Why should a real estate rehabilitator give a landlord a guarantee?
Most real estate rehabilitators want to finish the rehabilitation of a property and sell it as quickly as possible to make a profit. That is understandable due to the costs of maintaining the property and money that is “stagnant” until the property is sold. Selling the property often comes down to the quality of the rehab work and the buyer’s comfort level with buying an older property that could run into trouble later on.
To overcome any troublesome rehab problems, skilled rehabbers are giving buyers at least two types of home warranties. The costs of these warranties can be easily controlled, and in one case, there are actually no out-of-pocket costs.
In the first case, the rehabilitator can go online to Internet sites that sell home warranties. These warranties can cover the property’s basic appliances down to electrical and plumbing problems. The cost of these “insurance” policies varies with the benefits received. If the rehabilitator purchased new appliances for the property, each appliance will have its own manufacturer’s warranty, so no additional warranty would be needed for these appliances.
In a property where the rehab is doing a quick patch and painting and the original appliances are left, an appliance warranty can be a good investment. People buy a home because of their emotions, not because owning a home makes good business sense. Being able to move into an essentially “carefree” property and not miss a beat in the buyer’s life is what 99% of buyers want.
The cost of these warranties ranges from less than $ 200 to $ 600 depending on the length of the policy and the coverage of the mechanical items or systems (HVAC, plumbing, and electrical). The prospective homeowner could purchase a policy for each of the mechanical systems and appliances, but most will not. They wait for something to happen and pay the highest repair costs.
At first, it may not seem logical for a rehab to put an additional $ 500 on a property as collateral, but the advertising profit is many times this amount. If I choose not to spend more money on the rehab, but want to get the advertising benefit, I simply post “Warranty Available.” This means that I give the buyer the option to purchase the warranty for himself and add it to the purchase price. This is for buyers who have concerns about not having new appliances or new mechanical systems on the property. If they are faced with buying the collateral themselves, they rarely want to pay for it.
In addition, or as a replacement for the previous warranty, I offer the buyer the second form of warranty that I mentioned. This is a six week “fix anything” guarantee in which I personally take care of any issues. The terms of this self-insured policy must be in writing and must exclude appliances and anything that you, as a rehabilitator, have not repaired.
In hundreds of restorations that I have performed and in which I have given buyers this guarantee, I have never had a callback. If the rehabilitator does his job properly in the first place, he should have little or no problem in the first few months, especially the first six weeks. Again, this guarantee is another great sales tool and extremely profitable when the rehab gets their job done right in the first place.