Advice On Calculating Structural Issues

[Patty C.]

OK. I've found a property that I am interested in putting an offer on. This would be my first rehab so I am out of my comfort zone. I had a contractor look at it yesterday. It had the obvious issues of needing new roof, new gutters, updating everything, etc. That's fine and expected.

The part that is worrisome is the basic building of the house. The exterior siding is exterior siding. There are warps in several areas and the siding is discolored. The contractor said I could just fix the parts in need of repair and paint the rest, but the issue would need to be addressed at some point. Since doing things right the first time is important to me, I would replace the house with new siding. However, looking at the house further, we saw no sheer wall in the garage (which was a red flag #1) about the rest of the house. 

Looking at the two bathrooms, one looked like it could use updating so that looked fine. The second  bathroom had black shadows under the linoleum and the show pan was shallow. We won't know if there is an issue with water intrusion and how much of an issue it may have caused.

How do rehabbers deal with these unknown situations?

Using the formula on what to offer (and I'm going to stick close to it since this is my first crack at a rehab) my offer is going to significantly lower than asking and I am thinking of keeping in the inspection contingency and offer all cash. 

It would be appreciated if I can get some pointers.

Thank you!

[Andrew Syrios]

Unfortunately, there's only so much you can figure out about a rehab before you start ripping walls open and what not. That's why you should always factor in a contingency for unforeseen expenses and change orders. I usually go with about 20%, but if it's a project with a lot of question marks, bump that up a bit. And if there are serious structural issues, consider getting a structural engineer to look at it. If big problems come up, you can walk, or use it to retrade on the price.