Potential Asbestos Problems With Some Property Purchases
One of the potential profit torpedos you may encounter as a real estate investor is the presence of asbestos in your investment property.
Now before you shy away from anything that may even look like asbestos, let me suggest you ‘hasten slowly’ because there could be substantial rewards waiting for you, if you are willing to do some legwork.
Asbestos, like many other challenges you may have to face in life and as a real estate investor can be solved. All it takes is money. And…
…if it could cost you money, and you are in the process of negotiating a property purchase, you need to take the opportunity to negotiate a better deal, which will not only cover the cost of dealing with the problem, but also your time and effort in taking care of it.
Because there are many potential purchasers who would shy away from a property containing asbestos, it puts you in a strong bargaining position if you are willing to take care of the problem.
In my Super Secrets To Real Estate Wealth course, I describe this type of situation as an ‘acute’ problem, which can lead to good profits for you. While a ‘chronic’ problem is one that hangs around for a long time, an acute problem is one that can be dealt with in the short term.
One thing I’ve learnt in life is that most problems can be solved if you are willing and able to throw enough money at them. Asbestos in a building is one of those types of problems.
In some cases you may even have to demolish the building to solve the problem, but it CAN be solved.
Probably the first thing you need to do if you suspect that a property may contain asbestos, is to ask the agent about it, (preferably in writing) and the second thing is to make a note to advise your solicitor that you will want a special condition included in the contract to cover you for costs of dealing with the asbestos issue.
I say make a note, because at this stage you still have a bit of work to do before you will want to proceed to calling for contracts.
The next thing you will want to do is to determine the extent of the problem and how much it is likely to cost to rectify it.
If you suspect that the building contains asbestos, or if you’ve been told that it does, it’s a good idea to talk to the real estate agent about it. He would have a duty to disclose this to any other potential purchaser and that would scare most people off the deal for a start. (I believe that’s called eliminating your competition! 
)
Having done that, you would want to consult an asbestos removal contractor and obtain a quote for the removal of the asbestos. Then you’ll need to consult a number of other tradespeople to determine the cost of replacing the asbestos with a benign material. If you can obtain these quotes for free, that’s great. If it will cost you money to obtain these quotes, then you’ll need to put your negotiating hat on before you seek out this information.
One strategy might be to go back to the real estate agent and tell him that you have identified a number of contractors and ask him to talk to the vendor about seeking a quote (at the vendor’s expense) to have the rectification work carried out.
If the vendor is not interested in doing that, you’ll need to decide if you can make an educated guess as to the cost of the work required (double it for good measure), add in a cost for you to take the risk, organise and supervise the work and then start negotiating a reduction in the asking price.
Any reduction negotiated can be subject to you being able to confirm the true costs of the work involved.
Basically, the person who is willing to solve people’s problems stands to make money by taking care of the issue. Just how much money you stand to make will depend upon how well you can negotiate.
Let me share with you, two of my own experiences in situations like this.
When I bought my farm and as we were about to exchange contracts, my lawyer asked me to have a look at the plan and description of the property and confirm that what I was buying was exactly what I was expecting to buy. On checking the plans, I saw some separately designated areas and asked what they were. It turned out that they were separate landholdings surrounded by my property. Some areas were designated as crown land while two areas were owned by outside parties.
Since the agent had not told me about this situation earlier, I asked the lawyer not to exchange contracts until I came back to him with instructions.
My next phone call was to the real estate agent.
Now most real estate agents are super keen for the contracts to exchange and are very nervous if their deals are in danger of falling over. (They’ve either allocated their commission to something or already spent it in anticipation of the deal going through )
This is how I started the conversation with the agent: “James, we have a problem….(pause)…..”
How do you think the agent was feeling now?
Worried! Right?
That’s exactly what I wanted him to be. (I was about to push for a reduction in the purchase price).
I pointed out to him that he had not told me about these areas of land that were excluded from the sale and he told me that he was not aware of them either. (Even better for me!)
I therefore asked him to go back to the vendor and ask for a reduction in the purchase price. This he did and we achieved a further $10,000 discount.
When I bought my office building in Portland, I discovered that the awning needed to be strengthened. I only discovered this about one and a half hours before we were about to exchange contracts on the building.
Not knowing how much this would cost to do, I had to make an educated guess and decided on a figure of $5,000. The actual cost to repair the awning came in at just over $300.
In my opinion, negotiating is one of the most important and most rewarding skills you can develop. What is even more fun, is that when it comes to real estate deals, you can get the real estate agent to do the wheeling and dealing for you.
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Warm Regards,
Hans Jakobi - Australia's Wealth Coach