I talked to a lady who said she would consider selling her house for below market value simply beacuse she doesn’t want to deal with realtors. She said there are some very minor repairs. I really want to convince her why I can solve her problem and take the headache out of using realtors and going with me instead. What are some key points I need to mention to her.
okay, a little confused.
Are you a REALTOR(r) and want to list the house or are you trying to convince her not to use a REALTOR(r) and sell to you now?
Also, some details on the property and the market would help, too. Do you know what exactly her problem is?
Raj
I am not a realtor. I am a newbie sub2 investor. Houses in her neighborhood have sold for $500k+. This is in the north Atlanta market (buyer’s). She just doesn’t want to deal with realtors, wants out quick, and wants to sell as is.
If she wants to sell quick and as is I hate to say it but a Realtor actually is the way to go. Why she would want to take a hit just to not deal with an agent must stem from some serious hatred for Realtors
Who on earth would want to use a realtor if they want to sell quick? This is a perfect sub 2 deal.
Alright, now that we’re clear.
First, you need to determine what the FMV of the property really is, not what the seller thinks that it is.
Then, you need to determine what her idea of “quick” really is. Is it in a week, a month, 6 months? What is the average timeframe that it takes for similiar houses in your market sell? What is the average discount (negotiations) that happens in that average sell? She wants to sell “as is” what repairs are needed and how much?
We’ll keep the numbers simple for the example here:
Ms. Seller you want sell this house quick and I can buy it quick. Does that sounds good to you? If so, let’s work some numbers and see if we can make it happen, okay?
From there work the numbers. She thinks that the house is worth $100K, if that’s close to FMV, then great. If not, then let her know (with comps to back it if necessary) what the true ARV of the property is.
If it needs $5K in repairs, explain that most buyers don’t buy houses needing repairs and those that do expect a discount, especially in a buyer’s market. Expect a $10k equity lose from $5K in repairs.
Now, if Ms. Seller sold conventionally (thru a REALTOR(r)), then she’d have to reduce her equity by the commission fee, which would be another $5K. This is true even if she tried to sale it herself, because most people dealing with FSBO’s automatically reduce the price by the normal area commission.
Because it’s a buyer’s market, it could take some time to sell. The average on the market is 6 months. Since your payments are $1K a month, there’s another $6K lost. FSBO’s actually take longer, so if you’re considering that, add some more $$$.
And also because it’s a buyer’s market, the seller’s usually have to negotiate to get it sold, either through helping the buyer with closing costs, or reducing the price. The average negotiating spread for this price range is $5K.
Now, adding all that up:
$100K ARV
-$10K repairs/discount
-$5K commission
-$6K in upkeep
-$5K in negotiations
=$74K gross sale’s price.
From there, it’s all up to you, the investor. What’s your goal? I’ll assume a sub2 purchase.
Ms. Seller, this is what it would cost you to sell conventionally, do you agree?
Now, you owe $85K, so selling conventionally you’d have to come out of pocket about $11K to sell this house. You don’t want to do that, do you? You might get someone to pay to $85K selling by FSBO, but you know how long that will take, so you’ll be losing money every month, plus you’ll still have to pay a closing agent to do the paperwork to make sure that it’s correct.
If you want to sell now, I can buy it now. Here’s how we (your company) does it: And explain your buying procedure.
Raj
I don’t blame her for wanting to sell without a realtor, and this is a perfect opportunity for your subject 2. What is your question? Just make a reasonable offer.
Da Wiz
Hi, I just read your post. Here’s what I have done with success in the past… If the property is under market value do a straight option on it. Explain to the woman that you will give her $xxxx amount of dollars for the option to buy her house in the next 30 or 60 or 90 days for $xxxxxx you make your money but getiing her to agree to the lowest price she’ll take. Now for the best part… Let’s use your example of a $500,000 house selling for $405,000 you pay her $2000 for the option which gives your the right to buy the house at $405,000 or sell the option. Then you place the home in the paper on a Saturday and Sunday for $375,000 your phone is going to ring off the hook. 80% of the people who call will be nitwits but you only need 2 to start the bidding. Good luck
Okay, I’ll bite.
IF you have an option on a property for $405K, why would you advertise for $375K? Little confused on where you make your money?
Raj
You under price the neighborhood. This attracts lots of potential buyers and shoppers. People who wouldn’t have looked at this house for $450,000 are now bidding like crazy. The whole premise is the same as a foreclosure auction. You know how they go, you show up, the bidding starts, and within 5 minutes the house is within 10% of market price. Basically the $375000 gets everyones attention. I stumbled across this on 2 separate occasions. 1. A handy man special was listed in the local paper for $100,000 there are NO houses in this area for that kind of money. I called the gentleman he explained he was showing the house from 10am to 2 pm. When I arrived a 9:45 the street was a parking lot. I called him back that night and he had sold the house for $160,000 2. A woman getting a divorce lists her lakefront home $100,000 under market, she sells it that day for $90,000 over asking. Both these examples just took place in a definitly cooling local market. Never under estimate people’s desire for a BARGAIN!!
For now, I’m going to have to say that that is market specific because I don’t believe that that would work in this market at this time.
Generally, the common person does NOT know what market value is, so would not know if that is a discounted price or not.
Also, some markets (like here for example) do not sell their homes via open houses (watch any of those “Sell Your House” type shows if you don’t know what I’m talking about). Here, open houses are used primarily for agents to get other listings or to find buyers for other properties.
But I can see how that could work in some markets.
Raj
I just completed the same transaction THIS WEEK! As for the average person not knowing prices in a certain area. Overprice your next house by $30,000 and see what happens. The internet has changed everything, with the stroke of some keys you can get market data on any house anywhere. What your saying I guess is you don’t think selling a home that needs some work for less than it’s worth would attract other investors to it. Your wrong. It’s happening everyday right under your nose you just don’t see it.
Wow! A little touchy aren’t we?
Let’s set the record straight here, petey.
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We’re not talking about overpricing a property, but underpricing in the hopes of getting more.
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We’re not talking about selling to other investors for less than value (that’s wholesale, btw), but rather selling to homebuyers in a suedo-auction faction (or hopes thereof) to get market value or close to it.
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I can see everything that happens under my nose. For instance, right now, my hands are typing.
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I never said that this couldn’t be done. There are actual auctions in the area here all the time, and frankly, I’m always amazed at how much they get for the properties with the work that needs to be done. What I said was that I’ve never seen your method of advertising a low price in the hopes of getting a bidding war going work in this area. I’ve tried it a couple of times myself (The book on the subject is “How to Sell Your House in 5 Days” by Bill Elfros [tho you may have to verify the author]) but it didn’t pan out.
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What exactly is your plan if, and I understand that it’s a big IF, you only get one offer at the $375K price? Maybe it’s different in your state, but in NC RE law, if you get a valid offer at your asking price, then you have to sell it or you could be held liable for damages to the buyer (ie you could get sued).
No need to be so hostile. In most cases, this is still a friendly, family oriented forum. 
Raj
Rajyy, You stated that people don’t know the market. It’s in your post! I’m not looking for PEOPLE I want BUYERS, they know the market and they know a deal when they see it. Your on the right track as far as seeing how much houses go for at auctions. It’s the same in the northeast, people way over pay at auctions. So the premise is this if it’s a deal it’s gonna sell PERIOD. You make your money when you buy’em. The low price gets them in the door. As far as selling at that low initial price, there is no law saying you can’t take a property off the market or change your mind. It’s done everyday. Good luck I’m done here!!
As far as selling at that low initial price, there is no law saying you can’t take a property off the market or change your mind
I guess that it would help if you’re up on your state RE laws. In NC, there IS a law that prevents such acts. As the seller, you have a legal obligation to sell the property at the asking price IF the buyer is qualified to buy. If you fail to do so, then you could be held liable for damages to the buyer (ie you could be sued).
Raj
Roger, Oh I get it, your a BOOK READER, I thought you invested in real estate. You obviously have NO Idea what your talking about. So keep buying those “how to” books and making other people money. I’m sure there’s an opportunity for you out there some where. Maybe bio-deisel or emu farming. I’ll answer posts from people who are DOING IT not reading about doing it.
Rog, I had to add one more thing. I loved how you went into great detail about how DANGEROUS this deal could be for the initial poster then you GRACIOUSLY offered to buy it out from under him. Real Class!!!
Pete ol’ boy, I think that you may need your eyes checked or your reading level.
I never offered to buy this from him. My post detailed how HE could buy it from the seller.
Talk about class!!!
What exactly is your malfunction, sir? Can you not handle a simple question without resorting to name-calling and put downs?
I’ve got better things to do than act like a twelve year old.
Thank you for your time.
Raj
Raj,
I think you should listen to him…he obviously knows everything – after all he DOES have 12 posts…
Pete, After you have read all of Raj’s nearly 600 posts you can decide that he does or does not know what he’s talking about. Until then, don’t thorw mud in the forums…thanx. And, BTW, you’re not looking for “BUYERS”, you’re looking for “CHUMPS” caught up in a real estate bidding frenzy.
Keith
I’ve got 12 posts because I am buying and selling real estate not READING about it. 600 posts now that’s impressive!!! How much does that translate into your bank account. Have fun boy’s.