Posted by Greg NY on February 21, 2001 at 11:49:40:
Thank you, I’ve been worried about writing this up because of the “as is” and the sellers disclosure of defects. I got in contact with a friend of my fathers who is a contractor. He will take me through the house and teach me a little. No deal, no fee. Sounds good to me. Thanks
Greg NY
selling “as is” - Posted by Greg NY
Posted by Greg NY on February 20, 2001 at 22:41:27:
Hello,
Ok, here’s the deal. Seller (out-of-state) has SFH listed “as is”. Does he have the right not to disclose vital information?
66.5k comps
10k repairs (exterior, peeking in windows)
10.9k asking price (reduced 3 times)
The neighborhood is excellent, mostly married couples with kids. Area is between urban and suburbs, like it used be to the original suburbs (if that makes sense).
I’m just concerned that if i put this under contract to assign to another investor i have lined up. How do get it professionally inspected (i have no money). This being my first deal, and my buyer being a well known rehabber. I DON’T WANT TO LOSE FACE bringing a bum deal to the table.
But i just can’t afford to get this inspected.
Advice please, and thank you.
Greg NY
Re: selling “as is” - Posted by Ron (MD)
Posted by Ron (MD) on February 21, 2001 at 09:46:35:
Greg,
I’m not surprised that the wheeler-dealers here are telling you to write a contract on this one…with almost no information. There are many here who have a “forget the facts…full speed ahead” mentality.
The numbers on this deal sound great. I rehab in this price range and it’s hard for me to imagine a house in such poor condition that I couldn’t buy it at that price and make a good profit. In fact, even it the repairs are $20k (which is well within the realm of possibility), you could flip this for $15k, or more, to an rehabber who would still make $20k+.
Here’s the rub. This house has been on the market a while. In fact, you said the price has been reduced a couple of times. Even if the most recent price was $20k, in most parts of the country you’d have investors parading through it. If experienced investors have been looking at it, you can be sure that they weren’t bashful about offering something below list price…in which case, this one probably wouldn’t still be out there.
That doesn’t mean it’s not a great deal. But, you have to wonder why it’s been sitting there…unless the earlier prices were much, much higher.
You asked about the seller being required to disclose defects. In Maryland, a seller is required to complete a written disclosure questionnaire or sign a disclaimer statement. The disclaimer says that you are buying it “as is, where is”, period. It is very unlikely that the out-of-town seller of a $10k house will complete the disclosure. You will be on your own.
Others will tell you to tie it up with weasel clauses that make it easy for you to back out of the deal. Yep, that’s what all the books say. In real life, most educated sellers (and if your seller is represented by a realtor, he should be educated) are unlikely to let you tie a deal up for very long without earnest money (you said you can’t afford the $150 for an inspection) or with contingencies. Again, it is possible that this seller is desperate and will accept most any contract terms. Remember though, that you are probably not the first rookie investor that this realtor has received a (more or less) empty offer from. (Or, you can hope that the realtor and the seller are both desperate and stupid.)
I understand that you don’t want to lose face. But, frankly, if you talk with a seasoned investor, he will probably have you pegged by your second sentence. My feeling? Don’t try to pretend you’re something you aren’t. Don’t try to get rich on your first deal.
Here’s what I’d do…
You probably shouldn’t enter into a contract that you can’t back out of easily. Offer full price (if repairs are much worse than expected, you can always renegotiate after your “inspection”). The full price offer will get you the deal and make it easier for the seller to give you a weasel clause. Ask for two-three weeks’ contingency for an “inspection”. Insist upon having easy access (i.e., you want the key or the lockbox combination.) Then, run an ad in the investor section of your newspaper … handyman special, etc., etc. Tell the callers that you have this house under contract for $10.9 and you’re just looking for a $2k flip fee. If they’re interested, then you walk through the house with the investors. (The more, the better, one at a time.) This would be a great learning experience for you because you can get them to talk to you about the problems and repairs (and repair costs) that they see.
This does sound like a deal (although, like I said, I’m suspicious). Try to make a few thousand dollars and learn something at the same time. If you try to take a $5k or $10k profit, the investors just may contact the listing agent and learn that you have a weak contract with a two-week bail-out clause. Me? I don’t care how good the deal is, I’m not likely to take a flip from a rookie investor that stands to make a fat flip fee. (I know that I shouldn’t care about his profit, but I’m human.)
That’s what I’d do.
Ron Guy
Re: selling “as is” - Posted by Dewey
Posted by Dewey on February 21, 2001 at 07:24:55:
Regardless of the “AS-IS” listing, the seller has to disclose all known defects. Unfortunately, the out-of-state owner probably knows very little about the home, so I wouldn’t rely on his disclosure. He may not disclose any defects because they are not known to him.
Anyway, it sounds like a great deal. Get it under contract immediately.
Good luck with this deal.
Lock it up now! then… - Posted by BillW.
Posted by BillW. on February 20, 2001 at 23:46:22:
Greg,
Lock this deal up now! Then tell your buyer to send his inspector through with you to establish a “fair” price. Just tell him that you haven’t seen the inside yet because the seller is out of state, so you can’t be sure of condition. Make an appointment to walk the deal with him or his inspector. No need for you to pay for any “professional” inspector. These rehabbers use their own men and make their own decisions about what to repair and what it will cost to do it. Professional home inspectors usually do inspections for end users who plan to live in the house. GO FOR IT! Just put in a “subject to inspection” clause if you’re worried. This will allow you room to negotiate if you find unexpected extreme problems.
BillW.