I love that you’re doing what I think represents what our company would want which is kind of like going above and beyond and making sure that everyone’s on the same page and everyone’s comfortable and the buyers are educated and happy and all that kind of stuff so
Shannon: yeah just we learn stuff all the time
Adam: yeah
Shannon: all the time and it’s just it was really interesting and now just to learn about the Stars their function what they do I mean who knew I didn’t know
Adam: next time now you go to gringo Jones with your husband you’re walking around and you see a little basket with a bunch of those stars
Shannon: [???]
Adam: you will be like let’s talk about these stars honey and he’s like oh my gosh here we go
Shannon: yeah that’s pretty much right
Adam: okay so I have a deal where I’m I have a listing on a home we have an under contract and part of the agreement was that the seller when I listed the property had kind of like half finished the basement right and so what they had said on the contract but it was hard to get it under contract because everyone would be like oh my god I love the house and then they would go downstairs make hold on what’s going on with the basement it’s like half finished there’s tools everywhere drywall sitting around and so we got a buyer they agreed that they would put a contract on the house contingent on the seller finishing the basement right or hiring a contractor to finish the basement so we got a contractor bids they agreed on the bid all of this stuff it’s supposed to close in about 11 days from now right and what’s happening is the buyer’s agent in my opinion is not doing a great job setting expectations for their buyer
Shannon: okay [???]
Adam: in general tell me about a construction project that you’ve ever done or seen on TV or anything everything kind of seems to happen at the last minute right
Shannon: always
Adam: always right and so we got this deal under contract then her buyers like when are they gonna do the work I’m nervous about the work and so like three days later they go over there oh my god nothing’s really been done like yeah they’re like planning and out getting down their schedule they’re you know they’re gonna have to make lists and get beautiful supplies or whatever and then the two weeks later they go over there and it’s like there’s progress but there’s just not as much prize yeah they’re like nervous that we’re not gonna get it done on time right and so then they sent us we have all of this sewer lateral line work has to happen in the basement floor they have to tear up the floor and do all that stuff before they can kind of finish the basement around it right so the contractors doing other work in the basement while the plumber is getting this on their schedule to come and do the floor the lateral line program and then at the very end the contractor just gonna have to put in the flooring and everything’s gonna be done but the mice my point is the agent is not doing a good job of setting her buyers expectations because he’s freaking out that the works not gonna be done in time and she I guess is just sort of like letting him freak out about that instead of saying like this is normal you know a we have recourse if it’s not done on time but be at what construction project forever scene that didn’t kind of come down to the last minute and not that it has to be that way but it just seems like it generally does and we have a deadline and the way it’s going now is everything is going to be done by the deadline and it’s gonna be done properly and everything’s gonna be done right but she sent an email saying oh my gosh my buyer is freaking out that it’s not going to be done on time and he wants to back out here’s a mutual release and I’m going okay but it is gonna be done on time and you don’t have a contingency to back out like this is not an option that you have right now to just back out you know and they’re trying to give us the earnest money and I’m like you know no my sellers have spent all this money finishing the basement based on your contract you know you guys have agreed to buy the house and you can’t just back out now this isn’t how this works you know and so I’m not sure exactly what’s going to end up happening with this deal but it’s (2) just it’s like frustrating to me because I really think it’s a problem that’s that we’re dealing with that shouldn’t happen
Shannon: so did you ask if there’s because in my head the first thing I think of is well of course construction jobs come down to the last minute because one thing has to be done before the next thing is can happen then the next thing and then all the finished you work can all be done kind of together and everybody being there at the same time that’s why it always comes down to the last minute but so the first thing I went through my head is there another problem like what’s (2) the other problem
Adam: we never know what’s going on in the buyers personal life you know did they find a different house did they break up with their girlfriend did they lose their jobs I don’t know she’s not telling us any of that she’s saying it’s because of the work and she said but we have done at least one one-week extension on closing like but this was three weeks ago we thought man it’s gonna be a little tight on that timeline I mean the agent we’re talking hey why don’t you know it doesn’t hurt the seller doesn’t hurt the buyer let’s just giving him an extension that way because I think the buyer was always nervous that they were going to do like shoddy work just to get it done fast right and so it’s kind of like well let’s just give him an extra week then you know who cares right and that’s what we did I think we did that twice but now the agent is telling me like oh we’ve done all these extensions and all these delays and it’s really put this hardship on the buyer and he’s living in boxes and it’s all this stuff and I’m like you never told me any of that like I didn’t beg for an extension and you had to fight me on it but you just agreed just to make the deal happen or whatever like we both kind of had this hey it’s all good let’s just make an extension and everyone’s gonna be happy kind of attitude I had no idea that this was causing any sort of hardships for the buyer at all
Shannon: but that’s interesting to [???] boxes but why not allow this deal to continue to happen because he’s not find any place else
Adam: well that’s why you’re probably right that there’s some other factor at play you know
Shannon: yeah
Adam: and I’m kind of like okay well we’re not just gonna let you out of this because of all the time and expense and everything that my buyer my sellers gone to but I’m also like it’s literally the hole all of the work is literally going to be done in two days so can you kind of like hold your emotions together for two more days go there Friday night and be like oh my gosh it’s beautiful you know like they do at the end of every single TV show we’re well we’re about a week before closing
Shannon: okay
Adam: so that’ll allow their appraiser to go back and see the work being done that’s why we needed to be done that we kind of set ourselves just like tight timeline to give the appraiser time to go back and say yep it is done you know and which is plenty of time a week is probably way more time than he needs we’re actually kind of ahead of schedule in a lot of ways but like you know like I said to the reveal I’m like if he goes over there and sees the reveal he might be a lot happier but don’t take I just don’t think it’s a great idea to take kind of a uneducated buyer and I don’t mean uneducated in life but I mean inexperienced that’s kind of what I mean yeah if they’ve never been on construction sites and stuff like that you know to go over to your new house and see mud on the basement floor cuz they just had to tear up the floor for the latter line and you see drywall dust everywhere and stuff it he’s not gonna go over there and get the warm comfortable feelings I get that you know but I think it’s the agents job to either not go or really set that expectation like oh this is totally normal I’ve been to 100 construction sites and this is always how it looks you know don’t worry it’s gonna be done it’s gonna be beautiful they’re gonna clean it up you know it’s gonna be great right but that’s why the staging business exists is because people just can’t see that
Shannon: right
Adam: so I’m really I’m frustrated in general I think my seller I don’t know we’ll see if she ends up if this deal dies if we can’t hold it together which it looks like it’s going to I think she might end up being able to sell it for more money because this has been going on for so long that the markets improved and she might end up being a better spot but we’ll see and you know I’m just hoping for the best I guess with this
Shannon: we have for everyone
Adam: on a positive note I have a tenant who moved out of one of my rental properties and another tenant so he moved out like last Friday and then another tenant is moving in this Friday so one week window it’s pretty tight it’s rate that we already had the tenant lined up you know so we didn’t have to have it vacant and listed all that stuff it’s awesome and we go over there for the walkthrough crossing our fingers that you know there’s nothing major wrong right and I told you this is gonna be a positive story we walk in and this place is as clean as I’ve ever seen it nothing is broken everything’s in great shape like although even the blinds that we installed last year are still like in great shape and this was as clean I called and I cancelled the cleaner that we already had scheduled I’m like there’s nothing for them to clean and there’s no reason for us to take a single dime out of this tenants security deposit because he did an awesome job
Shannon: Wow now that’s a nice turn of [???]
Adam: nice turn of its like…so that my brother and I own that building together that I’m talking about and we went over there with these expectations we had like our drills and all this stuff to like ready to fix some stuff and then it was all fixed so instead it was great because then instead we had like two hours on Sunday morning you know to do this stuff so instead we like rake to the yard and pulled some weeds and like painted some exterior things to prolong the life of the building and stuff like that but it’s like wow this is awesome you know
Shannon: wow thank you renter
Adam: thank you renter especially owning you know I owned
Shannon: so where the renters go like he was an awesome renter
Adam: he was a awesome renter and I think he might end up buying and we’ve been looking like a little bit of property for him to buy and stuff like that but he travels a lot for work he I called him yesterday and he’s like I’m in China I just woke up you know he’s like he’s always gone and so I think he’s like moving in to a friend’s basement like for free or close to nothing to save money to buy this house
Shannon: okay I like that idea he’s gone all the time anyway
Adam: yeah but so you know I own this property with my brother who is amazing whatever but he also hasn’t been in that many you know crazy properties especially that I have and so I’m really thankful that we didn’t go over there and this place was was nasty year or whatever because I think he would have really freaked out and so he probably doesn’t even know what he would have gone through mentally if he would have seen some of the stuff that you and I have seen you know but it was it was really nice to have his experience of owning this rental property with me so far would be a really positive experience you know
Shannon: except for not to be a negative Nancy or anything but he kind of set the bar a little high because that is not necessarily
Adam: it’s not normal but it’s honestly it’s also not normal that we’re gonna just give this guy like for a for a landlord to be so fair to just we’re gonna give him like all of his security deposit and I to be fair as managed property managers and landlords but a lot of companies don’t you know a lot of companies even though he did such an amazing job would still find some way to take advantage of him and then that would probably cause him next time to not be as great of a tenant you know
Shannon: yeah keep it anyway [???]
Adam: yeah oh this is an interesting one so we got a call for someone who wanted to list their property and I guess to me this is interesting for two reasons A). because of the story which I’m about to tell you but also like I found over the years it seems like everybody thinks they know about real estate and so many of them just have these like really interesting perspectives like a lot of times they’re they’re wrong basically you know just they’re and they’re just have these crazy perspectives right so this guy wants to sell his house awesome we love it anyone else wants to sell their house call us I promise we won’t talk about you on the podcast but he wants bodyguards at every showing to protect all of his stuff
Shannon: okay (2) um okay so what stuff are we trying to protect because my response would be like okay that’s absolutely fair I totally get that I mean it’s gotta be a really it’s a really hard thing for a seller to just go these random strangers are gonna be walking through
Adam: I don’t know who they are anything
Shannon: yeah you don’t know anything about them but then at the same time as agents we do this all the time buyers aren’t really there they really are looking at the house and the space and they’re not really shopping this stuff yeah but at the same time then the next the next point to be made is that if there’s anything of value it does need to be removed
Adam: you should remove it yeah and if he thinks everything in this home is valuable then so what our agent suggested which I thought was great because he wants to buy another house our agent was like I want you to buy the other house first get all your stuff moved and then we’ll list it
Shannon: right
[???]
Adam: yeah but it’s true if (2) he left his stuff in there if there was a shady buyer who’s a dirty thief right and they were either in collusion with their realtor who happened to also be a dirty thief or if they just distracted the realtor or something like that it wouldn’t be that hard to do right and they stole stuff from the house and then that owner calls his listing agent goes you know my watch is missing right we’re not gonna say well we’ll have a check for $1,000 made out to you right away sir you know it’s like we don’t know what to tell you exactly right because hey you should have removed the valuable stuff but that’s that’s kind of unreasonable that a seller should really remove all of their everything of value from their entire house you know and so there’s there is sort of like I don’t know a gray area I guess where there’s some definitely some trust happening you know
Shannon: yeah I guess so I mean but and I think so I think the best option is to move out of the property and have it stay
Adam: in this case
Shannon: yeah in this case but I have seen many (2) listings where where the listing agent has to be present for all showings
Adam: yeah you see that but I still don’t even necessarily like that right
Shannon: because it’s not a good option because then you’re (2) a have to do it on well you have to do it on her schedule and your schedule now you have three schedules you have to match them matching up two it’s hard enough matching up three is
Adam: and what that’s gonna stop is the buyers filling up their car with personal property because the listing agent would obviously notice that happening right but if the listing agent is there and she’s talking to the buyer’s agent and mr. seller for example and then miss. aren’t mrs. mr. buyer I mean and then mrs. buyer is downstairs or upstairs or filling up her purse with watches right the listing agent being there isn’t even going to stop that
Shannon: not really because it listening a jury would have to follow them around the house which makes the whole experience really awkward
Adam: and make them both stay together you’ll to need to stay together at all times and in my sight it’s
Shannon: what is the price range of the home
Adam: I think it’s in 150
Shannon: okay so normally we would see that in not even half usually the million-dollar properties on up
Adam: yeah in it but it’s I’ve had it happen to us and it’s just like I say the (2) listing agent kind of stands in the foyer and just sort of there I don’t think they’re really there for security I mean they might they might think they are the seller might think they are but uh it’s there’s been a couple times where it is sort of helpful I guess because they can tell us about like the history or the property or some of the amenities you know if there’s a bunch of acreage or whatever it’s (2) not always terrible but it’s not great for security I think it’s great to like help us learn about the history and the amenities
Shannon: yes but not is no security provided
Adam: it would be interesting that have bodyguards
Shannon: you know yeah I just actually I’ve never had that request ever heard of it I think it’s kind of
Adam: but what would he do it’s really more like go through the house bah (2) but whenever you leave I’m gonna search you
Shannon: no the bodyguard follow around the buyers
Adam: follow around so we’ll need a couple bodyguards there at all times
Shannon: yes
Adam: three to four how many people will be in your showing three okay we’re gonna need three bodyguards hired
Shannon: I think it would be very costly though for the seller
Adam: it’s I’m making a joke of it because it’s ridiculously unreasonable
Shannon: [???] you’re going to get in that price point
Adam: we do use at Herman London most of the time we use this certain kind lock box on the house that can track which agents showed it so if you do notice something missing you can at least track which agent was there still gonna have a hard time proving that you know but uh did we talk in our last podcast or was that just in our meeting that we talked about cameras
Shannon: so we didn’t really talk about it so I was just gonna say so you know the new thing though is the camera and the audio not just cameras but the audio
Adam: yeah I mean I think cameras would be great to protect you know to be able to see if someone stole your stuff if a we’re not saying if cameras are legal or not because we don’t know we tried to research that kind of area
Shannon: No…that was the conversation
Adam: I can got the impression that they’ve generally are but don’t take my advice it seems very great to me but they’re definitely not legal in private areas you can’t have a cameras in like a bathroom or something like that where what they would say you like the expectation of privacy exists I think but I think you I think you can have one like in the living room or the dining room in the kitchen or something like that but it’s I think all buyers should probably assume at all times that they’re on camera you know and not say oh my gosh we would pay X for this house you know it’s just (2) assume someone’s listening you know I don’t want to talk about too much about cameras because I (2) love cameras but I don’t know the exact legality and what disclosure should happen you know should you have a big smile you’re on camera sign on the front door to the property you know
Shannon: and I think it’s the audio there was even the most questionable because knowing if they’re recording
Adam: that’s your list I keep going
Shannon: keep going
Adam: okay so I had a four-plex that I wanted to buy right
Shannon: I have a goal there I have a new goal and I don’t know if this is the place because but I do have a goal that I thought would be really fun for you and me
Adam: okay
Shannon: so go with your four flex and then we’ll go
Adam: okay I’m just gonna tell you I had a four-plex that I wanted to buy the number sounded really great I went and looked at it and then I ran it through my golden spreadsheet and it was like do not buy this house
Shannon: reds (3)
Adam: right all Reds for my scorecard there and so the property was they’re asking 150,000
Shannon: okay
Adam: yeah (2) it was a Benton Park West
Shannon: okay so we’re it’s a four-plex where they all lease out all units
Adam: all units are all leased out
Shannon: it prior to put the offer only
Adam: I did huh you had to you had to show that you were pre-approved or they had the funds before you could view it because they didn’t want to disturb the tenants and then the rents are 2150 total okay so it’s $150,000 purchased 2150 total I’m going these numbers sound pretty good but this golden spreadsheet that we’ve created is it’s (2) dang tough right
Shannon: it’s impossible
Adam: it’s hard to get a property to have all greens right unless we’re buying the really (2) cheap properties that rent for good rents and so this thing said don’t buy it part of the problem is on a multi-family building like this you have to put down 25% and so my whole expectation of like getting my entire down payment back within three years is just totally screwed up by (2) having to put down such a big down payment but then also I take you know I take the rent whatever the rents are and I basically subtract 30 percent 10 percent for maintenance 10 percent for management 10 percent for vacancy just as kind of trying to make like what I would consider to be a conservative estimate so I take the rent subtract that out minus then taxes insurance my mortgage payment and I even estimated like I think in this case 50 bucks a month and like building expenses you know utilities something like that I’ll have to pay to have the lawn mowed because (2) it’s a multi-family you know
Shannon: yeah
Adam: and so it was like don’t do it don’t do it it does meet that hold there’s like a 1% rule that have a lot of investors follow so it meets that great but then with all my other calculations it was like don’t do it and I was really disappointed because I really want to buy another property I thought this could be it and my spreadsheet said run
Shannon: that is the tough spreadsheet I’m a nice for fun all the time plugging in numbers and then I go well if you buy this property for this foot and then what if you got that much rent and then I mean I just get obsessed with like changing up the numbers and I can’t get all greens that means extra ordinary amount of number changing this could never apply yet
Adam: I don’t know that you necessarily [???] it also might be a bad sign right and so for the listeners I have the spreadsheet that we made and you enter all the details about the property and your expenses and all this stuff and then it has what we call a scorecard and it has like ROI and months to get your down payment back and gross rent multiplier and all these kind of little like formulas right different investors use and then we said we set a target for each one right like cap rate to be over ten percent for example and then if it if when you put the property details in if it meets that target then the little box turns green and if it doesn’t then the box turns red and so you’re right it’s (2) almost impossible for it to meet every single criteria and one thing that the spreadsheet doesn’t do it doesn’t consider anything related to appreciation of the market right
Shannon: right but that’s unpredictable
Adam: it is unpredictable
Shannon: specially with multi family
Adam: but if you’re buying a house and like a higher-end area v/s in a lower end area I’m trying to say this properly you know lower end area you’re gonna get a lot more cash flow but the appreciation is not going to be as great most likely the higher end area you’re gonna have a lot less cash flow but five years from now your house is going to be worth more you’ll probably have more equity right and so our spreadsheet basically says only buy in the lower end areas just by the way the formulas are done and I don’t want to just only buy that I want to have like a really diverse portfolio so I’m gonna have to buy stuff that has a lot of reds and maybe just one or two greens
Shannon: you have to pick up…and that’s just like every investor has their threshold and you have figure out what their criteria is it obviously can’t be every one of those but they do each one for whatever random picks something and they hold on to that right
Adam: and then other thing in this case that was weird honestly that was weird about this property is because all those numbers sound great to me but the agent was kind of like I don’t know how great of a deal it is you know like I think that they should sell for less and I’m like well I certainly agree with that absolutely as the buyer you know but I don’t know that why because it totally meets my criteria right so the regardless of whatever the spreadsheet says if it says buy (3) you still have to do this whole separate evaluation of what are the comps right because you don’t want to pay 150 for this for family if all the other four families in the area sell for 120
Shannon: yeah
Adam: you know even if my spreadsheet says it’s an amazing deal so all right a little Harman London update we have I think we’ve had six realtors join us recently within the last couple months or so and they’re all not all but I think five of the six are basically brand new and so I had the other night I hosted you don’t know this no one knows it except for these six people I hosted like a brand new agent meeting
Shannon: I wasn’t invited…oh my god
Adam: you’re not a new agent you already know all this stuff but so what one of the reasons I did this is because I want new agents that we people that work in our company I want to know what’s going on with them and I want I want them to feel comfortable like sometimes they’re not even comfortable like asking for help or asking for training you know and so but what the other thing that I heard from some of our agents who have been with us a while as they said I never used to come to the company meetings because I hated seeing all these other people be successful and I’m not successful yet and I’m like that’s a perspective I never would have even considered that’s not how my mind works you know and so having the new agent meeting it went really great I think they were all more comfortable to share about their challenges and their struggles or whatever because there wasn’t someone in the room being like what’s the big deal I sold five homes this month you know
Shannon: yeah you only need to buy two thousand dollars a month and Zillow [???]
Adam: all I do is spend five thousand dollars a month in billboards and it works great like okay but I’m still washing dishes and Applebee’s so you know which I get I was there too and so we had this it was a great meeting they got to meet each other we did a lot of sharing and they talked about where they’re at and what they’ve been doing and what’s working and not working and (2) I just think it was really neat for each of them to be able to hear that from each other and I think we’re gonna keep meeting like got probably on a monthly basis and do different trainings and (2) stuff like that and (2) I’m gonna keep trying to get him to share and kinda I want them to hold each other accountable a little bit too you know because I know as a new agent especially when you have another full-time job it’s hard to I think it’s hard to work all day and then come home and the last thing you probably want to do is keep working you just want to like Netflix and chill or walk your dog or do laundry or whatever until you have that first success or so and then it bites you this real estate thing bites you and then all you want to do is work on it right you know but
Shannon: and you do have to find what like drives you and there’s so many different avenues in real estate and I think that that’s an overwhelming thing when you’re new but it’s like this spreadsheet I could sit down for hours and just plug in numbers all day long seeing what works you know like even it you know two o’clock in the morning after [???]
Adam: especially now because you have all these investors you’re working with you’re looking to do more investments yourself right
Shannon: right
Adam: so this spreadsheet is really interesting to you
Shannon: it is
Adam: you have you know you have the access to be able to buy properties right if you couldn’t buy any property I’d probably just be frustrating to look at the spreadsheet right and see these deals and
Shannon: right but I also have a limited amount that I can put down on properties so I have to play this game correctly
Adam: well Shannon the reason I know you’re great is because we can decide to do a podcast ten minutes later start recording it and then nearly an hour later still be talking and be and you always have interesting stuff to say I think we both have given our weekly real estate updated this point
Shannon: and it’s just Wednesday
Adam: it is just Wednesday that’s why we love this job but if anyone’s listening and you want to talk as always please send your questions etc to podcast at HermanLondon.com if you have property to sell please reach out how can they get a hold of you Shannon
Shannon: so you can call me on my cell phone 314-583-0070 or and email me Shannon@LivingTowerGrove.com
Adam: okay awesome and we were looking for property to buy we’re looking for homes to sell as Realtors it’s still a crazy market out there right there’s still this you listen to couple weeks ago two are talking about multiple offers and stuff like that so definitely please reach out thank you for listening and take care.