Estimating repair costs off MLS pictures...okay to do? Or stupid?

77 Replies

How can I estimate rental costs on a MLS listing from my computer?

I am looking to begin my first flip in the next 2/3 months...is it okay to see fixer upper appear in my market and just make an offer of what I "think" the numbers would be? This "estimated repair cost" is the toughest part about "doing the numbers" for me.

Are there certain major expenses (roof, heating etc.) that may be hidden from the pictures and the mls listing? Or will all agents have to disclose that information, for a fear of not disclosing a defect?

Would a better option be to make an offer and then ask a certain list of questions that may not be disclosed? Or should everything I need to know already be disclosed on the listing?

I have this super huge fear of buying something that I thought was good, finding out it will cost WAY more, and then my parents and everyone around me calling me a massive failure.

Thanks!

"How can I estimate rental costs on aMLS listing from my computer?"

You do realize the listing broker is making the property look as good as he can with data or pix?

Why not just drive over there?

First, ask for a seller's property disclosure.  If there is one, it will tell you the age and major defects (the ones the seller can't hide) about the property.

Then, go on the property appraiser's website to check on square footage (the MLS is marketing so "let the buyer beware") and also check for any permits that were pulled on the property. Also check for any outstanding code violations. When you buy the property, they become yours if you don't put it back on the seller contractually.

You'll want to walk the property so ask for a showing. Check the exterior as well as interior.  There's a lot to look for and if you don't know what you're looking for, then it's just a walk and won't be all that helpful.  You need to know the life of the major components and their condition:

Foundation - any repair needed will be a costly one.

Plumbing - if cast iron, it rusts from the inside out so you never know when it's going.  Tree roots can damage any plumbing as well as the foundation.

Roofs - in my market, they last 15 years and you need 5 years of roof life remaining to get insurance. This is a big ticket item.

AC - you'll need 3-5 years of life remaining to engage insurance coverage.  

Electrical - is it to code?  Knob and tube, aluminum wiring - just not insurable.

And, when estimating rehab costs to make an offer, remember that you're not entitled to "new." You're buying a "used/very used and abused" house, not unlike when you buy a used car.  

Then check property values so you'll know whether it's worth doing in the first place. If you rehab it and you'll be over market value, then it's a why bother.

As a buyer, you don't pay commissions so why not add bench strength by finding an investor focused realtor who has sold a lot of properties for flipping and bring that expertise into making the best decision.

Real estate investing is a complex business. Please don't go it alone when it will cost you nothing to do it like a pro.

Best...

@Steve Morris

Hi Steve I agree with you in theory. The main reason why I ask is because when I am looking at properties I am always looking about an hour outside of where I live. I only look at fixer uppers and photos are usually poor, but I guess what I am asking is it okay to make offers from my computer, get them accepted (with a walk through contingency) and then estimate the costs then?

I’ll probably walk through with a general contractor.

@Patricia Steiner Patricia, thanks for such a detailed answer!

I've never heard of the idea of going to the appraisers website...do you mean like a national website or a local one for the area? And when you say, "check square footage" do you mean to double check what the actual square footage is on the property because the listing agent may have misrepresented it on MLS?

For violated codes, would that be with the intent of saving myself a step before inspection? Would that information that I look up with regards to codes, come up in inspections? Wouldn’t the seller be required to disclose these? Or would that be the inspectors job? Or no ones job, all on me as the buyer?

Also as a buyer, what do you mean by, I don’t pay a commission to the buyers agent? Last time I checked that was part of the closing process and what not, can you please elaborate?

Also, what information would the pulled permits tell me? What is valuable about hat information and how can I use that information to my advantage.

i think the only way to make a sight-uneeen offer is if you know the area, know the types of houses in the area, and know what they typically need.

I’ve seen enough houses in the neighborhoods I invest in to get a good feeling of rehab costs from the pic and description... but I’d still never offer without a walkthrough. Some actually have fewer issues than expected - but most have items that obviously weren’t highlighted in the pics.

I think most MLS listing realtors would look skeptically at any offer that the person didn't see the house. For abandoned houses and that kind of thing it might be different.

Originally posted by @Nnamdi Okwerekwu :

@Steve Morris

Hi Steve I agree with you in theory. The main reason why I ask is because when I am looking at properties I am always looking about an hour outside of where I live. I only look at fixer uppers and photos are usually poor, but I guess what I am asking is it okay to make offers from my computer, get them accepted (with a walk through contingency) and then estimate the costs then?

I’ll probably walk through with a general contractor.

Yes, lots of OOS buyers do this. The purpose of a home inspection contingency is to avoid getting trapped by such an offer.

@Mike McCarthy

Thanks for the advice Mike!

For me, I have no investing experience and I live in Boston where it’s wildly expensive and have to invest about an hour out.

It sounds like you recommend that instead of making an offer when a listing pops up, make the extra effort to make the drive and see it first, correct? Because I don’t know the area super well (but I am studying it in detail) I should probably do this a few times again and again till I get a good feel for rehab costs in the area.

My fear is wasting a contractors time or getting rejected by a contractor to walk through the property with me because I am not certain that I want to buy the space.

Any thoughts or tips on these?

@Nnamdi Okwerekwu

My first advice is to not worry about the opinions of others. Do what makes you happy. If you're excited about venturing into real estate, you just have to get into it. Yes, self education is required. Yes, there's a fear element EVERYONE has to go through with that first deal. You just need to accept fear as part of the process, and not a reason to continue waiting. You can learn from a thousand books, podcasts, youtube videos and you're still going to be scared when chasing that 1st deal. Its human nature and its okay to be scared. Every single soul on here knows what it feels like in the beginning.

In specfic regard to your fear of struggling with estimating rehabs, you have an inspection period after you put a property under contract. During inspection period, you'll ask a contractor (whom you vetted), to walk the property and give you an estimate on the work needed to get the property nicely rehabbed. Keep in mind, they also act as consultants as well. They're the ones that know the market norms when it pertains to the cosmetics of a home, so they can lead the charge on that if you'd like. And you'll have both the inspector and contractor walk the property and check for the things pictures cant reveal.

From their assesment and overall cost to fix the property, you can then decide if the numbers work in the deal or not. If not, you can back out on the deal, and lose nothing but the inspection money. Thats about 400 500 bucks.

I think that pictures are fine as a starting point if you aren't able to get out there prior as suggested above. They can be a starting point for things you can see in the pictures. If you have an inspection contingency, you can use this inspection report as another negotiating factor. Try to be present during the inspection if possible and ask lots of questions. You can even bring your contractor. This helps you get a better understanding of the total costs. I would not hesitate to make a sight unseen offer if I had good pictures and a walkthrough or inspection contingency. 

Having purchased a number of fixer properties, I can tell you that marketing pictures will be of almost no use to estimate rehab costs. It takes actually walking the property inside and out to see what is going on. When we look at/inspect a property, I use a clip board to make notes on and my wife takes lots of pictures of all the defects/problems she sees. Afterwards, I look at my notes and her pictures and put together a spreadsheet to estimate repairs. We look under the crawl space and up in the attic too. I often take an outlet tester to see if outlets are grounded or have been improperly replaced with 3 prong receptacles. As a seller, an offer from someone that hadn't even been to the property wouldn't carry any weight with me.

@Nnamdi Okwerekwu

You *can* but be conservative.

We write most our offers sight unseen, but it took years for us to get there. We follow a spreadsheet for preliminary numbers. Then get our contractor out to bid the job quickly once we have a contract.

Also keep in mind reputation matters. I’ve never backed out of a contract and that reputation of closing wins me deals. I’ll lose them on the front end by bidding too conservatively to keep my ability to close on the back end

That's a tricky thing to do but you can certainly spot things from the pictures. I would not rely on it however. I've bought my first two flips sight unseen, 7 hours away, just from the MLS, pictures and asking my agent to go check out the property and look for foundation issues, however if she missed something that's my fault, not hers.

I go into these flips thinking they will be full gut rehabs, and if we can save anything it's a bonus. When looking at pictures you can see things like, how many outlets are in the room etc...if you don't see many around there's a good chance you'll need a healthy electrical budget. Things of that nature. 

If you're serious about the house, an hour drive isn't much. 

Good luck! 

Originally posted by @Nnamdi Okwerekwu :
Are there certain major expenses (roof, heating etc.) that may be hidden from the pictures and the mls listing?

YES. Some of the problems can't be seen in pictures. Sometimes they can be seen if the picture is clear enough, but the listing agent deliberately uses a flip phone from 2003 to take the pictures of the fixer-uppers for the MLS. :D (Look at their other listings and see if the photos are better on the houses that are listed for full retail.)

You can usually see a few things from the pictures.  If the listing says "central air", or you can see an air conditioner compressor sitting next to the house, but there are window A/C units sticking out of many of the windows, then the central air is broken.  If the house is at the bottom of a hill or backs up to a creek, you should think about basement leaks and sump pumps.  (Sometimes it helps to look at online maps or street-view images to figure out if it's at the bottom of a hill.)  If the roof is so bad that some shingles are missing, you can usually see that.  If there are two-prong outlets, then the wiring is older and may need updating.

The square-footage thing has been mentioned.  In my area, a lot of the houses are in mid-1950s to late-1980s subdivisions, and were born at around 1,000 to 1,400 square feet.  Lots of them have had part of the basement finished since they were built, which legitimately adds around 200 to 300 square feet to the living area.   A few of them have had additions built on the back, which usually also adds about that much.

However, some listing agents have decided that if the basement is finished, they can just double the square footage that the county has, and list it that way.  If it was built with 1,000 square feet, they list it at 2,000 square feet.  The reason they do this is that most sites like Zillow, Trulia, etc, have an option to sort listings by "$/square foot", and inflating the square footage makes their listings show up first when sorted that way.

The county appraiser or assessor will have the tax records that show at least what the house was built with.  In most major metro areas, these are online, and free to search - often you can either punch in the address if you know it, or look at a map and click on the property you are interested in.  Usually you can find out the year built, square footage, current assessed value, and current or upcoming property tax bill.  Often they will have the historical values and tax bills going back 5 to 7 years or so.  Google things like "worcester county tax records" or "worcester county appraiser" or even "worcester county GIS" to find their site.

A few areas may still try to charge you to look at the tax records.  In that case, there is usually a computer at the county government building, or maybe at the public library, that can search those records for free, but you have to physically go there yourself and use that particular computer.  COVID-19 may have limited access to that computer, as well.

You can absolutely make an estimate by looking at pictures online. Listing sites are kinda like online dating...some people let it all hang out (flaws and all), while most put forth the best image possible. If you are not familiar with the area or potential problems homes may have, use a buyer's agent that works with investors AND understands the location and type of property investing you are doing. I make rough estimates on expected repairs all the time. When I get to the property I take a lot of photos and video. This can be used to show your contractor. You can have your agent ask the listing agent to disclose any problems, but oftentimes people lie. I have been under contract with multiple properties (while working with the listing agent) and asked if there were any problems with the house. They told me no and later disclosed previous home inspections from prior buyers (that cancelled) with significant damage to the property. I don't say this to scare you. In actuality buyers are pretty well protected, but you must do your due diligence. It's customary in California to have 17 days to inspect the home and also receive the Natural Hazard Disclosure. You can and should do a home inspection, roof inspection, etc. When you are making your offer it is based on the original information received. If you later find out that it needs a new roof, you can cancel the deal....or better renegotiate with the seller. If you are uneasy I strongly encourage you to use a buyer's agent because using the listing agent can be used against you if you are not sure what to look for and need guidance throughout the process.

Unfortunately you can't really get a truly accurate estimate on a major rehab until the walls are opened up. You simply never know what you're going to find. However if you have a lot of experience and knowledge, you can get pretty close from a full property inspection, plumbing inspection, sewer line scope, etc. You can't tell jack from looking at MLS photos IMO. I mean you can get a general idea of basic condition, but as far as putting together a detailed estimate? Nah. Team up with a great agent, inspector, and GC, have them put together some rough numbers during your inspection contingency period, and then plan for the project to cost double that estimated amount, and you'll be alright.

@Nnamdi Okwerekwu Listing photos are useful for ruling properties out, but there's nowhere near enough information to derive an accurate rehab budget.

Sure, you can see the original 1960 kitchen and bath and come up with a probable remodel cost.  But far more important is what you won't see.

You won't see exterior wall that are bowing out (common prior to the early 1800s), floors that are out of level due to shrinking cedar post supports (also common prior to the mid 1800s), ancient cast iron plumbing, knob & tube wiring, termite tunnels or rotted beams and you won't be able to smell the property.

One of the first things I do at a property is to head to the basement and sniff.  You'll know in an instant whether there's moisture or heavy mold.  You'll see if the floor is wet.  I always look for places where bare wood touches the floor to see if water has wicked up into the wood.  I also check to see if lally columns have been painted recently (to cover up rust on the bottom).

This is only a partial list, but you get the idea.  You need a LOT more information than what you'll see in the photos - especially given that this is your first flip.

Any realtor who knows what they are doing will not even respond to an offer until you tour a property. You cant estimate rehab unless its a full gut without touring. You need to see roof, foundation, etc. close up.

I use the MLS pictures and data as a tool to see a general picture of the property.

I understand that the pictures will be favorable to the seller, and go from there. 

I also use different websites to view properties and the pictures. Zillow may have some, and Realtor.com may have 0!

I did this while watching a BiggerPockets webinar too! The Host used a favorite browser and the BP tools. Few pictures on that chosen MLS site left potential on the table. The HOST ran the numbers taking the pictures he saw as a property value and condition. I used two other MLS sites and found more pictures. The Host figured it was not a deal, but with my pictures, it was a very good deal. Well, it was a good enough prospect for me to actually drive by the property and initiate contact with the owner. - Yes, I initiate contact with the owner first, even though if there is a realtor contract in force that she will be included and get her fees.

Use online pictures and your best guess of repairs and ARV to help you decide if the project is worth pursuit.

Before the deal is signed,  it is best to get some current eyes and professionals involved.

good luck!  

I would never base anything off off MLS listing as it does not assess the condition in an accurate way. You can see something that's great and it will turn out that the floors are completely slanted or you will find something bad and the seller's agent completely misrepresented because of lack of experience. In my opinion, you will need to be walking these properties thoroughly and seeing it for yourself before estimating the costs.

@Nnamdi Okwerekwu

I am a contractor and investor. So I do my

Own flips and rentals and I also GC other investors flips and rental turnover while doing homeowner kitchens and bathrooms. I’ve read

Most of the response on this thread and

Your continued questions so here what I’ve got to say.

First, I usually always make sight unseen offers contingent upon a walkthrough before

Contracts are signed. An offer isn’t binding nor a contract and most of my offers don’t get accepted anyway. So I don’t want to waste precious time by going to see every potential property. Get an offer accepted then go see if immediately and get your contract signed afterwards.

Second, I always make a rough Reno budget

Via mls info. I look at size of property along with year it was built and determine a good rough number. Me being a contractor plus having done flips in the past I can do this without a single picture and just with info and area. A great tip that someone said is to know your market. My advice is the go there and walkthrough houses that are for sale flipped or not and start learning. Review the years these

HouSes were built because older houses need more work.

Third, pick a few houses you are interested in and pay a contractor to walk you through and give you a rough estimate. I do this often with many investors. Just because “free estimates” is offered it doesn’t mean that’s the only way to do it. Tell a contractor you’ll pay $150 to walk through a house and give you a rough Reno budget. That is actually my policy on

Houses not owned or under contract. My time is valuable so pay someone for there time and they will remember and Appreciate that.

You need to get experience in this business to be able to release those feelings of

A massive failure as your family has told you. Not everyone is on board with investing. I have many friends who have Money and see me doing well but still won’t start investing. So make your offers and get out there and but a flip. The only way you’ll learn is by doing. If you make an offer and see that it’s more work then expected then politely decline said offer due to more extensive work or just adjust

Your offer accordingly. What are you looking to profit 20-40k(+). So basically that means you can make at min a 20,000 error before you start losing money. I don’t know any other industry that is that forgiving. Your first few aren’t for making money or getting rich. It’s for Learning and gaining experience so your able to continue doing this for many years and make

Money over time. Real estate isn’t get rich

Quick.

Rentals take time and flips take hard work knowledge experience and eventually a really good team. I say make 5 offers a week get something under contract and do a deal.

If you want to talk further you can always DM me. Good luck!!!

I will mirror some of the responses above and add some... 

1. If it's a hot market and you feel that you will miss out if you do not put in an offer, put in an offer. However, make sure you put in an inspection addendum that gives you the opportunity to walk if needed. 

2. It depends on what size of a rehab you are doing. In my market, I know that I will take the house down to the studs and replace with new everything. That gives me freedom to not worry about the mechanicals, roof, windows ... when I put in an offer.