Sunday, March 15, 2009

Real Estate: Are You Expecting a Retail Buyer?

I know I was. Let me back track a little. What I mean by this title is you think you buy a property, do a little rehab and resell it. I mean that is what I have seen on TV. Well that is not how it works. We had a property just like that. If you expect to do some work on a property and resell for top dollar, I am here to tell you that will be a tough road even if you give the buyer a great price. Let me explain with our example.

We purchase a great piece of property. We bought @ 60 cents on the dollar and we were looking to sell at 75 cents on the dollar. Great profit for us and a great deal for the buyer. Well it is not as easy as that. We do have it sold but what we went through to get it sold was more than I thought we would need to do.

We put the house on the market for a great price. We posted it on craigslist everyday. We got lots of calls while we were still in escrow. We got so much activity that we did not fix the property up. We just cleaned it out and thought people would come by the carpool. We held our Open House and people showed but a lot of them came with their realtors and they were not happy that we did not list the property and were not paying any commission. We did not think we needed to - big mistake. It will not cost us money but it did cost us time. So no offers after the first open house.

Plan B: We spent two weeks cleaning, repairing, painting the house. We put in a new floor and cleaned the backyard. We also did a flat fee listing with a 5% commission for the buying agent. We raised our price to compensate for the listing and repairs. Second open house: We got a few people through the house. Not as many as the first open house. But the agents did start to notice the property. We also had agents going to the property during the week to preview the property for their clients. We got questions about the rehab and why the kitchen was not done or that there were no blinds on the windows or dual windows. We acknowledged all of these items but pointed to the fact that the house was well below market value. But this pointed to the way the market is right now. Buyers can be very picky and want it all. They want the price lower and the property in pristine condition and and and... you get the idea.

So we answered all the buyer's questions and gave allowances for some rehab, but the house is sold and we can move one.

What have we learned:
  1. Perform full rehab on property
  2. No retail selling (unless you are selling at 50 cents on dollar)
  3. Sell with owner financing
  4. Lease purchase option

So sell at your own risk but it would behoove you to sell with owner financing and not rely on a retail buyer. It will help you sleep better at night. Now that we have that property sold I know I will. Our focus will switch to an owner financed property we have in Ripon. Anybody want to buy or lease a 3 bedroom/2 bath, give us a call or visit our website: JM2 Sells Houses

See Ya,

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