I think the largest risk is budget. CB, like lots of others, has very justifiable cost overruns. BUT this buyer looking for a bargain might not be interested in exceeding whatever preconceived amount she has in mind.
In addition, while CB might come up with a reasonable sale price…there have been “hidden issues” on almost every project she has shared with us that have driven costs up. Luckily…she was able to sell at a profit even with these.
But with a set price now…would that lock in the expenditures on this house?
One way to mitigate all the cost overruns, which will happen!!, is to remove some of the items I was going to do to the house and move that budget down into contingency. For example, the covered patio in back or big new windows in the entry area. I don’t even have to mention that and still stick to my target price.
@doschicos , I like the idea of a nonrefundable amount that CB will retain if the potential buyer walks for any reason.
I once dealt with a small production builder who agreed to a nonrefundable option fee. There were certain upgrades and modifications I wanted and had to pay approximately $15K up front to get. If I’d walked, he’d have kept the money. That was years ago and on a house that ended up costing less than $300K. If I hadn’t closed and he had to list the house on MLS, he could not have recouped the cost of my specific changes; that way he was protected.
The builder with whom I did that deal has prospered to the extent that he no longer offers any substitutions outside of his selected options. However, other builders in that area will make changes and substitutions, but only for upfront payment. The few true custom builders went out of business after the crash and the remaining builders can dictate terms however they see fit.
If this potential buyer really wants the house, perhaps she would accept a similar arrangement. I think it would be worth having a good RE contract lawyer write up an agreement in CB’s favor if this person is serious. Otherwise, it seems like CB would be able to get a quick sale given her usual quality of work and the great views this property offers.
“I like the idea of a nonrefundable amount that CB will retain if the potential buyer walks for any reason.”
. Any funds like that would have to be held in escrow by a title company under Calif law and would NOT be released without the buyer and seller’s OK. I can just see CB having to spend money on attny fees to fight the attorneys from the buyer to get them released.
It is not as simple as it sounds.
Here’s my budget for this project. The unknowns are that I want to vault the ceiling under the big A Frame in the middle of the house, and digging out a good drainage system around the house. These may go way over budget. One is a ‘nice to have’ and the other is mandatory
Demolition $2,600
Kitchen $16,000
Baths $10,000
Flooring $10,000
Electrical and Plumbing $3,000
Paint $1,500 (paint labor is included in my overall labor costs because I have a really good painter on crew now)
Termite Tenting $3,500
French Drain System $2,500
Lighting and Fixtures $3,000
Windows and Doors $4,500
General Supplies / Trim $12,000
Labor $30,000
TOTAL $98,600
I cannot figure out how my competitors could do this job for $75,000. The listing agent used to be involved with a company that did flips. He kept stating $75,000 was his estimate to fix the house. Of course, he was going to keep the windows and probably just stick lipstick on a pig or something. When I told him I had to change out the windows he thought I was nuts to waste my money on that.
My monthly carrying costs, not including general business overhead such as Workman’s Comp, business licenses, etc are $3,800. So, if I can save 2 months on market/escrow then I am saving $7,600 dollars.
I have decided to at least meet with the couple that want to buy the house and explain my design and what I was going to do to the house. I would also just generally explain the difficulties of this type of sales contract and some hard facts about how the deposit would be non refundable at a certain point in the contract. Not talking numbers yet with them, although she told me what her top budget is.
" When I told him I had to change out the windows he thought I was nuts to waste my money on that."
If you change out those windows, I foresee a huge increase in the value of the home well beyond the $4,500 you’ve budgeted for tht. It’s going to make a huge impact on how the house looks.
I agree that the windows have to be changed. Unfortunately, my exit price for future sale is going to be constrained by comparable sales in the neighborhood. There is a newer development built about 2005 down the street that has high prices, but a lot of them foreclosed during the recession. A new development in La Mesa is very rare so I don’t know how it will affect 2 blocks down the street, and they are larger sq ft, smaller yards.
I could come back out asking the moon because of the popular mid century design, but it doesn’t do any good if the buyer cannot get the house appraised for a loan.
There are 2 parts to fixing the drainage around the house. On one side of the house (that gets no sunlight… to the right from street) the dirt is higher than the base plate of the interior foundation. We have to dig out about 4 inches of dirt and lower the entire grade on that side. Then, we need to install a full french drain system around 2 sides of the house. Believe it or not, the cost of materials for that type of job is not expensive. The labor is expensive and is included in the giant labor blob
I thought I had seen it all… but today we discovered a new variation on poop yuckiness. The crew took off the toilet and tore up the tile in the master bathroom in the back of the house. This is one of the key areas where there is ‘moisture’ issues. I hear this yelp and then he calls me in to see “Something Really Important”.
Somehow… thin roots have traveled under the foundation and are coming up around the sewer pipe through the foundation, hugging the toilet pipe. Then they came out of the foundation and are imbedded in the wax ring and surrounding the toilet base. Those dang roots will travel anywhere they can find a drop of moisture. I actually took a picture… but don’t look at it if you are eating dinner
In one of the pix on Flickr, you mention that no insulation was installed, as was the custom at the time. Will you be adding insulation, or is that not necessary in SD?
Also, that’s great news that there’s no mold inside the walls. So all you needed to do for mold remediation was remove the lower portion of dry wall? There’s nothing else to do? (Well, besides replace it, of course.)
Insulation in the walls was not standard in San Diego in 1960s builds. It is not expected. But it’s really expensive to open up all those walls and insulate. Especially because they are plaster thick walls. Obviously it would be desirable.
I’m starting to get real worried about the foundation. There were 2 key reports provided to me. One was the mold inspection, which was very thorough. It indicated that the issues were high dirt and poor drainage around the house. They inspected the foundation after carpet was pulled out of bedrooms, living room and dining room. They measured with fancy moisture meters. The other report was a detailed scope for French drains and general drainage repairs. I was hoping that would solve the problem, or at least that was what was promised to prior owner.
The roots in the bathroom mean that roots got up somewhere through that foundation, or worse, roots are coming up everywhere the sewer lines are running in the ground under the concrete foundation and these roots came up a hole in the bottom of the foundation. I’m starting to think the foundation slab is not very thick. Unfortunately it’s not built to current standards which would have a bed of thick sand and a moisture barrier. One key fix is they have some very invasive plants right outside that bathroom. They are going to have to go.
This might be pointing to having to remove the sunken shower. It may be compromising the moisture issues in that area
We opened up the ceiling in the kitchen today and my carpenter and I got up there to analyze the roof structure. It’s going to be easy peasy to vault open the ceiling. The roof framing sits on the two outside walls. The ceiling is dropped solely for some ducting and some other things which we can reroute. Of course, I’ll ask my structural engineer to drop by and confirm our thinking on this
We will scrub the inside studs with mold stuff, but I don’t think we need to go further. The house already smells clean with all the drywall safely bagged up and out of the house!
