Re: selling “as is” - Posted by Ron (MD)
Posted by Ron (MD) on February 21, 2001 at 09:46:35:
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.