Avery Carl [00:00:03]:
What’s up, guys? It’s Avery Carl from the short term show doing the intro for the panhandle of Florida. We are doing a ten episode deep dive on two markets here, both the Emerald coast and the forgotten coasts of Florida, which basically makes up the entire Florida panhandle. So ten episode deep dive here. We are going to add quarterly updates, so make sure you hit that subscribe button. We also have some supplemental materials for you guys on our website. So anything you need to know about current short term rental property pricing in terms of how much it costs to buy a property in these markets, you can find that on our website@theshorttermshop.com, dot. You can also find current air DNA income data thanks to our friends over at, you guessed it, AirDna. And we’ve got all that for you guys.

Avery Carl [00:00:50]:
So that you can listen to this at any point in time and go find live pricing and live income data. Also, if you guys want to buy a short term rental investment with a short term shop agent on the emerald or forgotten coast, you can just email us@agentshorttermshop.com and we will get you hooked up. These are two of my very favorite beach markets, by the way. I’ve chosen to live in the Emerald Coast. I also invest in the Emerald and Forgotten coast, so very near and dear to my heart. Also, if you guys just have more questions and you want to chat about short term rentals, we’ve created an amazing community over on Facebook with over 50,000 short term rental investors just talking shop all day. It’s got the same title as my book. It’s called short term rental, long term wealth.

Avery Carl [00:01:33]:
So head over there to chat more about short term rentals. And if you want to chat live on Zoom, we’ve got a call every Thursday that you can join@strquestions.com happy investing, y’all. Hey, guys, welcome back to another episode of the short term show special episode series. This series is on the Emerald coast today and Forgotten coast, sorry. Today we’re going to talk about the contract process for this part of Florida. Got a pretty cool cast of characters here to help me do that. I will introduce them really quick. Jan, you want to start off?

January Johnson [00:02:12]:
Hello, January Johnson. I sell everything between Panama City beach and Navarre beach. I’m a local, I’m a Florida native, and I’m the longest running Airbnb host in the city of Panama City and a community leader for Airbnb.

Avery Carl [00:02:28]:
Awesome. Rush Valentine, first time on the show.

Rush Valentine [00:02:34]:
Hey, everyone, I’m Rush Valentine. Been with the short term shop for a few years, kind of, I guess one of the. One of the, I guess the original for this area. So for about the past four years now, only been working with investors that are looking for Airbnbs self management type properties. So it’s been fun. Learned a lot and have a lot of. A lot of info and knowledge to share.

Avery Carl [00:02:58]:
Thanks, Rush. Next we have an investor, Patrick Andrus. Patrick, you want to introduce yourself really quick?

Rush Valentine [00:03:04]:
Sure.

Speaker D [00:03:04]:
Patrick Andrus. I’m an investor. I’ve got two air. Two Airbnbs down in Panama City beach. And I’m also an attorney.

Avery Carl [00:03:13]:
Awesome. And last but not least, we have John Shelton, a home inspector in this area. John, you introduce yourself really quick.

Speaker E [00:03:20]:
Good morning. John Shelton. Aim higher home inspections owner operator. The area we’re coming in is great. We service from Destin all the way to Carabel, which is forgotten coast. I do a lot of work in forgotten coast. I think 1886 is the oldest house I’ve done. I’ve done so much out there.

Speaker E [00:03:44]:
There’s one week and actually did seven homes out there. I just got a motel and we stayed out there Friday, Saturday and Sunday. So I do a lot of, a lot of stuff on St. George island in Apalachicola. I’m very familiar with that area.

Avery Carl [00:03:55]:
Awesome. Thanks for coming on.

Speaker E [00:03:58]:
Yes, man. Thanks for the invite.

Avery Carl [00:03:59]:
Yeah, yeah. I just got back from the forgotten coast yesterday. We went on a little weekend fishing trip. It was awesome.

Speaker E [00:04:06]:
I think they’re fishing is the best over there compared to over here. Less pressure.

Avery Carl [00:04:10]:
So, yeah, yeah. It was a lot of fun. We only caught one thing, but we also don’t know what we’re doing when it comes to just, you know, fishing off the beach. So we did pretty good. We kind of pompano.

Rush Valentine [00:04:24]:
Definitely.

Speaker E [00:04:25]:
Nice try.

Avery Carl [00:04:26]:
Yep. All right, so what we’re going to do is we’re just going to kind of walk through the contract process. So if I’m an investor who’s interested in making an offer on something, maybe I’ve had my agent go take some videos or maybe I’ve come into town and looked at some things. So let’s talk about making offers and what the terms are on Florida contracts. So who wants to start? Start.

Rush Valentine [00:04:50]:
Okay. I mean, as far as I go or as far as I typically advise people, the Florida contract, luckily, especially in this market, is pretty straightforward. And especially over the past few years, once Covid started, we really got into a situation where I feel like most sellers specifically wanted an as is contract with that. Again, it kind of made things a lot more simple for us. You have, I guess the standard is a 15 day inspection period. During that time period, you can obviously can do any inspections you prefer, whatever you like. I always tell people, though, it is an as is contract. Just because we find things on the inspection doesn’t mean that a seller will typically work with us on those options.

Rush Valentine [00:05:36]:
I mean, on those items or credit as money or do anything else. There was a time specifically back in 2021, you know, you really didn’t get anything at all back. But now we’re kind of back in a position where we don’t just have to use that as this contract and can. Can kind of have a little bit more flexibility on, you know, our negotiating power and things of that nature. But again, it’s a, you know, standard for us. At least what I’m seeing is up, you know, 1% EMD.

Avery Carl [00:06:05]:
What’s EMD?

Rush Valentine [00:06:07]:
Sorry? Earnest money deposit. So we’re still seeing about 1% of whatever you’re offering as kind of like the standard. You know, sometimes we do get some pushback and ask for an additional amount. But that’s. I’m saying that most of the time, aside from that, it’s really just, you know, that inspection period, we’re still going with the inspection financing and appraisal contingencies in most contracts, unless it’s just some kind of unicorn property that the seller is just 100% positive they’re selling no matter what. But other than that, you know, 30, 30 to 45 day closings, and that’s the majority of it.

January Johnson [00:06:44]:
I want to add something about that. That on an as is contract, the seller does not even have an obligation to respond to a repair request. They don’t even have to acknowledge it, although most of them do. And if they. I tell my clients we will only try to negotiate items that impact safety or insurability. Nothing cosmetic. And just because they are safety or insurability related still doesn’t mean they have to give us anything or offer anything. But my position is always, the seller knows what condition their property is in.

January Johnson [00:07:17]:
And, you know, they know if the roof is too old, and they know certain things about their property. So we will try to negotiate, but I try to prepare everybody to let them know. Also, I tell them the inspector is going to find every little thing. That’s their job. So we’re not going to look at all of those little tiny things. Those are for you to hire, you know, an electrician or a plumber to come in for a day and fix all those things up yourself later. But I just wanted to flag that because people expect that because there’s this long inspection report in that 15 day period that the seller will address all of those items, and that is not the case.

Avery Carl [00:07:54]:
Good point. So let’s back up a little bit and talk about the earnest money deposit. So there’s only. In Florida there’s just one deposit. Right. It’s just the earnest money, and it’s refundable if you terminate under the contingencies. Right. Okay.

Avery Carl [00:08:10]:
And I want to hear from the attorney, Patrick, before we get too far into the inspection world. So when someone terminates a contract and gets their earnest money back in Florida, the seller has to sign the release to say, yes, you can have it back, even if you. Even if it falls under the contingencies. So what does that actually mean? Because a lot of people think, oh, well, I’m terminating under the contingencies. I automatically get my earnest money back. But that’s not the case. Can you kind of explain that in.

Speaker D [00:08:41]:
Both sides have to sign the waiver for the release and who gets the earnest money. And so if the parties don’t actually sign it, then we have to go to court. If we can’t come to an agreement over the split of the earnest money and get a judge to sign off on who will get it back. So it’s not a done deal if you did it under contingency, you may have to hire an attorney to go into court and get it signed and get your money back, because it may be clear that you canceled under a contingency, but for the title company to give it, they have to have the signed waiver by both parties to the contract. So if you don’t have a signed waiver, you got to go to court to get it back. So that’s why, in most cases, you want as little earnest money in as possible, whereas the seller’s trying to maximize the earnest money, they can hold up as much as possible. So it’s just kind of give and take. That makes sense.

Avery Carl [00:09:35]:
Yes. Thank you. What I wanted for people to understand is, I see people sometimes, they change their mind about a property and want to buy something else instead. And instead of, like, being honest with their buyer’s agent, like, hey, I think I’d rather offer on this property. Like, what can we do to get out of this one? They try to get really cute with the earnest money because they are with the contingency wording to get their earnest money back and think that it’ll just be automatic. So I want people to understand that you do have to act in good faith. And if you need to get out of the contract, like, let us know, and we’ll do our best to do that, um, legally, without, you know, acting in bad faith. But, uh, you gotta be honest with your agent to be able to.

Avery Carl [00:10:18]:
To move around and have some flexibility. But just know the seller could stub their toe that day and say, I don’t feel like signing this. And then it has to go to a judge. And I’ve seen it happen. Like, I’ve seen some people just dig their heels in where our buyers were totally within their rights to terminate that contract, and the seller just was mad that they were terminating and didn’t want to give it back. So just know, guys. It’s not just, oh, yeah, they’re holding it at the title company. Let me call and threaten the title company to give it back to me.

Avery Carl [00:10:45]:
Doesn’t work like that. Got to go to a judge. So just know that when you’re putting earnest money down, it’s not automatic to get it back.

Speaker E [00:10:50]:
Yeah.

Speaker D [00:10:51]:
The title company is just holding the money, and trust is what they’re doing. They’re not actually privy to the contract. That’s the term that we need to use, is privity. The. And that means that y’all are in contract with each other. Title company is just this agent holding the money. So the only person you can actually sue is the seller or the buyer to get the earnest money, not the title company. They would add the title company in because they’re the ones holding the money, but they’re not actually on the hook for any damages.

Speaker E [00:11:16]:
Yeah.

Avery Carl [00:11:17]:
And it’s not up to the title company to decide who gets it. I’ve seen people call and want to fight with the title company and. And plead their case as to why they should get their earnest money back, but it’s just not up to them.

Speaker D [00:11:28]:
Exactly.

Speaker E [00:11:29]:
Can I offer one thing on that?

Avery Carl [00:11:31]:
Please do. Yeah.

Speaker E [00:11:33]:
So, I’ve actually had one recently where we went verbally with the agent and buyer were there, and the agent said, that’s enough to get out of this contract. By the way, we have another one scheduled at 1030. So they already had a second property lined up. They basically used me to get out of it, so I thought that was kind of an awkward situation, talking about suing. I had one last week. It was front beach road rental. He talked to the neighbor. They weren’t getting what they wanted.

Speaker E [00:11:59]:
Roi, the neighbor isn’t. So they got cold feet, and they walked at closing table, and so it came up what was going to actually be forfeited the earnest money. And what can you actually sue for? And that was kind of, I kind of overheard the conversation, but I don’t know if you wanted to touch on, it was like a certain percentage you could actually sue them for. It wasn’t like, I can sue you and you have to buy my house. So I was kind of, I was wondering if you wanted to talk on maybe how that works. If you do walk last minute, if.

Speaker D [00:12:27]:
You do walk at the last minute and you’ve got all the contingencies done, you can actually sue them and make them buy the house. Yes. It’s called specific performance. And you can, in fact, there’s a Kentucky case on point that’s a federal case that would cover this. The guy signed on a napkin that he’d buy this house for x amount. As long as it’s in writing and you’ve gone through all the contingencies to get out of it, you can force them to buy it, because land and real estate is one of those things that is unique. So as long as it’s in writing that and you’ve gone through all the contingencies, everything’s been signed off on, they can. They can force you to buy it.

Avery Carl [00:13:04]:
Oh, wow. I didn’t know they could do that. Well, well, guys, I don’t want to scare you all. I just want you guys to know that, like, when you’re signing a contract, these are the things that don’t happen very, very often, but if you get a little crazy, they can. Okay, so back to the contract. So we talked about earnest money. Rush, you said an as is contract, which is pretty standard in this market. In Florida, it can differ in other parts of Florida, but in the panhandle, typically sellers want the as is contract.

Avery Carl [00:13:33]:
Does that mean there are no contingencies to the contract?

Rush Valentine [00:13:36]:
No, there’s still contingencies. The contingencies are actually pretty similar, just like. Just like in most states or in most, you know, most places, in most types of contracts. Like I said, right now in this market, we’re not, you know, we’re not in the craziness anymore like it was. It’s still, you know, I think it’s still, there’s a lot of situations where we’re still kind of seeing some seller power and a little bit of a seller’s market more than you would in a lot of parts of the country, I’m sure. But even then, we’re still, in most cases, seeing an inspection contingency, which, again, typically lasts 15 days. Every now and then they’ll shorten it to ten or request a lower one. Especially now that we are getting into summer in this market, things are a little bit hotter.

Rush Valentine [00:14:11]:
People want to know if they’re going to. They don’t want to wait. They might not want to make the whole two weeks to find out if somebody’s going to continue with the contract or not. So they may shorten it for that reason. But we’re still doing appraisal contingencies and we’re still doing financing contingencies. So all of those are still there. That, as is really just because from my understanding, from what I’ve seen in this market for so long, is, although we have a ton of out of state buyers, we also have a ton of out of state sellers. Most of these properties, even if it’s not, you know, if it is a current vacation rental, the last thing they want to do is cancel actual rentals to get inside there and repaint some baseboards or just fix some minor cosmetics, things that actually don’t affect the sale of the house.

Rush Valentine [00:14:51]:
They’re not going to lose that money or rental income just to spend more money to fix a house that they’re not even passed all the contingencies yet. So that’s why most of these sellers, I feel like, do prefer the ads as contract, because they’re not obligated for that. And even if it’s not an actual rental, chances are it’s a second home or it’s something like that. They have jobs elsewhere, they’re busy doing their own thing. They’re just kind of, you know, it just kind of works out better on the seller side to not be obligated to do all those things where in another market you may, you know, you may have to fix all these things in order to get a buyer to continue with the property purchase.

January Johnson [00:15:23]:
The timeline, too. I don’t. Avery, I don’t know if you have that as a question, but from the date contract, you have 15 days or ten or whatever the contract says, but typically 15 for the inspection period, and you can cancel the contract for any reason in the inspection period. You do not need to even have had an inspection, and it does not need to be inspection related, but you can cancel for any reason in that period. The effective date of the contract also starts the earnest money clock ticking, and you have three business days from the date of the contract to get the earnest money deposit to the title company. And that’s usually wired. So it’s calendar days for inspection and business days for earnest money deposit.

Avery Carl [00:16:06]:
That’s an important distinction. And also an important distinction compared to other states is so Florida during the inspection period, you could terminate for any reason you want. You changed your mind, you don’t think you’re going to. You analyzed again and you did it wrong the first time and you’re like, wait, never mind. You can do that in other states. It has to be some other states, not all other states. It has to be related to the inspection itself. So that’s an important distinction.

Avery Carl [00:16:29]:
Also. What happens, Patrick, if, and I’ve seen this happen before, where a buyer terminates before they deposit the earnest money, and they’re still in that three day window before their deadline to terminate like they got under contract, and then they’re like, wait a minute, I don’t want to buy this anymore. And they terminate. And now what? When they didn’t even deposit it, they.

Speaker E [00:16:53]:
Can just, it can pretty much walk.

Speaker D [00:16:56]:
Away because it’s going to cost too much to try and go back and get that earnest money. You’re talking about 1% to 2% of the purchase price. It could be 20,000, but you’re going to pay an attorney, which you’re not going to get paid back. In the us legal system, normally.

Rush Valentine [00:17:11]:
You’Re.

Speaker D [00:17:11]:
Going to pay them ten to 15,000. It’s just not worth it. So most people don’t want to bother with it. They’re going to show up to court. It’s just a pain in the butt. You’re not going to deal with that. So you just, you’re going to say, well, I’ll find another buyer and move on. Yeah, that’s what normally happens.

Speaker D [00:17:27]:
Now you have some people that say it’s the principle of the matter and they’ll end up doing it and they’re going to drive their attorney crazy and probably go through four at that point because they’re that type of person.

Rush Valentine [00:17:41]:
I’ve got this question a handful of times myself, actually, in different cancellations and things, and I just kind of want to hear your on that. Let’s say that a seller does refuse to sign a release and cancellation and return the earnest money to the buyer, and the seller does decide to, you know, hire a lawyer to keep that earnest money. Can seller go forward and complete and relist their house the next day, back active again and sell it while all this is going on? Or does this have to be settled first?

Speaker D [00:18:10]:
No, they can keep selling it because the contract has been canceled. The only question is over the earnest money, unless it was not for one of the reasons in the contingency period, and they want to force this person to buy it, then they can sue them for specific performance. But that’s going to cost a lot of money. That’s the reason you never hear of it, because the only time you’re going to do that is when it’s like such a unique piece of property, like maybe a Wyoming ranch or something like that. That’s just amazing. But, you know, or if it’s worth a lot of money, but yeah, they can relist it and sell it because the fight’s only over the earnest money at that point. So the contract has been canceled except for that.

Avery Carl [00:18:50]:
Okay, so as is contract doesn’t mean there’s no contingencies. You can still terminate and get your earnest money back if you’re using any of those contingencies. And it doesn’t mean that you can’t ask for repairs or concessions. It just means that the seller’s not obligated. So, guys, what I don’t want you guys to take away from this podcast is like, oh, in Florida, I have to do as is and there’s no contingencies. And that’s really scary. It’s just, as is doesn’t mean no contingencies. It just means you’re not asking for.

Speaker D [00:19:17]:
Stuff as an investor. I bought two properties in Panama City beach, and I’ve asked for repairs, but what I really wanted when I went to ask for those repairs was them to knock some money off the purchase price. And I got it each time because I was looking for properties that on the market for a while and stuff like that. So it is possible to get somebody to knock something off the purchase price. They probably won’t do the repairs, but you might be able to get a little bit back at the closing table for some stuff, just depending on what it is. So don’t, don’t say it never happens. It could happen.

Avery Carl [00:19:50]:
I’d rather them give me money than do the repairs because I would like to be in control of those so they’re not half assed, all that.

Speaker D [00:19:57]:
So, yeah, that’s the way I am, too. I say I want all this stuff, but I’m really looking for money.

January Johnson [00:20:04]:
And that’s what I do. When we put a repair request together, we’ll say we’d like these things fixed or x amount of dollars back or whatever, and it’s just easier for the seller. As Rush said, a lot of sellers are out of state, too. They don’t want to manage. I have somebody right now that’s they’re already an out of state seller, but they’re currently in Easter island, wherever that is. And so, you know, the, getting the repair done that we wanted is a little dicey, but.

Speaker D [00:20:33]:
Well, that is an awesome place to visit. It’s 3000 miles off the coast of Chile.

January Johnson [00:20:38]:
So I give, we gave them an option to give money back or whatever and they were like, yeah, just handle that.

Avery Carl [00:20:46]:
Okay, I have one more thing I want to address before we move on to the diving into the inspection. So there’s one thing that I’ve found to be pretty unique to Florida in terms of contracts or not? Not unique, but done much more often in this market anyway than other markets that we operate in. And that is a kick out clause. So who wants to give a definition of a kick out clause?

January Johnson [00:21:06]:
So generally speaking, it’s a 72 hours period where the seller has the option to kick out the first buyer if they get a better offer. So this would happen in circumstances where there’s like maybe a really long closing time or the buyer is trying to sell a property first. And so the seller might take the offer, but, and this would happen if there’s few offers or no offers except this one because if there’s competitive offers then nobody would add this in. But basically I’m saying, well, I like your offer, okay, but I don’t really like this part and this part. So we’re gonna, we want a 72 hours kickout clause because if we get a better offer, then we’re gonna come back to you and say you have 72 hours to either improve your offer, meet the terms, whatever you need to do to basically beat that offer. And then if, if it comes to that, then they can execute the kickout clause. So it’s, it’s basically a contingency for the seller to opt. To opt for a better contract if one comes.

Rush Valentine [00:22:13]:
But if the person in first position, if they’re willing to drop all their contingencies that were part of their original offer, they can continue with the original contract. So basically, if you had an inspection period or it was contingent on you selling a house and you actually have the means to purchase the property you’re under contract for without selling that house, you just kind of prefer to sell the house. So I mean, if you still want it bad enough and you can go ahead and do it without having to sell the house, you can drop that contingency from the contract and still move forward with your original price and everything.

Avery Carl [00:22:43]:
All right. Yeah, we don’t see that too terribly often. I think we’re going to see it more now that the market slowed down a little bit. But it’s definitely something to keep in mind because most of the time if you’re looking at properties on the MLS or zillow or whatever, they’ll still show as active. So you won’t know until your agent reaches out to the agent to make an offer that, oh, hey, actually it’s under contract with a kickout clause. So, so that’s that. Let’s move on to inspections. Then we will move on to financing.

Avery Carl [00:23:12]:
So you got 15 days typically depending on what you negotiate in the contract to get your inspection done. John, what does a typical home inspection in the Florida panhandle consist of? Looking at all that?

Speaker E [00:23:27]:
Well, in Florida it’s a little bit different because we have a lot of insurance moving parts that you don’t have in other states. The guy I worked under, trained under is a friend of mine in Alabama. And, you know, they don’t deal with any of the stuff we have down here. As far as there’s two specific items that usually comes up, a wind mitigation and a four point report are the two most common insurance issues we have to get over. The wind mitigation is you’re trying to lower your insurance annual premium. It’s optional. You can, you know, you can pay 5000 or you can pay 2000. So to get the credit for your, your wind discount, you do what’s called the wind mitigation.

Speaker E [00:24:10]:
And that’s where we check for hurricane clips and nailing of the roof and, and we try to do those on, they’re required on homes built prior to 2002, but we try to do them on all homes now just because insurance standards are not what I’m used to where I wouldn’t normally do them, now they’re making us go back and do them. So it’s just cheaper for me to do it while I’m there than to go back later and charge more money. So I tried to do them. I’ve actually ran into. So the hurricane clips are the biggest things that get you a discount. And that’s where the, the truss, the roof system comes to the outside wall of the house and it’s tied together the top plate with the truss and you have what’s called a hurricane clip. It’s a metal plate that ties the two together and it prevents the roof from ripping off during the hurricane. It’s a really, really big issue, what we’re actually running into on new construction.

Speaker E [00:24:58]:
Another reason I like doing them, even on new construction, there’s a builder here locally, who has decided to save a couple pennies is all it’s got to be. But there’s an additional code option where you can screw the truss down from the top down and then from the top plate up. So you have a screw and a screw. But now you put your roof decking on top of your truss and you put drywall over those screws. So when I get there on a home inspection and I go, I don’t see any hurricane clips. And I got the builder going, yeah, but we screwed it. But I can’t see it, so I can’t give you the credit. So I got to mark it as toenail, which is 1960s construction.

Speaker E [00:25:36]:
So what normally happens on a situation like that? And the insurance company goes, yeah, but we don’t need that wind mitigation now. So don’t worry about it. Just go and buy the house. We don’t need it. The problem is going to be in five years, if another storm comes through and they get a new roof, well, then they’re going to need a new wind mitigation. And at that point it’s going to be pointed out again, hey, you don’t have hurricane clips and we can’t verify the other option. So that’s kind of, I don’t understand why they’re doing that. I’m really pushing back on the builder it is to code and they can do it.

Speaker E [00:26:01]:
I don’t understand the reason behind it. So that’s a wind mitigation. And then if you have window protections, that would get you a discount. There’s a lot of different things you can get to get discounts. And that’s where we do that form and do that inspection. And then you turn that into your insurance and get your discounts. Then the other one is a four point inspection. I like it.

Speaker E [00:26:23]:
I’m retired military, so I like, I’m retired air force. And I like the standardizations. I like the check and balance system. And Florida, they have it, I feel, because we have what’s called a four point inspection. So if the property is older than used to be, older than 20 years old, you would have to do it. We try to do those on all homes now. So you have that documentation. If insurance all of a sudden decides they want it.

Speaker E [00:26:46]:
So that’s the four points of the house, the roof, the plumbing, the electrical, and the ac. We have to inspect basically all four of those areas and then turn that into your insurance. And what I’m saying on check and balance is if I tell, if I tell the buyer, hey, your roof is shot. Well, now I got to turn out and do your insurance paperwork. And on your insurance paperwork, I have to say, what’s the remaining life on the roof? Well, to get a VA loan, it has to have at least three years. Conventional loan. I’m sorry, Va. It’s five years.

Speaker E [00:27:15]:
Conventional loan is three years. So I have to give you at least three years. So if I tell you, hey, your roof is weathered, you’re going to have to repair it soon. You know, your insurance document is going to say you have three years remaining. So there’s kind of a check and balance there that whatever I tell you in the report, your insurance documents have to match it. So I can’t tell you your roof is shot. And insurance, you have ten years left. So that’s what I like about that.

Speaker E [00:27:39]:
The biggest thing we normally get is the roof and electrical. There’s certain electrical things they won’t insure. Fire hazards, safety hazards, plumbing. There’s certain water pipes they won’t insure, like polybutylene. That was in the 1990s. That was the new pex. There’s a big lawsuit out there on those guys. So if a house has polybutylene, it’ll have to be replumbed, more than likely to get insurance.

Speaker E [00:28:05]:
There’s a loophole along with everything. Insurance can actually write the policy on the house. If you have polybutylene, it just doesn’t cover anything water related. I don’t have the statistics in front of me, but I would have to say the highest claim is going to be water. You know, laundry, bathrooms, anything window. So you can still get insurance, but there is a little loophole there. Likewise, galvanized pipe, old piping. They’re having a problem with that now as well.

Speaker E [00:28:31]:
So those are the Florida unique insurance documents that we have to do. And then you go into the regular home inspection, which we do on homes, you know, like the forgotten coast. There’s a lot of them over there that have a crawl space. We have some here in Panama City, too, but usually your beach homes and older homes have crawl space. That’s a. That’s a unique situation on itself. We’re running into a lot of them now are putting spray foam on the subfloor, so when you crawl underneath to do your inspection, you really can’t see anything. You can’t see the integrity of the wood for any termite damage.

Speaker E [00:29:08]:
So the structural integrity of it, that kind of stinks when that happens. And when they do that, then that makes it difficult to get a pest, get it bound for pest inspection, too, because the WDO report can’t inspect the wood either. So on the home, we do the whole thing. Anything we can touch, we try to put our hands on it from the roof, get up on the roof, inspect that and the attic for insulation. I’ve, I’ve had seven homes so far with no insulation in it. With my, my oddest story being actually in St. George island, it was a seven year old home. When I got in the attic, there was no insulation in the attic.

Speaker E [00:29:44]:
The air conditioner was located in the attic. And the h vac guy had taken notes on the unit that he kept servicing the AC because the house was hot all the time. Never pointed out it didn’t have any insulation in it. So new, new homes, they’re still a good idea to get inspected. There’s a lot of stuff. In fact, we had an inspection this morning that we walked on because it’s, it’s supposed to be ready. And there’s just, we just showed up and there’s just so many things wrong with the house that I said, no, we’re not even going to do it. So from the plumbing, we, we test, we do a lot of pictures on a new construction.

Speaker E [00:30:17]:
I bet we still have 120 to 150 pitchers. We take pictures of the register when we’re testing the ac. We take pictures of the water temperature when we’re doing the water. Our reports are really, really in depth to the point I hardly ever get a call back. They’re just so in depth and detailed and we just, we document everything from loose toilets to dripping faucets. You know, in the cosmetic thing, I get it that, you know, that’s not going to be repaired, but you still, we still have to write it up. The way I look at it is, if you have a crack in a ceiling, is that going to get repaired? No. As a cosmetic, yes.

Speaker E [00:30:54]:
I ride it up because when they move in and three months later, they lay on the living room floor to watch tv and they look up and see that crack, they’re going to think foundation issues. Why wasn’t this pointed out? And they can just blow everything up. After Hurricane Michael, it was really cool. I had a lot of, I had a lot of homeowners reach out to me and say, hey, I need my home inspection report. Insurance is pushing back. And I had a stucco and stucco house in Baypoint that insurance said that the stucco was, had to been jacked up like that forever. And I had enough pictures to provide from them because they just bought it like six months earlier. And we had enough documentation on their house condition prior to the storm to show that the house was in much better condition than after the storm.

Speaker E [00:31:32]:
And they were able to get more money because of our report. So it’s really cool and things like that happen that you can later on use your utilities and reports to help people out.

Avery Carl [00:31:44]:
Yeah, that’s awesome that you’re able to do that. So you can’t inspect anything that you can’t see. So you guys are not opening up walls, you’re not doing that kind of thing. I hear people say sometimes say, well, like, how do I know if the electrical is good? Well, or, you know, something that’s inside the wall and that’s not a home and that’s not within the scope of a home inspection.

Speaker E [00:32:04]:
Right, right. Yeah. You can’t see behind the walls. You know, we check all the, we turn all the lights on, check all the receptacles. There’s two of us when we do an inspection, myself and my assistant, we like to say that we’re the most educated inspectors in town. I have a master’s degree in neuronal science and he has his master’s degree in education. And the two of us work together all day long. We, we inspect and then we get back in the truck and we type as we go.

Speaker E [00:32:32]:
But with us having two, it’s really crucial because, like, when I do underneath the house, if I’m inspecting the plumbing, well, if I’m a single man operation, how do I really inspect the plumbing? I can’t turn the plumbing on and go underneath the house because who’s watching the house? Well, when he and I do it, if it has a septic or any kind of drainage, we, we turn the water on, we fill all the tubs up. And then when I go underneath the house, he lets all the tubs go at the same time and flushes the toilets all at the same time. So some can make an argument that’s an unrealistic way to test it because that’s never going to happen. But it could, you know, it could. And we’re there to see what happens when we, when we do apply those, those kind of tests. And for us, then I go underneath the house and when all that’s happening, I have lots of horror stories. But I was actually under, under a 19 old house. And while I was underneath the bathroom, it all backed up and started leaking all over me.

Speaker E [00:33:27]:
And I’m banging on the floor, screaming and yelling and trying to figure out what’s going on. And it was cute. The homeowner knew about the issue but didn’t tell us. So that wasn’t very cool. Sometimes you just can’t go under the house because there’s plumbing leaks and there’s things going on that you’re not going to crawl through to get to those areas to look at anyways. So that’s. That’s the cool thing about having two people, is we can. We can take those risks because he’s inside running the water while I’m underneath the house and giving it a real thorough inspection.

Avery Carl [00:33:57]:
Aeronautical science. What in the world are you going to do with that?

Speaker E [00:34:02]:
Yeah, exactly. When I got ready to retire, so my last eight years, I was on the staff level. So I did my last eight years. I traveled affected military facilities. I was on the road two to three weeks every month for eight years. And when I retired, I wanted to do something with it, but I was. I’m over. I’m over setting at a desk inside.

Speaker E [00:34:24]:
I never want to do another staff meeting. These are fun and cool. Much better than the ones I had to set through on my military days.

Avery Carl [00:34:32]:
Gotcha. Okay, so let’s talk about some really common things that show up on regular home inspections. We’ll talk about ancillary inspections after this. So what are some things that are super common that might freak somebody out that hasn’t bought a house in Florida before?

Rush Valentine [00:34:49]:
We’re always, at least for me, I think about every inspection I’ve ever seen has always had at least one fog window. A lot of times it’s more than that, and that’s just one of those things. I guess, John, you might be able to elaborate more on that than I can, but I guess windows just don’t last that long around here.

Speaker E [00:35:07]:
After Hurricane Michael, most people got them replaced. Those who didn’t, like, I didn’t at first in my house, but it took about 18 months and then they started fogging. They’re just not built for that kind of wind. And it took a while for mine to show up. And I think a lot of that is due to Hurricane Michael. But, yes, fog and windows are definitely a common, common finding.

Rush Valentine [00:35:30]:
Also see a lot of corrosion on anything that is metal. And outside, I mean, kind of like the rust Avery mentioned, but I mean, just anything. I mean, if it’s next to a. I mean, a lot of times, even on water heaters and stuff like that, I mean, that are on the inside of the house, we still see a lot of corrosion behind toilets, just under sinks everywhere.

Speaker E [00:35:49]:
And the corrosion, especially with, like, the air conditioners, you know, the house is going to be ten to 15 years for your outside unit. But if you have a condensing unit on top of the roof, on a beach front house or condo, you know, you’re down to, and they’ll start really showing signs of wearing about eight years, you know, eight to ten years are pretty well rested.

Speaker D [00:36:08]:
I was gonna say the GFCIS always show up on the report, too.

Speaker E [00:36:12]:
GFCIS. And we try to document, like we did, a prospect prominence, I think is what it’s called. Their GFCI reset is in their laundry room. So if you trip a receptacle on the balcony, garage, or outside, normally it’s in the garage, but they have theirs in the laundry room underneath the sub panel. So we take time to actually document that. We take a picture of it and go, hey, your reset location is in this area. Just, you know, if it’s odd to me and it takes me a minute to find it, then I make sure to write it up, you know, new owner, informational purpose only, so that they can use that document. I would say my biggest, most common to Florida, if you will, would be microbial growth, which is a college word for mold.

Speaker E [00:36:56]:
But you can’t say mold because you can’t say it unless you test it. I just did first George island on Thursday, a matter of fact. And that one I got up in the attic. It was a three story beachfront house. When I got in the attic, it had originally had insulation, the pink insulation, and they raked most of it out. The rakes were still up there and there was some debris still left. Then they blew on spray foam on the roof decking. So they removed their insulation, they sprayed on foam on the ceiling.

Speaker E [00:37:26]:
So I couldn’t really tell what was going on there. The AC was located in the attic, and I think that’s what the issue was there. And there was mold in the attic. And so I called my buyer and he said, just do it if you were buying it. Just test as much of it as you would if you were to buy it. So we did that house and we took samples on all three floors and got those results back this weekend. But I’d say mold is one of the bigger from out of state. If I talk to the agent, they go, how’s my buyer going to feel about that mold statement? And I go, where are they from? They’re from the north.

Speaker E [00:38:00]:
Oh, they’re going to freak out, you know, if they’re from the south, you know, it is what it is. I mean, everybody’s used to it down to here. That’s why you would get it tested. And it’s always, it’s always best, you know, peace of mind, you know, that if it has it and it’s pretty common, but it’s not always active just because it’s there, it goes dormant. So just because you can see it. And that’s where when you do the test, it’s really weird because I can see it. But then the test says it’s not there and that means it’s dormant. It has to have the water supply to stay alive.

Speaker E [00:38:26]:
It’s a plant. So at that point we know that it’s dead and we can move on. If it’s airborne and it shows up on the report from the samples, then you got to get it properly remediated from there. Electrical, we have a lot of electrical issues. And again, there’s things, older homes, cloth wiring, for example, you can’t get insurance. I have, I think, three homes under my belt with aluminum wiring, which that’s pretty cool when you take the panel apart and it’s all silver instead of copper. But that’s from the 1970s and not very common. But we do see that occasionally.

Speaker E [00:39:07]:
Likewise down here, there’s another common with insurance is if your water heater is greater than eleven years old, a lot of insurance companies won’t insure it. So it doesn’t make a lot of sense because I mean, you could have a 15 year old water heater that’s perfectly fine and not leak and replace it with a new modern one, probably won’t last 15 years, but they have a threshold that they’re willing to take the risk on. And once that hits a certain point, they’re going to want those fix too. So the age of age used to be a roof would be a big issue down here. But after Michael, you know, most people have new home or new roofs, so we don’t run into as many roof issues. After hurricane Michael, we ran into a lot of them being installed, but not to code to where the roof decking wasn’t properly nailed down. So even though you have a pretty fancy new roof, it still may not be installed. Right.

Speaker E [00:39:58]:
I think I have about seven under my belt where they had to rip the entire roof off and re nail it because if they didn’t re nail the decking to Florida building code standards, then the decking’s loose and they have to tear it all up and then re nail it.

Avery Carl [00:40:11]:
So when you put beyond useful life on for appliances, does that mean they need to be replaced right now or does that mean they’re working fine, but they’re kind of old.

Speaker E [00:40:23]:
Well, the way I have my report document is it says typical lifespan of H Vac is ten to 15 years old. Yours is a 2001. So, I mean, I’ve told you the typical. And yours is a 2001. And then we take pictures of it and show that it’s working. So just because it’s. And that’s a tough argument that it’s beyond or past its typical life experience, because what I say is, hey, this lady living here is. Is 90 years old.

Speaker E [00:40:52]:
I guarantee you she’s not using the AC as hard as a 20 year old would be. So just because it’s older, was it properly serviced, has it been used accordingly, or has it been abused? So the age isn’t always a true factor on whether or not. And additionally different manufacturers. You know, there’s a company here. I don’t want to give a plug for a company, but there’s a company here who makes acs. And their tagline is, nothing can stop a train. And I’ve seen, and I’ve seen train air conditioners. I think the oldest one I’ve seen is 22 years, and it was working fine.

Speaker E [00:41:23]:
So, you know, just. Just because they’re up there, it doesn’t mean it has to be replaced right now. But this is something for you to budget for future, future repairs.

January Johnson [00:41:32]:
Yeah.

Avery Carl [00:41:33]:
What ancillary inspections should people get outside of just a regular, or what’s common outside of a regular home inspection or pest inspection? Separate radon. What’s common around here?

Speaker E [00:41:46]:
Okay, that’s a great question. Radon. I don’t have the radon equipment just because that’s kind of an upsell scam, if you will. I don’t believe in those kind of things. There’s a map out there that shows where radon is prevalent, and in this area it’s not. I get some people from the north who want it, but I can usually direct them to the website to show, hey, it’s not prevalent here. You’re wasting your money. And once they see that, then they’re okay with that.

Speaker E [00:42:14]:
The insurance inspections, those are pretty much a must. So you can do those. And then the way I do my mold is there is a way you can upsell it when the buyer calls. You know, you can try to talk them into it, you know, kind of a scare tactic. I don’t go that approach. I just leave it as is. And if I’m doing an inspection I see it, I’ll usually take a picture and text it to them or FaceTime them and go, hey, this is what I’m seeing. If you want it, I can do it.

Speaker E [00:42:43]:
The report’s going to say you’re going to have it. And if you want me to come back, if you want to look, I like to give them the option of looking at the whole report. If you still want to go forward and you want me to come back later, I’ll still do it for the same price, or I can do it while I’m here. Oftentimes they go, you know, I just want to know everything now. So mold testing, even when people call me and they go, should I, you know, I go, let me look at the house, you know, let me see what I think, and then we’ll go from there. But if they want it, that’s definitely something we can add to the inspection. Me, if I were to buy, I would get one done. Just peace of mind, you know, I’d hate to get in there and, you know, the first couple nights, start coughing and going, hmm, what we get ourselves into, because after, after the storm, I mean, there’s a lot of homes that were severely damaged and kind of patched back together and you just don’t know the condition of the house.

Speaker E [00:43:27]:
So mold testing is always something good to do. WDO pest inspections, definitely, definitely a good thing to do on that. There’s a, there’s kind of a loophole they’re doing now to where some home inspectors can do them. I’ve, I’ve researched it. I do not do it.

Speaker D [00:43:45]:
The loophole is.

Speaker E [00:43:46]:
So the company contacted me and said, here’s how it works. So it’s a three day weekend online training. Once you’re done, you will be trained to do WDO’s wood destroying organisms. Yes. So any, any pest damage, termite stuff. So the way that would work is then I would bill my client $125. Now, keep in mind I have a three day weekend class under my belt. I’m a professional at this point.

Speaker E [00:44:13]:
I would charge my client the same amount of money as a WDO inspector would, and then I would forward all this information to this online service and they would generate the report under their pest license and then they would kick back $45 to me. Me, it makes no sense. I mean, why would I charge my client $125 with my three days of experience when they can go down the street and get somebody who does it day in and day out and they’re going to charge them $125 and give them a much better product? So that is something I don’t do. I do see some inspectors doing it out there, and I don’t think it’s right. And I don’t know how legal it is to even go about that route. So that’s something that they can, I recommend them hire their own pest inspector, a licensed pest inspector.

January Johnson [00:44:58]:
That also includes fungi.

Speaker E [00:45:00]:
Fungi. And there’s different, different inspectors out there that do that, but we can do them at the same time. That’s really, that’s really good because we can kind of bounce what you see, but that doesn’t usually, we don’t often line up to do them at the same time, which isn’t that big of a deal. We do water test. You know, if you have a well, we can do water samples and send those off. Some. Some loans require it. Septic.

Speaker E [00:45:23]:
Septic’s another. Another good inspection, especially in, like, the beach areas where it’s smaller for us. Like I said, we tried it. We tried to max the system out. So for us, for, you know, we can’t take the septic apart and inspect it like you were talking about earlier. We can’t see behind walls. It’s the same deal with septic. Can’t take it apart.

Speaker E [00:45:44]:
So all we try to do is max it out and see if we can get it to fail. We have one. Last week, two weeks ago was a new construction. They have what’s called the lift station. So, you know, it’s new construction in an older part of town where the drain systems are a little bit different. So you have kind of like a sump pump for your sewage, and it fills up, and then there’s a float that then goes off and it pushes your waste to the city. So we’re doing a new house, three story, and we were maxing the plumbing out again. Released all the tubs at the same time, and all sudden this alarm went off.

Speaker E [00:46:18]:
And this is a million dollar house, and I’m like, uh oh. So I’m yelling at my assistant, stop all the plugs. Stop. You know, stop all the water. So what had happened was the plug wasn’t. The receptacle just wasn’t pushed in good enough, and it wasn’t getting good contact. So that had an alarm on it to go, hey, your water’s getting too high. And it was going off.

Speaker E [00:46:37]:
So that’s how we inspected that. But definitely a. Definitely a good idea to get a septic inspected. The property I’m in has a septic. I’ve never owned a house with a septic. And I was really, really leery about it when I bought it. I’ve lived there almost 20 years and I’ve had no issues with it. And the thing about Florida that’s unique is every gallon you use, you have to pay a sewer charge on it.

Speaker E [00:47:01]:
So if you get a glass of water, it’s a sewer fee. If you wash your car, you have to pay a sewer fee. If you water your yard, you have to pay sewer fee. If you have a septic, you don’t have to do that. So you save that cost. So the septic is actually a cost efficient option to go with. And, you know, if you get inspected and there’s nothing wrong with it, it’s good to go. They’ll tell you if it’s an older tank or if it’s a good tank and provide you those estimates as well.

Speaker D [00:47:29]:
I’d also say a pool inspection as well, if you got.

Speaker E [00:47:31]:
Oh, yeah, pool inspections. We do those. Do those as well. I like those. Some of, some of the beach ones can get a little bit advancing. Copy. Like, holy smokes. Some of those are pretty, pretty unique.

Speaker E [00:47:44]:
We did one over in Green Mountain where it was one of those overflow looking pools where it’s on the edge of the house and it was elevated and the pipes ran through all the concrete. And I’m pretty sure it had some settling of the house going on and the pipes were cracked. I’m pretty sure because none of it was working and water was coming down the wall. And I don’t know how you’d fix that. That would be a pretty expensive fix, but, yeah, we do all those, too.

Rush Valentine [00:48:16]:
Awesome.

Avery Carl [00:48:16]:
Well, that’s a pretty comprehensive list. I think that’s all my questions regarding inspections. So thank you very, very much, John.

Speaker E [00:48:26]:
Yes, ma’am. Thank you.

Avery Carl [00:48:28]:
And we are moving on to the financing contingency. So there are some things about the financing contingency in Florida that are different than other states. So let’s, let’s talk about that. What’s a financing contingency? To start off?

Speaker D [00:48:43]:
Basically that you can get financing on the house for what you say you can buy it for and that you’re going to get approved for financing. So based upon all the factors, and.

January Johnson [00:48:56]:
If you can’t get financing during the finance contingency period, you have to have a letter from the lender that says that they cannot get financing. They don’t have to disclose the reasons and the personal financial information. But you can’t just say, oh, I couldn’t get financing. I need my earnest money back. You actually have to have a lender state that. Yeah.

Avery Carl [00:49:19]:
So basically you can terminate the deal if for some reason, your loan gets denied, which is pretty standard across most real estate contracts. But the thing that’s different about Florida is that loan commitment date. So can somebody tell me what a loan commitment date is and when it is during a contract?

Rush Valentine [00:49:38]:
Most of the time. I mean, I guess the default on the contract goes to 30 days for the loan commitment. You know, kind of the same thing with the, with the inspection periods, you know, back 20, you know, but prior to 2020, it wasn’t really an issue. But, you know, later in the, I guess, summer of 2020, things got crazy. And all the multiple offers, high bids, everything’s like that. And the, you know, highest invest came in, it kind of got common that we would see, you know, a seller request a shorter, you know, period for the, for the commitment period. And so that’s short to, you know, 14 days. Like, we want to know within 14 days that you either have, you know, your, your loan approval or at least conditional approval or something.

Rush Valentine [00:50:19]:
We’ve kind of gotten away from that. Again, I try to typically make the loan commitment, you know, as far out as I possibly can, but even then, most sellers are going to want to see it at least a few days before the actual close date so they don’t get to closing and then find out that they’re not closing.

Avery Carl [00:50:37]:
Yeah. So it kind of works like an inspection deadline, but for financing. So in some states, your loan can get denied two minutes before you sign those docs and you’re good. You get your earnest money back because your loan was denied and it falls under that contingency. But in Florida, if it’s denied after that loan commitment date, then you do not get your earnest money back. Right.

Speaker D [00:51:00]:
Unless the seller agrees to give it back.

Avery Carl [00:51:02]:
Yeah, unless. Unless they give. Yeah.

January Johnson [00:51:06]:
Yeah.

Avery Carl [00:51:06]:
So that’s something to keep in mind. When you’re under contract in Florida, you do have to pay attention to that timeline, because if you’re not. Cause I know, y’all, it’s really, really annoying when lenders ask you for all these documents and it feels like they’ve asked you for the same thing a thousand times. But if you drag your feet getting them those docs and things that they’re asking for, then you could miss that deadline. So you want to make sure that you’re timely with getting. And I, guys, I know it’s super annoying. I have everything in a folder on, on my computer. But, um, make sure you’re being timely.

Avery Carl [00:51:38]:
And even if you’re super annoyed with your lender about asking for the same thing a thousand times. Because you do have a date. It’s not just the close date that you have to hit.

Speaker D [00:51:46]:
One thing I do as an investor, I write down in my due diligence every single date that I’ve got on my contingency. So I know that when we’re getting close on something, whether it’s a commercial property, whether it’s wherever it is, that way I can request an extension if we haven’t gotten what we need, or I tell them I’ve got to cancel because I haven’t gotten this. So I try to be proactive and be the squeaky will. As an investor, I think you have to be. That way you don’t get caught with your pants down.

January Johnson [00:52:18]:
Yeah. Action coordinators are super great about keeping people on track also. But you, as a buyer, definitely need to be in the driver’s seat on that. This is your contract, and so you want to make sure that you are on top of the dates as well.

Avery Carl [00:52:32]:
Yeah. And your. Your agents aren’t involved in your lending process. So we don’t know, like, what the lenders asking you for, where y’all are in that process. Like, you’ve given them seven of the eight docs that they need. We don’t know that stuff. So you got to kind of keep us in the loop on. On what’s going on there so that we can make sure that we’re helping you make sure that your deadlines are hit.

Avery Carl [00:52:53]:
So keep that in mind. Make sure, too, that you disclose everything to your lender up front, even if you think it’s not relevant to the deal. I’ve seen people not tell their lender that they were getting funds from a heloc, and then they, after the loan commitment date, couldn’t get the Heloc because their DTI. I can’t remember the exact scenario, but there were things that weren’t disclosed about the heloc to the lender, and then the loan was denied after the commitment date, and then, you know, you just don’t want any surprises close to closing. So even if you think it doesn’t matter, you’re buying a house in another market, you’re selling a house in another market, you’re getting heloC. You’re getting whatever heloc means. Home. Home equity, line of credit, by the way.

Avery Carl [00:53:38]:
Make sure your lender knows all of that upfront. And make sure you don’t do anything crazy during the contract, like quit your job or go get another loan, finance a car. A lot of people mess up and will especially if the property is not coming furnished and go finance a bunch of furniture before closing, that can mess up your DTI. It can mess up the loan. So just disclose, disclose, disclose to your lender. They’re here to help you. They’re not here. They’re not looking for a reason to deny you.

Avery Carl [00:54:06]:
They’re looking for reasons to not deny you. So just keep that in mind.

January Johnson [00:54:10]:
I just had a customer who’s under contract right now and the lender just found out that they closed on another property not very long ago. It’s going to be okay. But it was like, oh, yeah, you should have known that. You should have told us that.

Speaker D [00:54:22]:
And you’re not going to be worried about DTI if you’re in a DSCR loan product because they’re not looking at your DTI for that. So.

Avery Carl [00:54:28]:
Yeah, and we have a whole episode where we’re going to dive into that. So you all don’t have to worry about that too much on this one. Just stay tuned for the financing episode. But now that we’re on the subject of financing, let’s talk about appraisals. And what happens if an appraisal comes in lower than the contract price? Is the deal dead? Does the seller have to come down? What do we do when that happens?

Speaker D [00:54:49]:
It’s happened twice to me. So the first I did was in November 2021. Of course, that’s the crazy market. It appraised for 50,000 less than the purchase price. I had the seller actually give me a promissory note for the furniture in the house on that one to clutch as the appraisal gap difference. So that worked out great for me. I didn’t have to come up with an extra 50,000. And it was disclosed to the lender and disclosed to the agent and disclosed to everybody.

Speaker D [00:55:26]:
So everybody knew about it, but it was for the furnishings in the house and that, that’s how we got around it on that one. And I got a great interest rate on it, too. So the other time we had them drop the price a little bit because it just, this was one that sat on the market for almost 300 days. It was beachfront and I was going to do a total rehab on it. So they dropped the price. They came down a little bit.

Avery Carl [00:55:54]:
Okay, so three, or I guess four things can happen if it, if it appraises low. One most ideal thing is the seller comes down to the appraised value. Two, you can come out of pocket for the extra between the appraised value and the purchase price. Three, you can negotiate to somewhere in the middle. Or four, you can terminate the contract if the seller is not willing to work with you on that. So there are options that just opens the renegotiation of up a little bit.

January Johnson [00:56:26]:
Correct me, everybody, if I’m wrong, but if the house does not appraise, that is not part of the financing contingency.

Speaker D [00:56:32]:
No, that’s part of the appraisal contingency, which is completely separate. And if you’re in a DSCR loan product, they may require you, depending on the purchase price, the house to have two appraisals. And they may not disclose that upfront. The DSCR lender may not.

Avery Carl [00:56:45]:
So I think appraisals are pretty straightforward, although I will say if one comes in low, an appraisal at the end of the day is still just one person’s analysis. So two appraisers can appraise the exact same property and come up with different numbers if you get an appraisal that you don’t like. Unfortunately, we can’t just go get another appraiser because there’s all kinds of laws in place to keep buyers and agents and lenders from influencing the appraisals because that’s how 2008 happened. So what you would have to do is if you, if it’s pretty clear that like, okay, maybe this guy was having a bad day and, or maybe he missed something, or maybe he missed some comps and it really should not have appraised for this. What you would probably have to do in order to actually get a new appraisal is switch lenders entirely and start the process over. I’ve seen that happen and I’ve seen it work. I had one where I was a listing agent, or, no, I’m sorry, as a buyer’s agent. Oh, man, this probably back in like 2018, and they appraised us for 20,000 under a house that had sold that was exactly the same, exact same floor plan, exact same square footage that it sold a month before, and the buyer didn’t have, the extra seller wouldn’t come down.

Avery Carl [00:57:58]:
And she said, well, I’m just going to go get another lender and try this. And it works. The next appraiser used that comp that was exactly the same. So you do typically have to start over.

Speaker D [00:58:09]:
And it also depends on what loan products you use and for whatever kind of kind of appraisal. There’s two type of types of appraisals. The cost approach, which is where you’re looking at the comps neighborhood, and the income approach, where they’re looking at what the property is actually going to bring in an income. So those are two completely separate numbers, and it’s an extra on the appraisal if you’re doing the income approach. So you need to know what kind of appraisal that you are required to get for your loan product as well.

Avery Carl [00:58:34]:
All right. I think that covers appraisals. So let’s talk about the closing days. So there’s a few things that happen the week of closing. So we’ve made it through all our contingencies, we’ve made it through inspection, we’ve made it through appraisal, we’ve made it through financing. We’re on our way to closing. There’s something called a final walkthrough, or final inspection that is used to basically just make sure the house is in the same or better condition than it was when you got under contract or had it inspected. And who can do a final walk through for a buyer?

January Johnson [00:59:05]:
Guys, buyer or the inspector?

Avery Carl [00:59:09]:
Right. You, yourself, the buyer, or the home inspector, who you use to do the inspection are the two people who can do a final walkthrough for you. Real estate agents cannot do a final walkthrough for you because we are not contractors, we are not home inspectors. We can miss things that are outside of our scope. It’s happened to me when I was new, I did a final walkthrough for a buyer and did a video. Everything looked good left. We closed a couple weeks later. He’s like, hey, the floor in this one bathroom is really, really squishy.

Avery Carl [00:59:41]:
Like, what the hell are you doing? I’m like, I don’t know. I didn’t sit on the toilet. It was because it was. Had like, a wax ring that needed to be replaced, so. And it, I guess, been doing that for a while. I guess the inspector missed it. I don’t really remember. It was a long time ago, but he came after me and was mad that I missed the squishy floor.

Avery Carl [00:59:59]:
And I’m like, I’m not a contractor. I don’t know if it’s squishy or what. So that’s why you don’t have real estate agents do final walkthroughs, because we don’t know. I mean, great example. I don’t know what squishy like. Is it supposed to be like that? I don’t know. I didn’t feel it. It.

Avery Carl [01:00:14]:
I had on boots. So you want to have a home inspector or a contractor or yourself, ideally, if you can. I know most people buy out of state but if you’re buying out of state home inspector or contractor or someone who is trained in inspecting repairs or things that need to be repaired, which.

Rush Valentine [01:00:35]:
Is not me, and even if there’s no repairs, I mean, there’s still different items specifically, you know, this kind of market, a lot of houses are being sold as, you know, quote, turnkey. And, you know, previously, there have been times in the past where I just wasn’t. I didn’t know as much as I should have about my ability to do walkthroughs. And, you know, I went through and did a walkthrough and the house looked great to me. But at the same time, my buyers come to town and, you know, an item that they actually noticed and really liked maybe had been swapped out by the sellers, or maybe the sellers had taken some things that were actually supposed to be included. And that just wasn’t on my radar when I walked through because, you know, this, this particular beach painting on the wall wasn’t important to me when I walked through. However, it could have been very important to the people buying the property. And so just another reason why, even if it’s not something that I’m not technically qualified, such as, like, repairs or construction, there’s still a lot of other things that could go wrong.

Rush Valentine [01:01:25]:
So it’s just not, you know, not the best for us to do that.

January Johnson [01:01:29]:
And in the properties that so many of them here do, come turnkey and furnished with everything, it’s important to know if there’s a property management company, they might have all the linens. They might own all the linens and take those, so don’t expect that. Or there might be, you know, it might be used as a second home for people. And there’s personal items. So we want to make sure we get an exclusions list at the beginning so that the buyer knows what they’re buying and what they are not buying.

Avery Carl [01:01:55]:
Okay. And last thing, this is the last part that I see. Buyers get tripped up on a lot or not a lot. It happens sometimes is when is possession given? So don’t come to town expecting to close at the title company at 01:00 p.m. and take the keys and go to your house, because a lot of things can happen. Things can get pushed back. So when is possession given? In this market, in this county or these several counties in Florida?

January Johnson [01:02:26]:
I say anything can happen until the keys and the money change hands. Yes, the money is what has to change. I mean, I’ve had sellers not give keys at closing until they saw the money in their account, and then I could pick up the key.

Speaker E [01:02:40]:
So.

January Johnson [01:02:40]:
So, yeah, but I would say that.

Avery Carl [01:02:44]:
Yeah, sometimes they’ll give it to you after everybody signed, even if the money hasn’t shown up yet, but sometimes they won’t. So just keep that in mind and they can hang on to them until, until the money shows up. So just try not to. I would, I would close remotely. This is what my favorite thing to do, close remotely from wherever you live and plan to go, you know, if you’re closing Monday. Okay, I’m going to drive up there Thursday, few days after closing. So that gives everything time to change hands and, and get where it needs to be before you’re like getting all pissed off at everybody about not being able to get into your house, let everything settle down.

January Johnson [01:03:21]:
The buyer come to town with a trailer full of furniture, and they did not close. And he had, and it was like spring break week or something. He had to get a, you know, an expensive hotel, and then he had to turn around with all his furniture and go home because for whatever reason, the loan did not close. It was not going to, so.

Avery Carl [01:03:37]:
Oh, my goodness, that’s terrible.

Speaker D [01:03:40]:
Once the closing attorney has told you that the funds have been wired to them, to me and all the documents have been signed, that’s when you have a legal right to take possession. Maybe the seller still hold on to the keys, but they really don’t have a legal right at that point. Once they have, you know, there’s proof of wired funds going, because it’s not your fault as the buyer if the seller gave the wrong bank account, that’s not your problem to me.

Speaker E [01:04:05]:
Yeah.

Rush Valentine [01:04:07]:
It’s also a lender thing, too. Sometimes you can sign buyer and seller, let’s say buyer or let’s say sellers closing remotely, buyers closing in person or remotely, whatever. I’ve had situations where the lender wire didn’t come in until later in the day and they might have signed that morning at eight or 09:00 but until that lender wire comes through and at least hits title, a lot of times the sellers are not going to give you access to the house just because you signed the paperwork work.

January Johnson [01:04:31]:
And we want to know as agents, are you coming in person or not? Because that makes a difference for, you know, my time or if there’s something expected of me to do or if they want me to show up at the closing table. I need to know if they are coming in person or closing remotely. So we try to work that out ahead of time. I have had one or two surprises. But mostly we work it out ahead.

Speaker D [01:04:49]:
So we’ve closed remotely on both of ours. And one of the things that was nice was they were able to send a remote notary to us because my wife works in the medical profession, and so she was actually at work at the hospital. And so I had to meet the notary over there at the hospital, too, so we could get all the things signed because she doesn’t get off normally to like six, seven o’clock at night, and nobody’s open to notarize at that point. So that’s one thing that you can have is a remote notary show up if you’re in a really busy job or something like that while you’re on your lunch break and get it taken care of.

Avery Carl [01:05:22]:
Yeah, I love, I love a good remote notary. Also, you can go to any you, ups or sometimes FedEx stores, depending. We go to UPS store all the time and. Or is it a Fedex? I don’t know. I can’t, I can picture the front of it, but I don’t know if it’s UPS or FedEx, but they have notaries there. All right. Anything else that we need to hit on, on the contract process before we take off? I think we’ve got, we’ve pretty much.

January Johnson [01:05:45]:
I want to say one thing about the timelines and the calendar days and the business days. So in Florida, it actually is midnight or 11:59 p.m. for both calendar days and business days. But typically the title companies open till 4435 o’clock. So even though it says you can get your money there in however many business days, obviously there are business hours and some things are not possible to do after 05:00. But the 05:00 deadline is not generally observed. If it’s business days, it really is literally 11:59 p.m. good to know.

Avery Carl [01:06:22]:
One more thing I thought of. How are the honoring of bookings, how is that handled in this market?

Speaker D [01:06:32]:
You can get them canceled upfront. You just, I try to be upfront with the person I’m buying it from and just say, look, we’re not honoring any bookings. I don’t want your bookings. So if we close, I’m not honoring them. So you know it’s in the contract. And so they know that I had one client, the one we bought, the second one we bought, they had gone ahead, even though it’s in the contract, they’d gone ahead and booked it past just in case it didn’t close. And she was crying. Tell them, asking me, well, why aren’t you going to honor my bookings? I said, because I’m tearing the house apart and I’m about to renovate the entire thing.

Speaker D [01:07:04]:
And you need to cancel your bookings on VRBo.

Speaker E [01:07:06]:
I don’t want them.

Speaker D [01:07:07]:
And because she was renting a beachfront for dollar 600 a day.

January Johnson [01:07:11]:
I’m in the middle of one of those right now, the closing on a condo, and we’re closing in the middle of what was their last booking. And they wanted us to pro rate the booking. And we were like, no, that’s not the deal. It’s not our fault that you accepted a contract that has a closing date inside your booking. And we were clear about that upfront, so they did. I ended up having helping them find some alternatives because it was a self managing person, it was not a management company that could just transfer. But I jumped in and did that too. But we were adamant that we would not take bookings.

Rush Valentine [01:07:43]:
And if by chance they just neglect to tell you that they have bookings and then spring it on you at the end, I mean, if it wasn’t addressed in the contract, you know, there was no post occupancy agreement or anything like that. I mean, the day of closing, the property does. It’s the buyer’s property.

Speaker E [01:07:57]:
If I could offer something on a side note, since we have a lawyer in the house, a topic for me that I find troubling and is sharing of an old home inspection report. And I have buyers, new buyers will call me up and want to ask me about the home inspection I did a month ago for a different buyer. And when I get those calls, you know, I like to point out to the person looking at my report, that person a paid for and you didn’t pay for it. Somebody gave you my report, which is technically not mine. It’s my buyer who paid for it. I don’t own it. It, and you certainly don’t own it. And if you purchase this property with that home inspection report that you didn’t pay for, that somebody gave it to you, and you in there, and the house falls down, you have nobody to go after because you didn’t get it inspected by me.

Speaker E [01:08:48]:
It may be my report, but I didn’t work for you and you purchased the house on that. So whenever that happens, I always like to call the agent and go, hey, you’re kind of putting yourself in a bad situation here because your buyer is purchasing a house that, that you gave them somebody else’s home inspection report, and they’re relying on you for guidance. And wisdom, and it’s not a good idea because they don’t have a home inspection report. They have somebody else’s home inspection report. When they move in and things are wrong, they’re going to want to blame somebody and they can’t call the home inspector. That didn’t work for them. So something to think about there, if you ever run into that, that’s why.

Speaker D [01:09:17]:
You’Ve got language in your report, your contract when they signed it, that says this only belongs between me and the person involved.

Speaker E [01:09:23]:
Correct.

Speaker D [01:09:24]:
You’re not on the hook for anything. So I definitely, and time has passed, probably a year or more between the time that inspection was done. So stuff could have happened that you don’t have a clue about.

Speaker E [01:09:36]:
Right. Just a side note.

Speaker D [01:09:38]:
Yeah, good side note. I think one thing we haven’t covered is you better have insurance in place when you’re ready to close because that’s not a contingency, but it’s one of the hardest things to get in Florida’s insurance. So day one, if you’re in the contract process, you need to start the process to find insurance, even though it’s not a, one of your contingencies on your contract is definitely something that should be at the forefront of your mind because once you get that inspection, they’re going to want that four point and that wind mitigation and you better start looking for insurance. I think I’ve gone through 30 different companies trying to find the right insurance before on a beachfront. So just something to think about right now.

Rush Valentine [01:10:16]:
It actually can affect your financing contingency because, I mean, you know, some of these insurance rates that we’re getting, especially on some of these older single families, I mean, if that rates high enough and somebody’s coming in thinking they’re going to find an insurance that’s 5000 a year on this property they’re buying, and then they find out the roof is older and there’s some other stuff that’s going to make it a little bit higher. And not to mention Florida insurance going up in general. And the best quote they can get is $17,000 a year. It’s because they didn’t think about the fact that it was an older house. If they were already tight on their DTI, they’re not going to be able to get qualified with $17,000 a year in insurance payments.

January Johnson [01:10:49]:
I pay attention to the year the house was built, when they’re looking at how properties to make offers on. And I tell them upfront, I know you can’t get an actual quote until you’ve had an inspection. But here are some brokers I recommend, and please call them and get some what if scenarios so that you’re not shocked because I’ve had sellers argue with me that, oh, no, the insurance is only this much on the house.

Rush Valentine [01:11:09]:
Okay.

January Johnson [01:11:09]:
That’s not going to be your quote. That’s not going to be the buyer’s insurance rate. That’s not going to be the buyer’s taxes or insurance, whatever the seller is paying currently. So you have to get your own numbers. And that’s a good, good point.

Avery Carl [01:11:20]:
Absolutely.

January Johnson [01:11:21]:
Yeah.

Avery Carl [01:11:21]:
Make sure you’re shopping for insurance very early in the deal. All right. Well, thank you guys so much for coming on, guys. If you want to buy with Rush or January on the Emerald coast, email us at agents at the shorttermshop.com. or if you just have further questions about investing in this market, you can hit us up every Thursday. We are on Zoom. You can sign up@strquestions.com.com thanks, guys.