Rehabber

That's my bright green hammer.  It goes with my bright green measuring tape and sheetrock knife.  The funny thing is the measuring tape and utility knife have disappeared.  The hammer is still around because it's only a figment of my imagination.  My kid has a bright green sheetrock knife and tape measure.  I wonder if mine sprouted legs and went to his house!  I own these tools myself (not my husband's) because I am a "rehabber".

I was recently asked what the term "rehabber" means.   This question made me aware that "rehabber" must be a bit of jargon that I did not realize was jargon.  The further mystery to this question was that it was posed by a REALTOR®.  I'm not sure which career uses "rehabber" in their vocabulary since a couple agents didn't know the term.

The Erickson definition of a "rehabber" is a person who buys a distressed property and fixes it up to resell at a profit.  A perfect example in the Minneapolis Saint Paul market is the "Ug Buys Ugly Houses" people.  The kind of distressed property that is chosen varies by the person who is buying the property.  Some rehabbers only like minor cosmetic repairs so buy houses needing only paint and carpet.  Others like to really tear into a house.  The worse the house condition the better they like it.  For all rehabbers the key is to buy the property at a discounted price, to not exceed the budget in making repairs, and to make repairs and upgrades that will be attractive to the potential buyer.

A rehabber is different from a person who "restores" a house.  A person who restores a house is usually doing it as a labor of love rather than as an investment.  In a "restoration", authentic materials are used rather than today's equivalent.  Hours are spent scouring salvage yards for matching old doors and woodwork.  Extensive labor and money is invested in fixing old windows in order to retain the original wavy glass.  Woodwork is hand stripped and refinished.  Exact copies are made for missing pieces. Medallions are copied.  Push button switches are found for the electricity.  Old lights are rewired and rehung.  Plaster is patched rather than replaced with wall board.  Old tubs and sinks are refinished instead of replaced.  Restoring a home means to return it to its original condition, not just to repair it.  Restoration is a laborious and expensive job.

Rehabbers do not restore, they repair.  If they do it quickly and well, there is the potential for profit.  What the public needs to remember is that the rehabber's profit is their "salary" for the labor and time they invest in the project.  They deserve to make a profit is they have done their job well.

(c) Bonnie Erickson 2006

Comments

[Bonnie Erickson]

August 7, 2006

That's an interesting thought regarding FSBOs. The problem I've had with FSBOs has been that I end up doing the work for the FSBO seller's side but I don't get paid for it. If the FSBO seller has prepared all the disclosures, ordered point of sale inspections and made required corrections, arranged for the title to be updated, etc., then they have earned their savings. If they have not done the things a REALTOR would have done for them and the buyer's agent has to do all the work, the agent should be paid the extra commission. My experience has been that I negotiate for a lower sales price, end up doing the work of two REALTORS and my buyer clients get the savings.

[Leanne Paynter]

August 7, 2006

I found one of your last lines rather interesting: "What the public needs to remember is that the rehabber's profit is their "salary" for the labor and time they invest in the project." I guess "for-sale-by-owners" (FSBOs) feel the same way in that their "salary" comes in the form of commissions saved via doing the work themselves, but buyers don't care about that and oftentimes deduct the seller's savings from the offer price, which is why FSBO properties often sell for less than they would've had a Realtor been involved. I have a couple of Realtor friends who became Realtors after they had a terrible experience selling their homes themselves because they didn't anticipate potential problems that a good Realtor would've been able to prevent. Of course, it's not impossible to save money as a FSBO but sellers should be prepared for the myriad of issues that can pop up and affect their bottomline.