As a hard money lender, I want you to be aware of a disturbing trend that I’ve seen with many of our own properties. This trend is for buyers to pick your property apart and use the home inspection to renegotiate the price. You need to be aware – and be weary – of buyers who are fishing for a bargain and not emotionally vested in the transaction. They use the home inspection as a tool to renegotiate the price you’ve already agreed on. They demand more and more, and are ready to walk away from the contract if you don’t agree to meet their demands. As a hard money lender, I have several suggestions on how to handle such situations.
When planning construction costs for your house flip, you need to decide in advance whether you need a construction permit or not. Pulling permits requires opening your property up to an inspector who might ask you to bring many areas of your home “up to code.” This adds extra expenses to your renovation. On the other hand, not getting a permit might result in retroactive changes to the areas you’ve already completed. As the result, not only your costs increase, you might also experience major delays. One of the worst mistakes a rehabber can make is to plunge in the house flip process without carefully considering whether to get a construction permit or not.
On every team you have what can be considered the “support players.” We’d like to consider ourselves support players for our hard money loan customers. Support players are the people who work hard, but don’t always get recognized as star players. This is not to say that these people are not important. In fact without these people the whole process would break down, but you don’t hear them mentioned as much as the lawyer, lender or real estate agent. These are still key members of your team, so you need to choose them wisely and recognize their worth.