Sometimes it takes a village to close a transaction

Our team closed a transaction yesterday that proves that even in a tough market, difficult transactions close– it just “takes a village!” We faced and overcame the many surprises outlined here, and if you’d like to read the whole saga – the narrative is below.

Sequence of surprises for Grant Park Duplex transaction:

  1. Buyer chose a duplex after seeing mostly single family homes
  2. Seller accepts offer as written – no counter offers – signed on the spot
  3. Home inspector finds that significant repairs are needed throughout the entire house. There were issues with a cracked sewer line, defective LP siding, cracking foundation, rotted sill plate and posts in the crawl space and basement, old roof, bad plumbing and electrical throughout the home, and the list went on and on
  4. Seller accepts the buyer’s repair addendum as written requiring over $40,000 in total repair costs
  5. Lender requires clean pest and dry rot report and the work turns up even more dry rot behind the siding, under the porch and in the crawl space. Seller says they’ll fix it.
  6. After 3 oil tank scans, soil under the foundation is found to be contaminated by underground oil tank – over $6500 in DEQ required repairs. Seller says they’ll fix it.
  7. Appraiser requires all peeling paint to be removed and repainted on the inside and outside. Seller says they’ll fix it.
  8. Siding company gets behind on siding installation due to the extent of dry rot repair and weather. Closing has to be extended.
  9. Price has to be changed because the exterior paint will not be done by closing so the buyer has to pay for painting after closing
  10. The transaction actually closes with no last minute mistakes to manage

The Jackson Group relationship began with these clients about 2 years ago when they started searching for homes with classic charm and character in NE and SE Portland. We focused our search on homes that were in great neighborhoods like Clinton, Abernathy, Hawthorne, Ladd’s Addition, Grant Park, Alameda, etc. and most of what we were finding was older homes that needed some work. We even had an escrow on an REO property that ended up being a little uneven on its foundation. When that one failed we took a break for a while.

We started our search months later and prices had come down. We expanded our search to duplexes with the possibility of renting out the second unit until the buyers could someday expand into the entire home. One hot summer Sunday evening, we looked at 3 properties and the last was a duplex in Grant Park right behind the high school. From the outside with the peeling paint, vines growing up the chimney, old roof, cracked foundation and original windows, it was an obvious fixer. But on the inside the original charm was still there. The rooms were large and stately but there was still a lot of work to be done. We were surprised when the clients wanted to write an offer.

The sellers had owned the home for many years and had never lived there but had a steady stream of loyal tenants in both units. The home had gone through quite a history since it was built in the 1910s- it was even converted into a boarding house in the 1950s. It had only been on the market for a few weeks and our offer was below the asking price, so we made the extra effort to present the offer to the listing agent and the sellers in person.

Our client was a very strong buyer with a solid loan approval through one of our favorite mortgage brokers, Mike Hall of Pacific Residential Mortgage. The presentation of the offer went well and on the way back to the office the call came that our offer had been accepted as written. I was so surprised that I almost hit the car in front of me! I called the client right away to deliver the good news. But we all knew that we had quite a ways to go to get through this transaction because of the extent of the needed repairs.

After the 5 hour inspection, Don Hatch of Assurance Home Inspections discovered that almost every element of this home needed some repairs. And, we’re not talking about “the kitchen sink leaks when the hot water is on”. No, we’re talkin’, this home needed a new roof, new siding, new foundation supports, new posts and beams in the basement, code violations in staircases, peeling paint, electrical and plumbing, and more. We could not even find the underground oil tank that we knew existed somewhere. So our work was cut out for us.

Over the next week, I went out to that house at least once a day to meet contractors to get proposals on the repairs. And after about 2 weeks we had most of our numbers in order. We were ready to draft the repair addendum. I presented the repair addendum in person again due to the extent of the request (over $40,000 in repairs). We continued to re-iterate our client’s wish to be as reasonable as possible and focus on repairs that the lender would require as a condition of closing such as structural and safety hazards. The buyer was even willing to raise the purchase price to help with the cost of some of the repairs.

The seller accepted our repair addendum as requested. We then had to mutually agree to choose the contractors for each job. Sorting through those numbers took another 2 weeks and 5 additional addendums but we finally set the dates and chose the contractors to do the work. Now there was only the work to be completed and to close.

WRONG! Another surprise hit us when we finally found the oil tank using a geo-tech specialist. The underground oil tank was leaking underneath the foundation of the home. DEQ requires that the soil not be contaminated by leaking oil and, if found to be unsafe, the tank and soil around the tank must be removed. The sellers took charge and found the right contractor for the job and cleaned the site – phew!

The siding company got behind schedule with the installation of the new hardy plank because of poor weather and more dry rot found behind the siding. The lender was requiring re-inspections by the appraiser, the pest and dry rot inspector and our home inspector so we scheduled them all for the same day. But because of the extent of the repairs, there were still some items that needed to be addressed during our final week of escrow. The seller went to task on the remaining list and finished 4 days later. I gave him my pink camera to document the additional repairs to send to the inspectors. Finally, all that was left to do was to get the okay on the paint from the appraiser and push a little paper.

The transaction officially recorded yesterday. Our clients were out to the house last night measuring rooms and creating their “to do” lists for moving in and making the home “theirs”.

I give the most credit in this transaction to the sellers. They were there at every step of the way to make sure that we had everything covered. I even had the seller’s phone number plugged into my phone because we were in such good communication. Our team has never done more paperwork or had a thicker file. This closed real estate transaction shows that even in a really difficult market, tough deals can come together if everyone works together to make it happen. The buyer never stopped wanting to buy, and the sellers never stopped wanting to sell, so everyone did their part and made it work.

Thanks to everyone that helped make this long shot become a success for all!

October 20, 2009 · Filed Under Business Philosophy, Coaching for Buyers, Coaching for Sellers, Home Purchase Process in Oregon, Preparing your home for sale, The Jackson Group, What to expect from the Jackson Group

Comment 

Are you toast? And if so, what are you doing about it?

For 8 years I have studied business fundamentals with The Aji Network. The learning from this course has helped The Jackson Group experience steady and substantial growth. Our clients have increased in number and value, the team has expanded in talent and our colleagues seek our help and cooperation. Now we are coping with the recession by refining services, managing costs and investing in tools and the knowledge to use them – all to help our clients and ourselves achieve our respective objectives and continue to thrive. I attribute our success, and trust our future, to the learning that comes from the association with The Aji Network.

Aji Network founder, Toby Hecht, recently published a paper titled Reading-the-Economy: Interpretations and Strategies for Fulfilling Ambitions. When I read this paper I was compelled to add my voice to his about the serious problems that Americans face as a result of not preparing for the future; for “disrespecting,” as Toby would say, the fundamental realities of the marketplace. I recommend his paper as an opportunity to learn how to take care of your own situation in this recession and avoid the trap that so many Americans are in today.

What trap is that, you ask? Toby claims in “Reading-the-Economy” that the recession displays for us how people ‘squander’ their opportunities to earn, save and invest adequately to take care of themselves while working and suffer as a result in their retirement. He observes that millions of people (70M Baby Boomers, in particular) have foolishly spent their careers working hard, spending freely, saving little and borrowing heavily while they lived for the moment at the cost of their dignity and capacity to take care of the basics of life in their old age. Toby has been warning students for years that “incomes, savings and investments are far too low while spending and borrowing are far too high” and he poses that most of us have been duped and tranquilized by journalists, entertainers and politicians whose messages have been motivated by the need to sell advertising or get elected. Now there are millions of Americans who have too little saved or invested to support themselves through retirement – the 20-30 years that they will no longer be able to work and will need care and support (food, housing and healthcare) from programs and institutions that are as broke as they are.

This is not a pretty picture. The economic recession shines a clear, cold light on the problem bringing us increasing unemployment, homelessness, bankruptcies and rolling bailouts. The marketplace demonstrates its fundamental mechanics, including – you don’t get to borrow more money just because you need it, you can’t replace a 40% loss in equity without the “time” for compound interest to grow your money again, and, most of all, you can’t fix these problems or support yourself to live well except by out-performing the marketplace with knowledge, strategy and superior competitive action – the key to making money!

Hard working people are good a decent and they are also a-dime-a-dozen. They are the ones who have denied the imperative for learning and becoming expert with new knowledge and we will observe the harsh reality of that mistake for some time to come. The unfolding crisis and the consequences of people losing their homes, their cars, their healthcare and their dignity will be the vivid reminder of what we risk when we fail to learn and develop our personal value in the marketplace.

Aji Network students practice “Reading-the-World” to 1) plan action for coping with threats, 2) discover new obligations that matter to us (those things we do to avoid problems or fulfill our promises), and 3) observe and take advantage of new opportunities that will help or improve our lives. We do this practice out of “respect” for the marketplace. After this recession there will be the inevitable expansion and all of us must prepare now for the new marketplace that we will live in when that happens.

As the marketplace evolves old products and services are abandoned and we must invent new ones. We must not be gripped by the recession, but use its lessons to develop new ways to help our customers. We must be responsible for producing our own new value in the marketplace. Toby claims that through the strategic use of computer-driven tools we can be more effective at developing competitive advantage – and competitive knowledge is the source of power for that invention. We must drop the common and obvious work that is priced on the margin and pay attention to proven superior offers of help. The new power for business people is in communication, coordination of action and production – all of which are augmented with the knowledge to use computer-driven tools effectively. This is where design and innovation will trump hard work and task-oriented processes and enable us to produce highly-valued and scare help. There is no shortage of the former, and customers willingly pay for the latter.

So, rather than be toast, let’s make one!  Here’s to life-long learning and the stable future that uncommon knowledge and superior offers in the marketplace will produce!

Becky

April 2, 2009 · Filed Under Business Philosophy, The Jackson Group

Comment