Do you Inspect Fix & Flip Before Contract or During Contract?
Hey BP Fam,
when looking at a fix and flip deal, do you bring out your contractors, inspectors etc. before going into contract and submit an offer based on the cost of rehab with no Inspection period or, do you submit an offer with an inspection period at which point you get all your crew down there?
Thanks in advance!
sooo....we like to agree on a price, get the the contract signed. Then begins the inspection period. In the inspection period get the contractors in. They shoot back the estimates. We use the estimates as leverage if we need to lower the purchase price or walk away in the inspection period.
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#3 All Forums Contributor
- Contractor/Investor/Consultant
- West Valley Phoenix
I would usually waive inspections and take 'As Is' to make sure I got the property. Of course I would personally walk the property and get a number in my head for a reno budget first to make sure there was ample money in the deal.
Sometimes I would make the offer without seeing the inside except through the windows. Only got burnt a couple times.....
You do your own inspection during but then bring contractors/get bids during the review period after offer accepted. Some of my clients even offer sight unseen and then do inspection during the review if its a really good deal.
It really depends on who is selling the home.
If it's a wholesaler...they aren't going to give you an inspection period. It's most likely an as-is deal and you have to put it under contract immediately or risk losing the property so write your offer based on a worst-case scenario.
If it's a distressed seller...they will most likely agree to inspection period but will make it difficult for you to get back inside the house to parade a bunch of contractors through so be prepared to get them all in there at once.
Good luck Isaac!
There is not a one size fits all answer to your question as the true answer is this: It depends! It depends on your market, your situation, the seller, and some other factors.
In a seller's market or any highly competitive market, your offer is stronger with no contingencies or a very short contingency (i.e. 5 days or less). Your offer is weaker with contingencies or longer term contingencies. The best practice is to walk the site whenever possible and identify the deficient items, then put together your estimated budget for repairs. You make your offer based on this info. Once under contract, you can then pay for your professional inspections if you need that. Re-trading the price using your inspections is typical from some, but keep in mind that it should only be used when items that were totally hidden from your eye are found. Re-trading the price claiming the kitchen and baths need updating and it needs landscape and paint is NOT a valid reason to re-trade the price in my opinion as these were easily identified in your initial walkthrough.
If you make offers sight unseen, then you will certainly need an inspection period contingency and get in there with your professionals once under contract.