Property Manager, issues with make ready repairs

11 Replies

Hi,

I purchased a house recently and my property manager did make-ready repairs in it. Nothing serious (not a fully-fledged rehab). There are a couple of issues with it, though, and I want to understand how you would react in my situation.

Issue #1: the sump pump installation. They recommended installing a sump pump in the property and I agreed. We did this work in my other house for about $500 and I assumed it is going to cost the same in the new house. Yesterday, they sent me an invoice with the price of installation $2,800, almost 6 times more of what I assumed. Now, granted, I did tell them to go ahead with it and it's partly my fault that I haven't asked them for the price beforehand. But I expected them to communicate this price to me prior to starting working on this. If they did, I'd never have approved this expense. The PM says she did communicate the price to me (she did not), and the work is already done, they used a 3rd party contractor for that. How would you react? What would you recommend?

Issue #2: fridge. There is a brand new fridge for the price of $1,200 in this house. On the photos, there's clearly a dent at the lower part of it. Not a huge one but visible, maybe several inches across and a couple inches deep. I told the PM about this, she said she'd take a look but didn't come back to me on this one yet (it was more than a week ago). What would you recommend? Is it reasonable to expect to replace the fridge or ask for a discount? I don't want to sound cheap but this is a new appliance and I'd like it to be in a good condition.

Thanks everyone, this is my first post on BP, hopefully I chose the right forum.

Jerry

Originally posted by @Jerry Miller :

Hi,

I purchased a house recently and my property manager did make-ready repairs in it. Nothing serious (not a fully-fledged rehab). There are a couple of issues with it, though, and I want to understand how you would react in my situation.

Issue #1: the sump pump installation. They recommended installing a sump pump in the property and I agreed. We did this work in my other house for about $500 and I assumed it is going to cost the same in the new house. Yesterday, they sent me an invoice with the price of installation $2,800, almost 6 times more of what I assumed. Now, granted, I did tell them to go ahead with it and it's partly my fault that I haven't asked them for the price beforehand. But I expected them to communicate this price to me prior to starting working on this. If they did, I'd never have approved this expense. The PM says she did communicate the price to me (she did not), and the work is already done, they used a 3rd party contractor for that. How would you react? What would you recommend?

Issue #2: fridge. There is a brand new fridge for the price of $1,200 in this house. On the photos, there's clearly a dent at the lower part of it. Not a huge one but visible, maybe several inches across and a couple inches deep. I told the PM about this, she said she'd take a look but didn't come back to me on this one yet (it was more than a week ago). What would you recommend? Is it reasonable to expect to replace the fridge or ask for a discount? I don't want to sound cheap but this is a new appliance and I'd like it to be in a good condition.

Thanks everyone, this is my first post on BP, hopefully I chose the right forum.

Jerry

 There is no way you did a sump pump installation for $500 on your previous house.  You may have replaced an existing sump pump - but to install one it requires adding drain tile and $2800 is a really good price IMO.  That is on you.  

$1200 for a fridge is expensive.  A standard top freezer SS one is $700 so you must have gotten a larger higher end one you would find in a personal residence.  I would be pushing back about the dent unless it was sold to you at a discount because of the dent and would retail for a few hundred dollars more.  

Brie Schmidt, Real Estate Agent in Wisconsin (#57846-90) and Illinois (#471.018287)

@Brie Schmidt  Thanks for the answer.

It could be a replacement on the previous house. The invoice just said something like "Install sump pump", so I don't know the details. Even if the price itself is OK, don't you think they should have communicated it beforehand?

The fridge is similar to this one: https://images-na.ssl-images-amazon.com/images/I/8...

It wasn't sold to me at a discount, the PM never said that. It was going to be a brand new fridge.

How exactly would you push back on the dent? Ask for a replacement?

Thank you.

Originally posted by @Jerry Miller :

@Brie Schmidt Thanks for the answer.

It could be a replacement on the previous house. The invoice just said something like "Install sump pump", so I don't know the details. Even if the price itself is OK, don't you think they should have communicated it beforehand?

The fridge is similar to this one: https://images-na.ssl-images-amazon.com/images/I/8...

It wasn't sold to me at a discount, the PM never said that. It was going to be a brand new fridge.

How exactly would you push back on the dent? Ask for a replacement?

Thank you.

 The sump pump is a grey area.  From their point of view you didn't ask, so they are gong to assume you already know the price range.   Most times my PM does not give me a price, but they know me and after 7 years and 90 units I know what things cost.  When I am unclear about the cost I ask.  It is feasible that they assumed you knew how much installing a sump pump would be. 

If the property had consistent flooding you would have probably needed a sump pump regardless of if you wanted it or not  

For the fridge I would ask them to replace t or get a credit from wherever they bought it.  That is retail price and you shouldn't get getting a damaged product. 

Brie Schmidt, Real Estate Agent in Wisconsin (#57846-90) and Illinois (#471.018287)

I would have to agree with Brie about the cost of the sump replacement.  However, you should check your management agreement for a repair limits clause.  My management contract includes an amount that I am allowed to spend on repairs before having to get the owner's approval in writing.  

It is definitely poor judgement, in my professional opinion, to sign off on a repair of that expense without having prior written approval. If you don't currently have a similar clause in your agreement, ask for an amendment immediately so you don't have to walk down this road again.  You should also ask for documentation of the repair costs (an actual invoice from the plumber and not the PM company) to satisfy your curiosity on the cost...

I also agree that you ask for a replacement since it was delivered damaged.  Best of luck to you!

Originally posted by @Jerry Miller :

Hi,

I purchased a house recently and my property manager did make-ready repairs in it. Nothing serious (not a fully-fledged rehab). There are a couple of issues with it, though, and I want to understand how you would react in my situation.

Issue #1: the sump pump installation. They recommended installing a sump pump in the property and I agreed. We did this work in my other house for about $500 and I assumed it is going to cost the same in the new house. Yesterday, they sent me an invoice with the price of installation $2,800, almost 6 times more of what I assumed. Now, granted, I did tell them to go ahead with it and it's partly my fault that I haven't asked them for the price beforehand. But I expected them to communicate this price to me prior to starting working on this. If they did, I'd never have approved this expense. The PM says she did communicate the price to me (she did not), and the work is already done, they used a 3rd party contractor for that. How would you react? What would you recommend?

Issue #2: fridge. There is a brand new fridge for the price of $1,200 in this house. On the photos, there's clearly a dent at the lower part of it. Not a huge one but visible, maybe several inches across and a couple inches deep. I told the PM about this, she said she'd take a look but didn't come back to me on this one yet (it was more than a week ago). What would you recommend? Is it reasonable to expect to replace the fridge or ask for a discount? I don't want to sound cheap but this is a new appliance and I'd like it to be in a good condition.

Thanks everyone, this is my first post on BP, hopefully I chose the right forum.

Jerry

 For the sump pump you & the PM need to get on the same page before hand. A signed bid prior to any work starting is a good practice. It will protect you as well as them. Honestly they put themselves at a huge risk here because they didn't do that & it doesn't sound like they even collected a deposit from you on that job. 

As for the fridge is it possible they purchased a scratch & dent from their supplier? Fridge prices very widely. You can get the standard low end white ones for under $500 or you can buy high end stuff for $3k+. What type of fridge are we talking?

James Wise, Real Estate Agent in OH (#2015001161)

I see these items as poor operating procedures from your PM. It may be a sign of inexperience and it also may be a sign of getting money where they can. I'm not saying leave just yet, but keep an eye on them. The PM that I work for will not even start work until the owner has been given an estimate, authorized the work, and sent funds. We hold funds for all work until complete about 95% of the time. This ensures that our clients have proper expectations and that we have funds to pay the vendors. 

I find the fridge a little troublesome. It makes me wonder if they purchased a scratch and dent fridge from a refurb shop or even new from Sears Outlet or something similar. It is possible that your PM marked up the cost. I don't have a problem with PM's marking up costs as they have to find reliable vendors, negotiate special rates, schedule with the tenants for work, and verify that the vendor adequately performed the work. We mark up our vendors by 5% or $50 in most cases. Most of time, our prices are still considerably less than retail. We procure vendors periodically throughout the year and several vendors compete for our business as it gives them residual work throughout the year without advertising for new business. We get rates as low as 65% of retail. Even after a mark-up the discount price is still more than 25% below retail.

It sounds like your PM may be milking you. I see this most often with the flat rate PM fee structure or the discounted PM fee structure. They try to gain your business by offer special management rates, but at the price they will likely fail. They make their money by charging excessive ancillary fees and maintenance work.

I would certainly follow up with the refrigerator issue, but installing the sump pump seems to be a fair price if there isn't a pit there already.

@James Wise the fridge looks like this: https://images-na.ssl-images-amazon.com/images/I/8...

They didn't collect a deposit for this work but I sent a partial deposit for other items that were on the make-ready list.

@Ross Denman thanks for the input. It's really helpful to see how others handle such situations. Will definitely follow up on the issue with the fridge, either will ask them to replace it or provide a credit.

Originally posted by @Jerry Miller :

@James Wise the fridge looks like this: https://images-na.ssl-images-amazon.com/images/I/8...

They didn't collect a deposit for this work but I sent a partial deposit for other items that were on the make-ready list.

@Ross Denman thanks for the input. It's really helpful to see how others handle such situations. Will definitely follow up on the issue with the fridge, either will ask them to replace it or provide a credit.

 That's definitely not an entry level $500 fridge. If still in doubt ask for the serial # of the fridge. & ask if you received a scratch & dent discount. From the limited info you have shown the pricing seems reasonable.

James Wise, Real Estate Agent in OH (#2015001161)

The sump pump sounds like a lack of communication on both sides. As an investor and a contractor, an expenses that large should be documented and agreed upon in writing. To install a sump pump where there is not one in a basement with a concrete floor takes some doing. $2,800 is not outlandish.

On the fridge, ask for a copy of the receipt. That will tell you where they bought it. They should be able to provide one. It's a good time to discuss what you are trying to accomplish too. A higher end rental may need a more expensive fridge. That said, you should make sure they know what your goals are and make decisions commensurate with your strategy.

My first question is "how many units do you own?"  

My second question is "how long have you been in the rental business?"

If the answers are "1" and "I just started" then we can chalk this up to inexperience.  I would first ask what software your property manager is using.  Why? Because if they are managing a bunch of properties without software, this may become an ongoing problem.  Depending on how many properties they have under management, they may be overwhelmed.  I hired a property manager one time, when I paid off my mortgages for them because I had extra money coming in every month as a result.  Immediately I had vacancies that were going over 4 months. (When I managed they were never more than 2 days).  I finally had to audit the financials because I could not believe the amount of repairs that were done on my properties behalf.  I found that there was much fraud.  My 3 bedroom apts. had 7 window, one sliding glass door.  I found orders for window blinds that listed 40 blinds for my 3 bedroom apt.  That is only one of many examples.  Another time, I approved replacement of vinyl in a kitchen that had been damaged and was older so we would not charge the tenant.  When I came later to inspect, I found that the area that was damaged had a different color and type of vinyl and it ruined the value of the property.

I give these anecdotes because you may be going down the same road.  In my case, I had a contract so I sued for the contract to end.  The court found against me because there was no specific language that could relate to the errors, omissions and fraud that had been done.  

Now that you know what happened in this first experience, I would go back and renegotiate the contract if you have a contract with this company.  Tell them that you want to see repair bids, be able to speak with their repair people they use until you get to know and trust them, that you will pick out all of the replacement appliances and if they have volume discounts, that they can do the purchase.  If they plan to move a used appliance into your property, you must get them to tell you first and get your approval.  (I agree with the person who suggested that it was a used appliance or may have been moved from a rehab done by another owner and you were charged a HUGE price.) Many have charges for their service to do this so get that in writing also.  Be sure to ask them to add their service charge or commission separately to the bill you receive.  And do demand to see all bills related to your property.  

There should be an approval sequence. The tenant notifies the PM of a needed repair.  The PM orders bids or a bid for repair.  If it is under say $50 (you have to tell them at what $ level you don't need to approve and for anything above  that $ amount you want to approve) the PM approves and orders the repair.  Competent repairs are critical.  They impact the value of your property and the relationship with your tenant.  Your tenant should be given proper and reasonable notice and the repair should be done immediately (within the week if not an emergency).  This language should be in your contract.  (Remember contracts that are not specific cannot be canceled).

You should ask for photos of the repair and get a copy of the bill.  I started asking the tenant to review the repair and repair person.  (have them do a simple survey.)  We asked if the person identified himself ahead of time.  Did they show up on time.  Did they clean up any mess.  Did they complete the repair in one visit.  If not how many visits did it take.  Do you feel that the work done solved the problem. I highly recommend this survey for several reasons.  You can see how much your PM values your valuable asset and you can get an idea of what kind of work the repair people are doing.  But you can also get some insight into the kind of tenants that your PM is renting to.

Whether you have one or one hundred properties, if you use a PM you need to be involved and let them know that you are in control of what happens to your properties.  That is how you keep a cordial relationship with your PM and be sure your properties are well maintained.

As for the refrigerator, I would ask to see the bill. I would ask them to manage the replacement and explain that in the future, you will not accept delivery of any damaged items when replacing new appliances, carpet, blinds or draperies, fixtures etc.

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