My parents own a home and they want to sell. With the market the way it is now, they don’t want to take a big loss for it. What would be the best way to come out of this issue with little to no losses, or maybe even a win? I don’t want to wholesale this property because it’s my own parents’ money I’m taking. Rent to own? Subject to? Please help. Thank you all!
Yia
They may sell for a bit less, but they will be buying for less also. It can be a good market for buyers.
Research your competition - the other homes on the market in the price range you expect to sell for. Invest a few dollars to get the house into the best condition possible for its market, it needs to make its competition seem like a poor value compared to your house. Price the house some reasonable % lower than the competition. Market the crap out of the house to bring in prospective buyers. Invest in marketing it yourself, it will cost real money, I usually spend $2k - $3k marketing a property in the $350K range. Save the commission.
jmd_forest
Do they owe a mortgage? If they own it free & clear, they could do either a lease option or rent it out until the market changes. If they don’t need a ton of money right now, renting would be a good option until the market changes. Then they can enjoy rental income AND get better price down the road. Or they can just keep renting it out.
jmd_forest - would you mind sharing how do you spend the $2k-$3k in marketing? Marketing properties to buyers is an area that I don’t have much experience. I was planning to put them in the MLS (I am a realtor), put a sign on the yard, and list them in some free sites (craigslist, etc…). It seems that you have a more involved (and probably more effective) marketing… I would love to pick your brain.
thank you.
The cost of something is not always an indication of quality. It may or may not be a bargain at 2k - 3k.
Phlenboy is right, the cost is not necessarily an indication of quality. If you’re a realtor, I would expect you to be an EXPERT in marketing otherwise, why is anyone paying you a commission. The paperwork and administrative work in selling a house is trivial.
However, most FSBOs fail at marketing their properties, in my opinion because they are afraid to spend the money on marketing because they might fail to sell the property… a self fulfilling prophesy. On a $350K property, I usually spend between $2K - $3K on marketing and pocket the $19K difference in commission.
Get several 3’ x 6’ banners professionally printed. Get as many as necessary to put on several of the the closest main road intersections to direct traffic to your property.
Get a dozen or more 18" x 24" signs professionally printed to put out at intermediate intersections to direct traffic to your property.
DO NOT USE THE HOME DEPOT TYPE PREPRINTED SIGNS. USE PROFESSIONALLY PRINTED SIGNS SPECIFICALLY FOR THIS PROPERTY.
Advertise in several local newspapers. Not the tiny 3 line classified, but the larger
1" x 8" “Open House Specials” or “Hot Properties” special ads in the Real Estate section, NOT the classified.
Use a discount MLS only broker to get the property into the MLS. If you get a buyer’s agent to put in an offer, let the buyer pay his agent. I tell the agents they can have any commission they want …on top of my selling price. I make sure the buyers know this also. The agent can always try to negotiate a better commission.
Have 1000 flyers printed up. Distribute them throughout the development, and surrounding developments. Put flyers on every buliten board in town.
Open house every weekend.
This may not work for everyone or work in every environment, but it works for me. I always try to have a better house in better condition and at a lower price than the competition. But even so, you need to get people in to see the property.
jmd_forest
Yia,
How long have your parents owned the house? What did they pay for it, and what is the market value now? Is it their primary residence?
jmd_forest - somehow I thought you were going to make this comment… :O) I am an investor (or becoming one) first, a realtor second. I got my license only with the intent of doing my own real estate transactions. So I am not an expert in marketing… Far from it… I would classify myself as an eager learner.
Thank you for sharing your marketing approach and perspective. I agree with your statement about the self-fulfilling profecy. I will take it to heart when I am getting ready to sell my first property.
Thank you.
Yia,
besides the questions Dave as posed, where it is at would be good, too. :smile
jmd_forest is correct in most of what he laid out. I was much more successful selling my own properties as an investor than most Realtors were at selling long before I ever slipped to the dark side and got a REA license.
Two points I’d disagree with are:
the “trivial” response to the paperwork/adminstrative work of selling. It IS, and should be, trivial to any investor or agent that has sold more than, say 3, properties, but it’s hardly trivial to a FSBO going it alone for the first time. And it IS a reason someone inexperienced in selling SHOULD hire a professional.
And you should list in the MLS as most buyers go there first. However, if you’re not offering a buyer’s agent commission, this is largely a waste of money to pay for MLS advertising. Agents are, in general, NOT going to make a buyer pay them a commission IF there are other properties available offering commissions. This is the basically the same as the FSBO who advertises “agent friendly” or “commission paid.” If there is no guarantee of payment (and that’s not), an agent is going to direct their clients to another property.
Not only SHOULD one offer a commission to a buyer’s agent, if you’re in a down market (which alot are), offering a higher than average commission will ensure that your property will not only get more showings from agents, but also be put in much more of a “positive” angel from agents.
Just my thoughts.
Raj
It’s their primary residence and they have owned the property for about six years now. I believe they bought the house for $225k and the market value is $230K(off of Zillow.com). My parents live in Michigan.
If anything at all, we will look into investing some money into fixing it up a little and market it as FSBO.
Besides that, anything else we can do?
Thanks again!
Yia
Since the property is worth today about what they paid for it, they won’t take a big loss when they sell provided your numbers are accurate (zillow is notoriously unreliable). The problem here is that there is not enough equity to cover a sales commission.
Your parents still have a couple of options.
If they still want to move, they can convert the property to a rental. Collect enough rent to cover all their expenses and to give them a little extra cash flow. They not only benefit from the positive cash flow, but also benefit from the tax benefits they would derive from rental property ownership. If they sell within three years of vacating the property, they still preserve their eligibility for the capital gains exclusion on their sale profit.
By selling on contract for deed or lease option, they could get a higher price than the current market value and avoid the sales commission.
Dave,
Thank you very much for your help! I’m not too familiar with lease options or contracts for deed but I will do research on them and go from there. I have spoken with my folks since I last posted and they said they want to invest a little money in it and try to sell it. I will bring up the thought of renting out the place, but with the mortgage payment being as much as $1800 a month, I think it would be a little tough to get any positive cash flow from it. Please keep the ideas coming. Thanks!
Yia