The good old days were refreshing. You can put up a sign in your yard and get quick responses from interested potential buyers, or hire a listing agent and not worry about their commissions eating up your cash. The time has changed.
Real estate has become competitive. In some areas, it’s a seller’s market. In others, the buyer takes the reins. Whatever happens, there are thousands more people in real estate now than there were then. With investment seminars and investment shows becoming more common, the real estate group is growing larger every day.
But what if you’re in a hurry to sell? Does that mean you’re motivated? Let’s take a look at what constitutes a motivated seller, and whether or not some of these sales techniques will work for your situation…
- You are facing foreclosure
Times can be tough. You may have been laid off from that job and not been able to replace the income on time. The bank sent you a letter notifying you of a lis pendens (the beginning of foreclosure, also known as pre-foreclosure) You have no options and you don’t want foreclosure to end up destroying your credit.
- You are behind on taxes
As before, this is an immediate situation that can destroy your credit. Taxes will be collected no matter what, so there’s no need to add bad credit to the mix. Back taxes will not only eat up your capital, but will also be attached to your future wages.
- you have bad tenants
You are constantly receiving complaints about tenants at one of your properties. The police are becoming a normal sight in front of the property. Perhaps the tenants are turning their intended investment into a drug house. He doesn’t want to deal with the situation and would prefer to cash out of the investment and walk away.
- you are getting divorced
Let’s be honest. Not many are fair in divorce proceedings. Who gets the house? None of you? So you have no choice but to sell quickly so you can avoid your soon-to-be ex like the plague and get some cash to start over.
- you are retiring
If you’re an owner retiring from the business, or a couple with a home you’ve owned for years, you just want some cash for your equity so you can move to warmer climates and bingo.
- you inherited real estate
You just inherited a house or multi-unit property, but would rather have cash instead. You want a quick sale and you don’t want to be bothered with maintenance.
- You are an out of state homeowner
He thought he could manage the California investment property while relaxing at home in Maine. Unfortunately good help is hard to find and all the property managers happen to be drunk. The grass is tall and you are receiving letters. It’s causing more headaches than it’s worth.
- You just want some extra money
You don’t need the property in question and simply want to fill your bank account.
These are all valid reasons that would make you a motivated seller. The only question I have for you in this case is… are you greedy?
The number one real estate sales killer is a homeowner who has too much pride to accept that the market won’t support outlandish property valuations. Fair market value may be high, but no one is biting. How’s that quick sale going? The first step to selling your home quickly is recognizing that you need to keep an open mind. If you can keep an open mind about the price of the sale or the terms, then selling fast will be a piece of cake.
Where are my target buyers?
You have quite a few options. Some will take longer than others. Probably the number one way to sell quickly is to find a wholesaler. A wholesaler is a real estate investor who searches for discount properties, writes an offer, and then assigns the contract to one of his many cash buyers. Often the wholesaler will have hundreds or even thousands of investors on their contact list who are ready to buy immediately. His investment partners have been qualified by the wholesaler with proof of funds and will have shown the wholesaler multiple deals they have closed in the past.
There are wholesalers who buy properties in multiple states, while other wholesalers are limited to a single state. Some of them even stick to a specific city or regional area. They are known for using phrases like “we buy houses, any area, any condition.” While many wholesalers stick with deeply discounted properties, others work with low capital deals where Subject2 and seller financing may be at stake. These are some of the techniques that require you to be an open-minded salesperson who is truly “motivated.”
Another option for a quick sale is Craigslist and other classified websites. If you’re going the classifieds route, you need to be prepared for ‘tire kicker’ responses. There can be a lot of novice investors and people who are just looking, which will take you a long time to weed out before you find a real buyer. When posting a classified ad for your home, be sure to include as many details as possible in the ad. Skipping bedrooms, bathrooms, parking, and other features will only mean you’ll have to spend time discussing these things when you’re handling the multitude of calls you’ll be receiving.
If classified ads aren’t your thing, you’ll want to find buyers through a more direct route. Go where they hang out. There are forums like EquityPaper and BiggerPockets that have premium subscription options for real estate listings and other networking tools. These are forums where investors meet to discuss real estate issues on a daily basis. If you list your home in these professional member areas or markets, you can get fairly quick responses from interested buyers.
Determining the value of the property for an investor
When listing your property, there are a few things potential buyers will want to know in addition to the standard property details. ARV (value after repair) is one of them. To find your ARV, go to Zillow, Trulia, and Redfin. On each of those websites, search for your property and write down the estimated value for each of them. Add up all 3 of those values, then divide the sum by 3. The result will be your ARV.
After you have your ARV, you want to determine what the new buyer will have to invest in the property to repair it. If your house is in excellent condition, you only have to consider simple things like paint, appliances and other things related to the tastes of the buyer. You would multiply your square footage by $10 to get the total credit the buyer will want. If the property needs some updates like flooring, new toilet, etc., then you will multiply the SF by $15. Broken windows, doors, etc. they will cost $20. If the house is a disaster and a full rehab, then the multiplier is $30. Now subtract that number from the ARV.
Whether or not the buyer is a wholesaler or flipper, they need to do something about the deal. This can range from $2,000 to $50,000 or more, depending on your property’s location, value, and other factors. However, many good wholesalers will stick to the price of $10,000 or close to it. So take your new ARV and subtract the buyer’s profit to get an expectation of how much money you’ll be offered for the property.
Creative financing for a quick sale
Assuming the final number of calculations listed above wasn’t even close to taking care of what you owe on the property, then you need to learn to get creative. Some wholesalers and flippers will continue to purchase property with little or no capital.
Topic 2 Financing
Theme 2 is a technique that allows new buyers to take charge of their mortgage payments and take control of the property. Sub2 investors seek leverage so they don’t tie up their credit, but can get a rental property at the same time.
A seller may have a concern when it comes to a sub2 deal. For example, what if the buyer defaults on the mortgage and ends up as a bad credit item for the seller? Well, there are protections for sellers during existing subject 2 financing agreements.
- A single late payment can be a deal breaker. It can be done so that in this case the buyer defaults and loses the property back to the seller. This one possibility is the number 1 reason why this is a rare scenario. Most topic 2 investors are experienced. They have been doing it for years and have made millions through rentals with these types of deals.
- Limitation clauses, such as the one that requires the buyer to refinance the property in their own name within a set period of time, further reduce risk. Let’s say that in 2 years, the buyer must refinance. By then, they will have built up enough equity through their loan repayment to make this a possibility through traditional lending methods. Even in the worst case, they can get hard cash after that time to take advantage of the extra time to change ownership or get other financing.
Deed contract or lease option
If you’re not in a big rush for a lot of cash, you can sell with a deed or lease option. This will ensure that the buyer is responsible for maintenance, insurance, taxes, and everything else, while providing a monthly income stream with little risk. With either technique, you’ll get a quick sale. The best part is that you keep the deed to the house until the buyer’s obligations are met. If they default, you can simply evict them and start over with a new buyer. The best part is that you are earning interest on your principal at a rate that you agreed to in the sale.
FSBO (For Sale By Owner) doesn’t have to be difficult. It can be quite lucrative and surprisingly fast when you learn to be creative and open-minded.