Ron Starr, or other experts?? Need advice please! - Posted by Steve

Posted by David Krulac on March 03, 2002 at 20:56:06:

What are the actual sold comps? the identical listed next door for $151,000 is not a comp, since it has not settled. But is it really identical? So extras, improvements, corian instead of formica etc.?

I’ve repeated this before, if a property doesn’t sell within 90 days AND it is advertised properly, the price is too high. If you really are desperate to sell you should consider the rock bottom price of $135,000 and stop the bleeding.

$142,000 is not price point pricing, but $139,900 IS!
The 2 hour trip is a killer, even for showing rentals, personally I don’t like more than 30 minutes, but that’s me.

I’d consider a real estate brokerage, must be in the area and I would probably go with the agent/broker who has sold the most houses in the neighborhood.

Also I’m not Mr. Starr, who can give you expert advice.

David Krulac

Ron Starr, or other experts?? Need advice please! - Posted by Steve

Posted by Steve on March 03, 2002 at 18:35:25:

Last June I bought a house in a popular downtown area for 135k, appraised at 155k. Not much room, I realize that now, but I am still learning. Within three weeks I had a full price contract on it for 155k. The buyers backed out later (cold feet). I advertised it for 150k for the next six weeks, received a lot of attention but no serious buyers. Another full price contract failed again (the buyer was in an accident). I was tired of driving two hours to show it, so after getting comparable sales of 150-155 from seven different realtors, I listed it with one. Two very slow months later, the realtor suggested I try to sell it for 130k instead (what is interesting is that he is now the realtor listing the identical property next door for 151k). To make it more competitive, I just finished updates in the kitchen…new cabinets, paint, countertop, sink, etc. Also stripped the dark paneling in the bedroom to make it more attractive. The mortgage payment is eating me up every month, so update costs were put on the equity line I have on the property. Since June is has been advertised as owner finance, lease op, no money down, all flexible terms and even as a rental. Asking price is 142k which just covers the expenses due to updates. Asking rent is within market rent of the area. At this point I am so fed up, I don’t know what to do with it anymore. In another month my cash reserves to pay the mortgage will be spent. I have another rental and now this is at risk if money is needed for repairs (I had a very nice cash reserve and now it is gone). Please, what are my options with this property, understanding the market for selling is slow.
If I rent it, I would take a negative cash flow as my payments are higher than market rent. I don’t mind that too much if I can hope for market appreciation but if repairs are needed, I am in a very tight crunch for money to repair anything. Taxes and insurance coming up will also further put me in debt. Also, it is two hours away and I don’t want to keep it. If it makes a difference to my options, I have 9000 equity in my rental house, and about 27,000 equity in my primary residence.

here’s some numbers on the deadbeat property:
1st loan payoff is 135,000
line of credit owing 9,000
total payoff is 144,000 (even if I rent the place out that will free up enough money and I can pay down the equity line)
30 year loan at 8%
$990/month does not include taxes and insurance
equity line payment $65/month
market rents for $800-900/month

I am approaching what could be a bad situation, am hoping for suggestions from experts on what to do
(but OH the learning over the past half year!)
Thank you

P.S. Would it make sense to transfer all debt on the equity line to a credit card with low interest payments, try to sell it for 135k again, just to be rid of it, and work on paying off credit debt as I get caught up again? My cash reserves after this month will be at zero. I will not even have emergency money set aside for my other rental.
Suggestions, please!

Re: experts?? Need advice please! - Posted by Randy_OH

Posted by Randy_OH on March 04, 2002 at 12:18:36:

You may want to consider a lease/option. On your property, I would advertise it as RENT TO OWN with the rent equal to PITI with a fairly high rate of interest. Give a monthly rent credit roughly equal to the principal portion on a 30-year mortgage payment. Two-year option to buy at $155,000. Get as much down as you can. Ask how much they can put down. You will get calls from people with messed up credit. No problem, credit can be repaired in 12 to 24 months. Rule of thumb is to get 3 to 5% down with an option price about 10% over current value. You may need to play with the numbers a little, but it is an excellant exit strategy for your situation.
Good luck,

Re: Ron Starr, or other experts?? … - Posted by Frank Chin

Posted by Frank Chin on March 04, 2002 at 07:16:33:

Hi Steve:

Dave gave you very good advice. My wife was a realtor and tells me that properties NOT SOLD in 90 days is “stale”, and oftentimes, people take it out of the market for a while and then sell it later.

If the word gets out that its been around since last June, folks would think there’s something wrong with it, and perhaps you’re now a motivated seller, which you are. I would’ve rented it out at a reduced rent as of last October at the latest. At least, you would’ve gotten some money in instead of nothing, even if its negative cash flow.

It appears the market may have changed a bit since last June. I placed a property on the market the first week of last August, but for the two weeks after 9/11, the agent advised me things were completey DEAD. So, I pulled the listing, and its been rented.

Also, the market is a lot slower in the winter than the summer. If you couldn’t sell in from June to September, you’ve have a harder time from December to February.

The big problem also is the property is technically VACANT, and you’ll lose the insurance if anyone checks. So renting it out would get someone in there right away, and some money instead of nothing.

I find pricing very important in renting. If area rents are $800 to $900, I place an ad for $795. I did this recently when I tried to rent a SFH on 01/19 for Feb 1. Brokers told me the normal price is $1,800 but moves a lot quickly at $1,750. But for $1,675, I got over a dozen applicant fighting over the place. Obviously, going below $1,700 did the trick. Yes, it was rented within four days for Feb 1.

Similar ads in the paper asking for $1,800 to $2,000 had been in there for several weeks.

The other option is to sell it for 135K or LOWER. But as you had it on the market since last June, BIG MISTAKE, it smells like DESPERATE SELLER, and you might have people low balling you.

If you rent it for a year, then give it another try, at least the market may turn, and you remove the “stale” label from the property.

Unfortunately, it looked like you overpaid for a property too far away from you, and there are not many options.

Frank Chin