Posted by Kristine-CA on June 19, 2004 at 22:55:07:
Verve: thanks for your reply. The problem with listing a property on which I have a contract is that the title report will come up with the seller’s name will come up. Then we have an agent in the middle who probably can’t explain it very well–I can’t blame them for that because it’s difficult to explain. Also, the paperwork–the Realtor Board contract and it’s requirements are things that I think prevent getting a deal done.
When you’ve listed your properties for $300.00 are you also getting the services of a listing agent, or are you doing your own paperwork and working directly with the seller?
Your post really gave me some things to think about–like using hard money to close on deals that I know I would get higher selling prices for if I listed and sold via the mls. There are so many out of town investors that have different criteria for their rehabs and their buy and hold deals–meaning that they are willing to spend a lot more than the old network that worked the city for years without any appreciation.
Thanks for bringing up the mls idea. Sincerely, Kristine
I bought this house for $64k that I figured needs about $10k worth of work and would retail for about $100k. I have been trying to sell it for $74.5k and have had 2 buyers but both deals fell through.
I was thinking about rehabbing and retailing myself but I just want to get out of it as soon as possible.
The formula most used by newer rehabbers…and even some experienced ones to determine the price they’ll pay is one you’ve probably seen here: .70 x ARV less the repair cost. In your case, it would be .70 x 100k - 10k = $60k. That’s the formula (or one similar to it) that most of your prospective buyers will be using. That means, you overpaid by $15k and you’re trying to sell at $25k over the normal rehabber’s price.
Even if you find someone who doesn’t know any better to buy it, they will be unable to close 'cause they won’t be able to get financing (unless they happen to have your $85k in cash).
Asking 75k for a 100k house that needs 10k in work, isn’t a deal any experienced rehabbers going to go gaga for, I’ll tell you that.
For me to remotely be interested, I’d want to be in it for a max of 70ish (preferrably much less than that) by the time I have it all repaired.
30k on the table means I might be able to get a 20k payday… and frankly I am not rehabbing a house for less than a 20k payday, especially a 100k house.
How much profit do you think you are leaving for your customer/rehabber. Looks to me like a gross profit of $15k, less closing costs, financing costs, selling commission, other holding costs, contribution toward the end buyer’s closing costs, etc. What do you think his net profit will be?
Since hard money lenders usually will loan up to 65% of the ARV, that pretty much rules out a HML. (Which is probably why your first two deals fell through.)
That means, you have two choices. Find a buyer with $85k cash and stupid enough to do this deal for a very small profit. Or, cut the price to what you paid for it (which is still not a great deal) and hope you can unload it to a rehabber who will work for less than most will.
I learned a valuable lesson recently on my latest property.
Bought fixer for 250K. Comps showed fixed up value to be around 350K to 400K. I figured it would take 40K to get there…
I tried flipping to some rehabbers but the few I knew weren’t interested in paying what I wanted. I was about to get started on the rehab myself.
But before I did, I thought I’d expose the property to the MLS to see what would happen, just as a learning experiment. End result?
I sold it ‘as is’ for $450K. A builder bought it and plans on adding at least 1000 sq ft. I also have multiple backup offers from other builders and contractors.
Would’ve never happened had I not exposed the property via the MLS.
The lesson learned was you just don’t know how the marketplace is gonna react until the marketplace sees it. I’d expose the property to as many people as possible…then…if your expectations aren’t met, rehab it.
Had I rehabbed before I put my property for sale, I’d have spent 40K and spent a lot of additional time and energy and netted probably 80K LESS.
Re: Bought the flip and can’t sell it… - Posted by Kristine-CA
Posted by Kristine-CA on June 18, 2004 at 13:09:21:
JCR: what were the reasons the buyers fell through? Loan problems? Changed their minds after additional inspections? There might be some useful information in why they aren’t buying.
Also, if you own this outright, you might be able to sell for a better price by carrying the loan for your buyers and selling the paper for a discount. Krisitne
Re: Bought the flip and can’t sell it… - Posted by Kristine-CA
Posted by Kristine-CA on June 19, 2004 at 11:19:14:
Did you own the property outright when you listed? I’ve often wondered if I could list when I have just the contract. My understanding is that it’s technically possible but won’t happen because agents wouldn’t take the deal if all I had was a contract. Thanks very much for sharing your story. It resonates with my experience of selling things for what I think they are worth only to find out later that buyers think it’s worth more. Kristine
One of the buyers lost his job before the closing and the other just flaked out - I never was able to get in touch with him after we agreed and went to contract. He may have inspected the property further as I have it on a lockbox and don’t know when people come and go.
Yes, I do own it outright. Your suggestion sounds like a good idea. I will try that.
As far as marketing a property via the MLS when one only has a contract…I’d imagine it’s got to be more than technically possible. BTW, I pay about $300.00 to get my properties listed via a listing services broker and I’ve never once been questioned if I was indeed the outright owner or if I only merely had an interest. I typically buy my properties outright but I’d be interested in hearing if you ever get the listing to fly with just your contract.