HORRIBLE rehab advice from LeGrand - Posted by HR

Lease options and property inspections question… - Posted by HR

Posted by HR on June 21, 2000 at 22:24:12:

Hey Matt,

I’m glad to hear things are going well for you. You made me think of something I had never considered before, and I’d like some input on it.

It seems to me that on these sandwich lease option deals (which I have never done), there could be a thorny issue around the property inspection. I never thought of this before, or heard it discussed by Bronchick or LeGrand. It seems they assume the property will always be in great condition with little defects. What do you do on a lease option deal, though, with inspection problems?

Let’s say you lease with the option to sublease, and then sublease. Your tb decides to buy and gets a property inspection, which reveals all sorts of defects. This tb has the right to expect improvements, I suspect, or does your lease agreement limit that? Can you then turn to your seller and demand the same repairs? What if he/she doesn’t want to pay it? I’ve never heard any of the lease option gurus discuss this, but it must come up from time to time. Have you (or anyone else) experienced it?

What’s the solution? Do an inspection when you lease option and buy as is? Have your tb get a copy of the report and buy as is, in addition to accepting any further damage during the rental period? Hmmm, this could get tricky. I’m sure this would never happen on my first lease option deal, though. :wink:

Wishing you well, Matt.


Get a grip, Steve… - Posted by HR

Posted by HR on June 21, 2000 at 19:51:45:


First, I am going to comment on the substance of your response, then I will comment on your process.

Before I start, let me say I don’t have my LeGrand course in front of me (or the tapes); my brother in law in a neighboring state has had them for awhile, so I can’t refer to his actual materials, as I would like. I am going to make some comments about LeGrand that may be wrong; they are what I have taken away from his stuff. I don’t think they are wrong, though. While I have studied his stuff over and over and put into practice a few times, I do believe my recollection is right. If I am in error, though, I hope someone else (not you, Steve, but an objective soul) will point out the error. Having said that, allow me to get to the point.

First, I go back to my original statement, which I now believe with all my blood: LeGrand’s inspection process is fatally flawed and will ultimately come back to haunt someone who is not a pro at home construction.

What is LeGrand’s process? To quickly walk thru a property, note all the deficiencies, and use his formula to calculate an offer. (You know the one, arv, mao, etc). This, I again offer to you, is sheer insanity.

I’ll give you this: maybe it can work in some markets with some construction types. Not here, though. In New Orleans, we have much older housing stock (average age 50+ years), it’s all wood with hard wood floors and high ceilings, yada yada yada. No exterior paint jobs here for $800. In my experience, there is often extensive damage to sills, ceiling rafters, floor joists, etc. ESPECIALLY with the beat up homes, ie the stuff you can get cheap, ie the stuff that has been neglected, ie the stuff with lots of stuff wrong with it. My point: it’s this structural damage, which you often can not see readily, which can come back and bite you. And you can’t see this stuff in a 15 minute inspection.

As far as the 15 minute inspection, that’s EXACTLY what LeGrand suggests. Don’t you remember that point on the tape where he says you should be able to walk in and out in 10 minutes? I do. If in another market one can buy homes with little likely structural issues wrong with them, then this might work. Not here (and I doubt not anywhere.) LeGrand’s method is based on speed and assuming it needs to be fixed, but herein lies another problem.

If, as you suggest, you assume it all needs to be inspected, then are you saying to assume every floor joist or roof rafter or sill needs to be replaced? Should I just make an offer based on the land value and calculate a tear down with new construction? Obviously not. You can’t assume it’s all bad, or even half bad, or even 1/3 bad. That would lead one to three wildly different rehab estimates, and, assuming you have competiton for the deal, the higher (inaccurate) estimates could cost you the deal. You need to check it out with a good inspection, so that you can accurately crunch solid numbers to come up with a solid offer. I now believe a quick inspection is not adequate.

And where, Steve, are you getting this “get it signed up and then inspect it” stuff? That’s not LeGrand (from my recollection). NEVER does LeGrand say bring in a licensed inspector to back up your figures. Myers does, and I now think Myers is right. LeGrand doesn’t advocate this at all, though.

In fact, Steve, if I’m not mistaken, LeGrand says offer NO CONTINGENCIES at all. Renegotiate? Use your escape clause? What module do you have? What tapes did you hear? LeGrand advocates offering so low, with no contingencies, that, as he says “it doesn’t matter if it has an inside.”

I’ve done that. It works. One can buy stuff real cheap. The problem, though, is not that you didn’t buy it cheap enuf. The problem is, if one is starting out and/or still learning about all the intricacies of home construction, is that you may miss rehabbing something that should be rehabbed because you didn’t know it was a problem. It’s what you don’t know you don’t know that will kill you. There may be other, inapparent structural issues that a more thorough inspection would have caught, and that’s why it’s important to get the inspection done by a licensed home inspector. Because, in my experience, when a deal killing inspector may/does come thru with your potential buyer, it will be found. And it ain’t a happy day when it is.

  1. I find it interesting that some many folks commented on the different market prices for things. Of course you need to do the research for one’s own market. I don’t have a big beef with this, which is why I didn’t comment on it much, but I think his numbers, even for a Florida market, must be ridiculously low.

  2. I coulden’t possibly disagree with you more, Mr. Steve. LeGrand touts himself as the greatest rehabber in America. Putting his arrogance aside, the guy does know his stuff. And his three module course is a good price for only a grand, but it still has some major flaws. Think about it: you’re going to teach someone about doing rehabs and your only including purchase and sale contracts (and land trust documents)? Give me a break. I’m hardly being unprofessional to expect the king would provide some legal forms. I created mine from some of Bronchick’s stuff and something Kevin Myer’s sells. It’s assinine not to provide them, in my opinion. It’s a huge flaw in his system. Contracts are an integral part of real estate, even rehabs, and he who has them in his favor is a step ahead. It’s a flaw steve; let’s call a spade a spade.

  3. Handyman doing most of the work idea. I’m curious about other’s experience with this. I’m open I may be wrong here. Hasn’t worked for me. I like subbing to different groups better and maintaining more control. It’s more work, and requires more skilled crews (which I have) but I get better control and better outcomes. Right now, I think it’s worth the extra effort.

  4. Finally, Steve, a comment about your process. You obviously can dish it out, so I assume you can take it too. I don’t like the tone of your post or the unprofessional comments. I’m not going to give you the low-life response I would like to give you, though, or that you deserve. I have been and plan on being a part of this cyber community for awhile. You probably won’t be around in 60 days. Turds like you come and go frequently. If I’ve pee-ed on your little LeGrand deity, then get over it.

LeGrand’s stuff is worth $1000, but it has some serious flaws. To those that are willing to conduct some critical thinking, this is not a threatening exercise. Your post is borish, assumptive, and rude… not something some of us welcome around here. And, not to disappoint you or anything Steve, but I could care less what you think; your post is a chance to clarify my thoughts and help, maybe, someone else from making the same mistake. Maybe a minor deity like yourself doesn’t make any mistakes, but for me, it sure is nice to post here, admit my mistakes and needs, and get some feedback that both eggs me on and challenges me to keep moving (and falling at times) forward.


Oh Please! Some Of His Inspection “Techniques” Are Ridiculous - Posted by Hugh James

Posted by Hugh James on June 21, 2000 at 11:43:32:

This nonsense of “assume the worst” and make your offer accordingly. And the unprofessionalism of having your offer accepted and THEN sending in a contractor and THEN trying to get your t*t out of the wringer because things are worse than you thought are just bogus.

Here’s my opinion: If the property or the deal isn’t worth making an informed, realsitic offer on in the first place, you ought to just take a pass and leave it to those of us who know what we’re doing. LeGrand’s approach of being the “wheeler dealer” who, as he told us in boot camp, makes offers from his desk by looking at Polaroid pictures taken by other because his time is so valuable sounds cool, but doesn’t work in the real world.

As a Realtor (yes, I’m ready for the worst) I will NOT accept either on my own listings or those of a client, ANY of these goof ball offers with inspection clauses, gotta have my partner’s approval clauses and all that time wasting junk. I don’t know about your market, but our market is still red hot for a good deal, and we don’t need to be bothered.

P.S.>>>>For the price, IMHO, Every one of LeGrand’s courses ought to come with forms and contracts out the wazoo.

Wow… - Posted by HR

Posted by HR on June 21, 2000 at 22:27:22:

That’s a mighty nice, undeserved comment; thanks. I have a great deal of respect for Joe. I think he’s one of the smartest cats to ever attack this field, and he’s an absolute genius at figuring out how systems work and how to beat them. If I learn 1/1000th of what Joe has forgotten (let alone remembered), I’ll do ok. Thanks for the kind words.


Re: How it can bite you! - Posted by Jim V

Posted by Jim V on June 22, 2000 at 01:47:23:

While I’m reasonably comfortable with costs to repair, you can never count on things being what they seem. I had a property with a concrete slab, I knew the kitchen cabinets had to be replaced, but when the cabinets were pulled, a gopher had pushed dirt through a plumbing access in the slab up behind the cabinets and filled any available space possible. Dryrot turned into a major expense due to the dirt and moisture. Even if it all looks acceptable you will never know until rehab starts. Just part of the fun, I guess.

Jim V

Re: OK, you win! nt - Posted by Stacy (AZ)

Posted by Stacy (AZ) on June 22, 2000 at 24:40:51:


Re: Lease options and property inspections question… - Posted by Matt B

Posted by Matt B on June 22, 2000 at 08:04:31:

Since I use LeGrand’s contracts, I believe that issue is covered as far as the tenant/buyer acknowledging that they are buying the house as is. However, I still want to improve my home inspection skills because I have missed some things in the past.

On one deal, I simply agreed to do a lease option on a house that needed all sorts of work that I didn’t even see! I found out about it after a guy who owned a construction company took a look at the house and pointed out all the defects. He wasn’t trying to use it to negotiate either. He told me that he wasn’t going to take it first, then pointed out all the problems.

Another time, I got a house on a lease option and as my tenant/buyer tried to get their electricity turned on, they were told that the electric meter had rusted too badly. They told her that she had to have it replaced before they would turn on the electricity. Technically, since she had just signed the agreement stating that she was responsible for all repairs up to $1,000, she would have to pay for it. Since she had just given me $3,000 as an option deposit, some of which she had borrowed from her mother, she asked if I would take care of it. I contacted the owner of the house, and they agreed to split the cost of the replacement with me. It wasn’t too expensive, but I would still like to know what to look for next time I take a look at a piece of property.

Any way, I will take a look back over my contracts, but I’m pretty sure that after all the papers are signed, the tenant/buyer either takes the house as is, or they move.

Re: Lease options and property inspections question… - Posted by The Donald

Posted by The Donald on June 22, 2000 at 03:54:14:

That’s simple. Address it in your Option with the T/B.

Just have a clause that states: “Optionee acknowledges having had the opportunity to inspect the property prior to submitting this Option and understands that upon exercising this Option there shall be a binding agreement of purchase and sale between Optionee and Optionor.”

Got it? :slight_smile:

Re: Lease options and property inspections question… - Posted by JPiper

Posted by JPiper on June 22, 2000 at 24:12:17:


I don’t think this is much of an issue.

In my lease it does two thing:

  1. Makes the tenant responsible for repairs and maintenance. An interesting question would be that if the tenant did a property inspection just prior to exercise, how would he make you responsible when by contract HE is responsible.

  2. The tenant acknowledges that he has had an opportunity to inspect the place, that I make no warranties or guarantees, and that he accepts the place in it’s present “as is” conditon.


Re: Lease options and property inspections question… - Posted by Laure

Posted by Laure on June 21, 2000 at 23:32:17:

I don’t do sandwich L/O’s but my Tenant/ buyers have never requested an inspection. After all, they have lived in the house for a long time ( a year or so ) and they would be very well aware of problems by the time they exercise their option.

Laure :slight_smile:

WOW! I Didn’t Know I’d Touched A Nerve - Posted by Hugh James

Posted by Hugh James on June 23, 2000 at 11:43:41:

Glenn, JohnBoy, everyone…Look, I mean no disrespect, but here’s the reality of the business where I live. Let’s say my house (or my client’s) is listed at $100K, and needs some work. Forget ARV and all that stuff, I’m listed at $100K and some guy (or gal) who’s spent more time in following the speaking schedule of Ron LeGrand (or Sheets or any of the rest of these gurus) instead of learning how to price rehab costs and learn the value of property in my area–wants me to present an offer at $55K with two or three (or more) of these absolutely goofy “must be approved by my shrink” weasel clauses. My reply: “GET OUT!”

Anyone who’s in the rehab business who needs a “professional” inspection every time they make an offer needs to rethink their career, IMHO. Worse, while you’re playing the LeGrand “lowball then look” game, I’m selling the house to your competition who knows what he’s doing and pays cash.

So whine all you like, threaten to go to my client direct, call the state, sue me…whatever. I AM NOT obligated to humor you and play games at my expense or at my client’s expense just because I’ve got a license. Any newbie who comes at me with that “I’m going to the state” nonsense better know what they’re doing or I’m going to have them for lunch. Frankly, I think the ultimate mark of a newbie is the “I’m going to sue” threat. Get real. Everyone in this business knows you don’t make money going to court everytime you don’t get your way. It’s just not reality.

If those of us doing this stuff every day spent as much time in court and at state hearings as a lot of the people on this board suggest, only the lawyers would be making the real money. You all make it sound like you can just head off to court or a complaint hearing at the drop of a hat.

Seriously? - Posted by Mark (SDCA)

Posted by Mark (SDCA) on June 22, 2000 at 11:14:00:

You will refuse to present an offer that has an inspection clause? In all the contracts I have seen (including the ones that were created by the realtors’ attorneys), inspection clauses are BOILERPLATE. You really expect me to drag my inspector into every one of your listings BEFORE I make an offer and before I know if we are even in the ballpark on price?
Ummmmm… That is a new one to me.


Re: Oh Please! Some Of His Inspection “Techniques” Are Ridiculous - Posted by eric-fl

Posted by eric-fl on June 21, 2000 at 14:31:45:

Hey, Hugh, I’m a Realtor too! (I’m a poet, and I didn’t know it). Hey, I just had one question, when you said, “I will NOT accept either on my own listings or those of a client, ANY of these goof ball offers with inspection clauses”, I think you really meant to say just your own properties, right? Because, I seem to remember hearing something about how it was legally required that you present ALL offers to a client, regardless of how ridiculous they seem to you. Yes, come to think of it, I do remember that now, something about fiduciary responsibility, ethics, and a bunch of other stuff you apparently choose to ignore. It was because of time wasters like you that I got my license in the first place - now I can go around your antiquated ways of thinking and conduct business in a fair and ethical manner. Do you really think you are going to make a post on a Creative Real Estate Investment site about how you can’t be bothered with an inspection clause, and not get slammed for it? What would you have us do then, perhaps buy all our properties on the seller’s price and terms, in as-is condition, while doing nothing to protect our own interests? This kind of thinking might get you applause and praise down at the local board, but here in the world of BUYERS and sellers, that isn’t going to cut it. Interest rates are creeping up; this seller’s market WILL end (they all do) and you are going to be high and dry if you don’t start thinking a little more creatively. I’ve never understood the “seller’s rights only” mentality most Realtors have; it’s like they think the coin has only one side or something. Buyers have rights too. We will enforce them. We have a legal right to do so. And you’re just going to have to learn to deal with it. If I were making an offer through you and you attempted to reject an inspection clause, only a computer could measure the amount of time before I had you brought up in front of your broker and insisted on doing business with another agent (a request with which they must comply). I hope you don’t ever “NOT accept… ANY goofball offer” from an experienced investor who knows their rights, or you may be in for a rude awakening.

Thanks Mark - Posted by Hugh James

Posted by Hugh James on June 23, 2000 at 14:52:53:

…for the question. See my post above if you’re interested.

One More Thing - Posted by Hugh James

Posted by Hugh James on June 23, 2000 at 14:51:28:

The operative phrase here is “goof ball offers” NOT the inspection clause. See my post above if you’re interested.

Sorry, Missed This One - Posted by Hugh James

Posted by Hugh James on June 23, 2000 at 14:48:21:

The only thing here that’s rude is your attitude. Been doing it this way since 1969, and I’ll match my record with yours any day. Don’t need your advice either, about how to run my business. I’m no Donald Trump, but I’m not losing weight from going hungry either. You’re entitled to your opinion, but not to personal bashing which is how I take this post.

Time wasting is what my post was all about. So go ahead, debate ethics and fiduciary responsibilities all you like. While you do that, and after you’ve got 31 years of deal making on your own (and I don’t think you do) and for a whole slew of satisfied clients, THEN you can give me advice about ethics and responsibility. Until then, as the lady is rumored to have said, “To each his own…” as she kissed the cow good night.

Re: Oh Please! Some Of His Inspection “Techniques” Are Ridiculous - Posted by GIO

Posted by GIO on June 21, 2000 at 19:11:15:

From NYC : ethics or not many offices wont present these “goofball” offers, and when more than one or two or three offices do it than you (the buyer) will not waste your time trying to sue or complaining about each offices ethics or rule breaking.
what the brighter r.e. offices will tell you is that if your partner, inspector etc. will have to inspect or approve the prop. than have them look at it asap and then the offer will be presented. I’ve been an agent in the past and i will not present an offer that has an escape clause that i consider “ridiculous” and easy to get around, if so than give me a minimum $100 (certified funds) NON-REFUNDABLE good faith deposit. DONT WASTE MY TIME !!! , but of course not all agents or brokers are aware or sharp so i guess investor can try it if the investor can get away with it. When crazy offers were made on my props, i want to be compensated for my time of taking it off the market.

Touche’ - Good for you. (nt) - Posted by Andrew

Posted by Andrew on June 21, 2000 at 16:30:13:


Re: Thanks Mark - Posted by Mark (SDCA)

Posted by Mark (SDCA) on June 24, 2000 at 08:40:04:


I am curious. If you don’t mind my asking… What state are you located?? The reason I honestly ask is that I honestly cannot imagine what my realtor would say to a listing agent who refused to present an offer because I did not strike through the language in the listing agent’s contract that says I have X days to inspect property and Y days to present my findings to the seller who has Z days to fix it or cancel the contract. The reason I cannot imagine this is because an inspection is so standard where I invest.
As for neegin a professional inspection… I am an investor. My talent is making deals and doing the analysis and finding the money. My talent is NOT plumbing, roofing, electrical work, foundations, pools etc… That is why I need the inspection. Because I am going to pay someone to do it. So I need to know how much it’s going to cost me. I am not an inspector so if I do my own inspection I will undoubtedly miss some problems. Those problems will still need to be fixed and they should come out of the seller’s proceeds not mine.



Re: Attn: newbies, and Emperors with no clothes… - Posted by eric-fl

Posted by eric-fl on June 21, 2000 at 21:45:00:

Well, I don’t know how they do it in New York, but here in Florida (Welcome to Florida! Now go home!),(We don’t care how you did it up north!) and, (Not all of us are here on vacation!), I’ve never not had an offer accepted because of an inspection contingency. Sure, I’ve had 'em rejected because the price was too low, the terms too much in my favor, etc., that’s the name of the game. But never over an inspection clause - it’s just good business sense, and no one has ever given me grief about it, ceterus paribus.

Perhaps I’ve just been lucky (doubtful), but I’ve never even considered that an inspection contigency was “flaky” or “goofball” - in fact, in my area at least, it’s an accepted, standard business practice, even in non-creative, traditional type deals.

If I couldn’t check out a property before buying it, what incentive would I have? Is this like a P.T. Barnum, sucker-every-minute, greater fool theory kind of a thing? If so, stay in New York, because that wouldn’t fly for 5 seconds down here. Especially the thing where, let me get this straight, you want me to PAY YOU for the privelege of inspecting the seller’s property, so they can then reject my offer out of hand and use it as a marketing tool for the next sucker that comes along? How stupid do you think people are?

What agents need to learn is, buyers have thousands of properties, in any area, they can buy - but most sellers, the overwhelming majority, have but one to sell. The backlash against agents is coming. As one, I can speak to this. Did you know that in public opinion surveys, of respect and professions, RE agents consistently rank near the bottom, usually above only janitors and waiters? (I took umbrage to that when I was a waiter.)

The word for the day is “disintermediation”. This is what happens when a technology, institution, or otherwise replaces another technology or institution, making it obsolete. Travel agents have already mostly experienced this with the Internet, and the Realtors are next. This is because, the only reason Realtors have power, is because they have access… to the MLS. All this is is a database. Nothing more. There is no magic to it - this is an Emperor with no clothes indeed.

This is what is going to happen a) Someone will make a suitable replacement for it. Never happen? That’s what IBM thought before Apple came along. Or b) the DOJ will “go Microsoft on their a**.” Why? You want to talk monopoly? MS has got nothing on the Realtors. Check this out - in certain markets, such as Dallas, the local Boards are forbidding their members to advertise in ANY OTHER Internet site other than Realtor.com. That is collusion, pure and simple. They see that their long standing monopoly is threatened, and their days are numbered. Though I am a member, I welcome the coming day of reckoning - and the more level playing field to follow. I, for one, am not afraid to compete.

It is the pure arrogance of the posts in this thread that are the reason why this will happen. Most RE agents are salespeople, who happen to be moving houses instead of computer chips or lipstick. Who wants to deal with people like that? I only want to deal with truly knowledgable Real Estate practitioners, and I believe the public at large shares my sentiment.

Attention newbies: Don’t let the posts in this thread fool you. Properly worded contingency clauses are a normal and accepted way of doing business, as long as they are fair and reasonable. Never let a salesperson (ahem, I mean, agent) talk you out of your rights. When it comes to protecting yourself in RE transactions, the law basically says “Caveat Emptor”, so that is exactly what you should do. And remember, no agent represents the buyer by default, or otherwise - they represent the seller, unless you have a signed, written agreement to the contrary. Do not be fooled into thinking otherwise, ever. I’ve known more people than I care to recount who were taken advantage of because they were not aware of this simple fact.