Thursday, August 23, 2007

Want to sell your home to an investor?

I get the occasional call from people that have a house they wish to sell quickly. Often, the home is in less than optimal condition (sometimes heinous is a word that creeps into my mind). They range from estate sales to pre-foreclosures to rentals that the owner doesn't wish to handle any more. Usually, these people are wanting to market to my investor database. Sometimes, I don't think people understand what this entails.

Investors are looking for houses that they can use to make money. In order to make money the house needs to offer one or more possibilities.

  • It needs to be flippable in its current condition. If you just need out of a house immediately, an investor might be willing to buy at a discount and sit on the house while a proper marketing plan is implemented.
  • It needs to be priced so that it can be improved and re-sold. Perhaps you know that the kitchen looked dated when the Brady Bunch was still on prime time. Maybe there are deeper problems. An investor might be willing to put the money and time into the property to increase its value.
  • It is in an optimum area to rent, or already has solid renters and can offer positive cash flow.
  • The property might be reclassified to a higher use (residential to commercial for example).
  • The property is in an area that shows huge potential for appreciation.

The last two are actually more inline with speculation than investment, but I included them anyway since investors and speculators sometimes overlap.

The thing that potential sellers need to keep in mind is that investors are looking for a profit. They are taking on risk, and want to be rewarded. Be prepared to NOT get an offer to buy your house at or above market price. Whether you are calling me, or HomeVestors, or Ug Buys Ugly Houses, or another agent, don't expect to see an offer much over 70% of the FMV (Fair Market Value). If the home needs work, look for an offer that is around 70% FMV minus the costs of any improvements. And, that isn't the cost of buying the stuff at Home Depot and doing it themselves... it would be the cost of having a reputable contractor perform the work properly.

I am not trying to knock anyone down. On the contrary, I have found that a lot of sellers are glad to sell the property under these conditions. Executors of Estate often have heirs SCREAMING to get money from property the decedent left to them, and other times there are bills that need to be paid and the sellers are glad to find a buyer that will close in a week or two. In these cases, the sellers understand that they are giving away money in order to close quickly.

In other cases it is a poor fit for the seller. They would be better off listing the property and selling it through traditional methods. If they can bring the property up to selling condition (fixer uppers seldom sell for even market minus repairs needed, and in this market can be a VERY tough sell), and carry the property until it sells then selling to an investor is not going to be the first option to consider.

If you are looking to invest, or have property to sell (to investors or not) I can help you.

If you are interested in real estate investing, I have a great series for you:

Real Estate Investing 101, Part I

Real Estate Investing 101, Part II

Real Estate Investing 201, More about Flipping

Real Estate Investing 202, Buy and Hold

Real Estate Investing 301, Advanced Strategies

I would also recommend:

One Improvement too many

What Buyers are Looking for

Repairs, Improvements, Upgrades and Resale

Do you have a Unique Selling Proposition?

I could probably find a few more... and then if I started adding other people's posts... well, you wouldn't have time to actually do anything, just read about it.

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