Punch List Analysis for 2nd Quarter

Overall the average size of the punch lists has shrunk from just over six items per Punch List to slightly more than five and a half items per punch list from the first to the second quarters. Additionally, six out of seventeen closed escrows had no punch lists as opposed to four of nineteen punch lists in the first quarter. While these two facts could be attributed to any number of factors the only logical conclusion is that the overall quality control of the finished product has been good and has had a positive effect on the work of the contractors and the finished product. The goal is to continue both of these trends, fewer items per punch list and more sales where there are no punch lists.

The composition of the punch lists nearly mirrors that of the punch lists from the first quarter, with electrical and plumbing items constituting almost identical percentages of the total number of items. Of those items in these two general areas that were called out numerous times, leaks and non functioning electrical outlets stand out. Both of these defects can and should be eliminated before the property goes into escrow. From now on, any leaks or non functioning electric outlets detected by the property inspector are not only to be noted on the final punch out form, but they are to be immediately brought to the attention to the contractor for repair. As many of the electrical items on the punch lists were fairly simple to detect, i.e. outlets and lights not working, it is our goal to cut the percentage of electrical items per punch list next quarter from 24% to 10%.

Appearing on several of the punch lists, regardless of county, was the request that seismic strapping be placed on the water heater. From now on, we will require all of our contractors to properly strap and secure the water heaters on our properties. This will be added to the final punch out check list and Darrell Patterson will teach Damian and Matt exactly how a water heater should be properly strapped. In addition to water heater strapping, a general “leaks” category will be added to the final punch out form. This is to cover all toilets, kitchen and bathroom faucets, dishwashers and water heaters. Inspectors should run each sink for at least two minutes during their final inspection to both test for abnormally low water pressure and any leaks which may present themselves. Also, each toilet in the subject property should be flushed and each shower/tub fixture should be allowed to run for two minutes as well. As with any electrical problems that may surface, any leaks or strapping issues should be brought to the contractor’s attention for repair.

Where the Problems Are Being Made 1st Quarter

24%

23%

7%

46%

Plumbing

Electrical

Landscaping

Other

Where the Mistakes are Being Made 2nd Quarter

23%

24%

7%

46%

Plumbing

Electrical

Landscaping

Other

Although I will list a property if there is a small leak or an outlet or two doesn’t work, the contractor should be asked to fix these problems before the house is in escrow and a formal home inspection takes place.

Average Punch Lists Per Contractor

02468

10121416

In-H

ouse

Newcastl

e

Hocken

berry Teo

Denning

ham

Contractor

# o

f It

em Average Punch List 2nd Quarter

Average Punch List 1st Quarter

Among the individual contractors, there was improvement by both the In-House crew and Bill Denningham in terms of average punch list items per project. Hockenberry had approximately the same average sized punch list and Newcastle’s went up. Teo’s went up a little but was still acceptable at three items per punch list. It is difficult to determine why Newcastle’s went up. Vicci certainly played a role in this as it was an extremely difficult project with several sub-standards in place from the start. Perhaps this shows a slight shift in the market as home Buyer’s are beginning to be more demanding in their requests of more expensive homes. Perhaps supervision of Gary was not as good in the second quarter as it was in the first. The next few punch lists from Newcastle projects will be watched.

Property Payoff Estimated Cost of Repairs

11035 Emelita, North Hollywood $ 6,500.00   $ 8,600.00

6071 Geremander, Rialto   $ 400.00   $ 1,200.00

4019 McKinley Ave., Los Angeles $ 600.00   $ 750.00

19118 Vicci, Canyon Country   $ 1,200.00   $ 1,640.00

11056 Ave. R-4, Littlerock   $ 1,600.00   $ 2,475.00

43227 San Miguel, Hemet   $ 1,600.00   $ 1,475.00 7935 Tujunga, North Hollywood

  $ 740.00   $ 800.00

345 N. Shattuck, Orange   $ 2,500.00   $ 4,350.00

5113 Alcoy Ct., Lancaster   $ 900.00   $ 1,145.00

Totals $16,040.00 $22,435.00

As you can see, during the second quarter, the total amount of payoffs for punch lists was $16,040. The estimated cost of the work which was requested is $22,435, a difference of over six thousand dollars. The payoffs have the added benefit of allowing

our contractors to fully concentrate on the projects they have before them and not losing time going back to fix small items four months after finishing the job. Each contractor was asked to go back and complete some items off of various punch lists from time to time, and Bill Denningham, as he is relatively new, was asked to go back and fully complete the Velardo punch list. This serves to clearly illustrate the errors to the contractor and satisfy some of the simpler demands of the Buyer.

While the average quality of our product is as high as it has ever been, it is our goal to eliminate as many small/stupid mistakes as possible. The water leaks, faulty outlets, water heater strapping, etc. need to be cut down dramatically if not entirely eliminated. While the payoffs were cheaper than the cost of the actual repairs themselves; smaller punch lists would allow Dawn and myself to negotiate even smaller settlements or even no payouts at all. This should be what the construction department strives for in every project.