Can a house be too ugly and require too much repair to scare off rehabers? I have a house under contract ,posted ad, received 5 calls, they claim to go see the house and nobody seems interested. What I have also found is that I had another contract on a property and sent rehabers to view and they waited out the contract to buy direct from owner. How can I Prevent this? I think this is what’s happening now. What to do next???
As for your first question yes. A lot of rehabbers like a simple cosmetic job. The more extensive the rehab, the smaller the niche, and the less investors you’ll find.
As for the second question, put a clause in your contract that says something along the lines of:
“At the expiration of this contract, the buyer shall not be required, but shall have the right to extend the contract for XX days, for and additional earnest money fee of XX. If the seller does not comply with the buyers attempt to exercise this right he/she will be in violation of this contract and may be sued for specific performance.”
Something along those lines. But I have to ask how is it that these other investors know, that you are not the seller of the property? If you tell them that you are not, well my advice is to stop. If the owner has signage, or an ad in the paper with their direct number, put another clause in your contract saying that all advertising of the property by them must stop immediately. Also put something in their that says that they must direct all inquiries about the property directly to you during the contract period. And last but not least, when you get an offer from a buyer or investor to purchase your contract, it is actually an offer to purchase the home that you have control of, meaning it is a real estate contract, further meaning that the offer is legally binding on their part, unless and until you refuse it. All that is to say, once you have their offer you can reveal to them that you actually have the property under contract, and you are selling them the contract. At that point they can’t back out, and wait the contract out unless you let them, because their offer although not a full purchase agreement is legally binding. But beware that a LOI or Letter of Intent is NOT the same thing. It is NOT an offer it is a proposal that may or may not be followed by an official offer in some form or another.
I hope that helps.
T hanks beautiful, Advice greatly appreciated!!
Yes, a house can be too ugly. Besides the rehabber who likes a specific type of rehab and it doesn’t fall into that category, you also may have a house that is too old (too many structural repairs to get it up to code), or functionally obsolete (ie, bedrooms open into bedrooms, no dining/living area, multiple front doors, no bathroom inside - again, most all because the property is too old). You can also have a property that is visually obsolete, meaning that the outside appearance doesn’t match current trends (or never did).
The first lesson on having rehabbers sidestep you is to not “send them to view” the property. YOU take them! It’s much easier for someone to try to screw over another if they have never had any personal contact with them.
Second lesson, act professional! I don’t know for sure if you are or aren’t, but many rehabbers (even the ‘honest’ ones) may choose to wait you out as opposed to buying from you if you do not present yourself as an experienced, knowledgable wholesaler.
Third, be prepared to close on the property yourself if you can’t/don’t find a buyer before your contract ends. If the rehabber knows that you CANNOT close on the deal yourself, then they know that they can simply wait you out.
Fourth, assuming the above is done, if a rehabber does wait you out, and you were the only reason that he knew about the property, make sure that you NEVER do business with them again. These types of investors rarely are ever in the business long (at least not in the same area) because word DOES get around.
Raj
Hi Roger,
Thanks for advice. The house is 43yrs old and used as a duplex ,dbl front doors,center wall that is converted bdrm to bdrm( functionally obsolete). I thought if it’s ugly and in terrible condition, the better bargain. For $12,000 what can u expect?? I will try to get hml fix and sell estimate repairs $40,000 arv $95,000. Thanks again.
some houses are not worth rehabbing; bad location, funky layouts or just being a complete basket case are all reasons to pass. I’ve done a couple of extensive rehabs and there has be to REALLY good upside to even consider big major rehab considering the risk involved in discovering and mitigating unforeseen issues.