Hey guys, I’ve posted here before about some deals I’ve come across that didn’t work out, so I’m hoping that someone can help me close this one. Here are the facts:
Owner of vacant property wants to sell because she can’t afford the $1200 / Mth. payments (Not counting Taxes and FLOOD ins.)
She says that she thinks the house is worth $380k and wants $330k out of it. She owes $150k on a first mortgage and has no seconds.
I’m an appraiser and I did the work-up on the house and it came out to $300k in good shape, (it needs about $10k in clean ups, no big repairs)
That means that in this market (Northern NJ) I have to price the house at about $270k to sell it quick and make a profit. There are some nicer houses in the same neighborhood listed at $325k.
How do I tell her the house is only worth $300k in good shape without upsetting her and losing the deal or try to turn it into a L/O or Option?
I didn’t major in math, but looks like you said the house is coming in at $300k, and needs $10k in repairs, but to sell it quick, you need to list it at $270K?
Thanks for the reply. Those are only the numbers I’ve come up with so far. I don’t know if the owner will be willing to accept that her house is worth alot less than she thinks. I’m thinking that if it’s not going to be a retail or wholesale deal for me, I could go the route of L/O and get some up-front cash. What do you think? DAVE
Start off by saying that the house is very nice, but $380K is more than I could pay in this market. I would also mention how many homes are for sale in say a 15 mile radius.
Explain to this woman that inorder for her to sell the home she’ll have to fix the things that are wrong with it and HOPE she can find a buyer that can get a mortgage. Explain to her how many foreclosures there are on the market and how it’s killing home prices because the banks are selling them for what ever they can get. The ADVANTAGE she has in selling the house to you is SPEED!! You can buy it IMMEDIATELY.
I would further explain to her that once November gets here, home sales just about STOP because people are so pre-occupied with the holidays. I would further explain that once November comes she had better plan on having the house until spring. This will entail HEATING IT, SHOVELING SNOW, and PAYING THAT MORTGAGE for 6 more months!!
The thing you WANT to do here is SPRINKLE these facts through out the conversation. DO NOT dump that last paragraph in her lap all at once. You should look at it like your LEADING her down a certain path. Point out the advantages of a quick sale.
If I were in there my approach would be HAMMERING home the advantages of selling NOW. Explain to her how home prices CONTINUE to fall and that for all practical purposes she can expect to get LESS for her home in the spring as the economy weakens.
I like to leave people with these EXACT WORDS…
Thank you…REMEMBER…Your MONEY IS A PHONE CALL AWAY!!!
Planting that SEED is HUGE. You want to drive home the fact that with a simple phone call to you, she can be DONE with this entire transaction and get her MONEY.
great job fdjake, I would also like to ad, NEVER tell someone this is what your home is worth. Them’s is fightin words, with most homeowners.
Instead tell them, “given the current market conditions, this is what I can afford to buy your home for. I am sure that it is worth considerably more to you, but as an investor I need to leave some room in for my overhead and profit…”
There are two answers to your question: yes or no. You’re trying to predict the future, and you can’t.
If she/he doesn’t want to sell at your numbers, then they weren’t motivated to begin with. Thank him/her for their time, and say next.
To Jake’s point, Halloween candy is out… mention that to the seller. YOu know what’s next… spending money for the holidays, and no one wants to move their family during the hoildays/cold/snow/ etc.
the last few winters have been (cold/bad/heavy snow) so spring thaw and TAX TIME – that pushes the sale o ut to April… before anyone’s looking for a home again.
Thanks FDJake, ericmedem & RealNew. I didn’t have a chance to meet with her yesterday, her kids were sick, but we’re going to get together on Thurs. Those suggestions sound great, I’ll do the “sprinkling” throughout the conversation about how a quick sale would benifit her, and I won’t tell her that her house is worth “alot less”, that could ruin the whole thing. Thanks again for the advise and I’ll post a follow up. DAVE
Hey Everyone, sorry I haven’t been back to this topic, but I was checking out some other things. I contacted a local “experienced” REI and turned him on to the deal. He said he would check it out, even though I gave him all the details and what was going on. I don’t know if he thought it was NO DEAL, but I contact the seller again today and she said he never called.
Help me out here, I don’t mind Birddogging, I’m sure it’s a great way to learn, I just want to be kept in the loop so I do learn something.
The seller said that she was waiting for my call. I explained to her that research is showing that her house is only worth $300k topps and that I would need some room in the deal to get involved. She seemed open to anything at this point she just wants to sell.
Here are the numbers again:
ARV=$300k
Might take 2nd in equity, she owes $150k on a 1st.
Might L/O
She just wants to get rid of the $1200/mth and get some cash.