A Rehabbers Guide to Selling Property
A lot of conversation goes on about buying the right way, and remodeling the property efficiently, but if you can’t get the property sold does it really matter? According to a California Association of Realtors study, from February 2010, 63% of homes fall out of escrow before they close. That is almost two out of three… if the average escrow takes 45 days, you could be stuck holding a vacant home for an extra three months.
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Here are the tips that have helped us beat the stats… we run under 5% fall out
Step 1 – You want to Control the Listing Process
I am a big advocate that if you are planning to do volume in this business you should get your real estate license and list your own properties. A listing agent won't be nearly as tenacious to earn their 3% commission as you will be to get your original investment and profit back and you shouldn't expect them to you. You want to control the process, or have someone on your team that understands the importance of closing.
Step 2 – Sell a Good Product that Attracts Multiple Buyers
You have no leverage in negotiating when you only have one offer. It is important to sell a well rehabbed product that can attract multiple buyers so you can pick the buyer who will close.
Step 3 – Use Your Team, or Pre-Qualify the Parties Involved Before you Open Escrow
The Buyer's Real Estate Agent, Mortgage Broker, Lender, and Appraiser can all cost you money.
My favorite type of Buyer's real estate agent is also the most annoying one. I love it when an agent will call me 3x a day every-day until I accept their offer. If they are willing to follow-up this much, imagine what they will do to the lender when they are waiting for something? You can search how long an agent has been licensed, how many deals they have done quite easily. It's free and easy to do.
I always force my escrow company. I always ask for permission to call the buyer’s lender on pre-qualification lender, if I don’t get the feeling they are deal makers I request we use my lender.
Step 4 – Don’t Put a Bad Buyer in Escrow
Sometimes we make poor decisions, trust me, if you have a bad feeling about the buyer or the qualifications look “iffy” you are better off not opening escrow. Once you sign contracts you are obligated to the buyer and committed to the process.
Upfront, I always ask for: bank statements, copy of FICO scores, and a pre-qualification letter. Be sure to review these and look at the details. Ask the lender about them in pre-qualification letter.
Step 5 – Follow-Up
Once you open escrow, I contact the lender and the buyer's agent weekly for a status update. Lenders provide something called "Conditional Loan Approval," ask for a copy of this report once they have it. It summarizes what documents the lender will require before they issue loan documents, and what they require before the fund the deal.
The process and requirements always change, but if you put together a good team they will protect you and keep you updated on the rules.