Selling mid-flip. Why?

Question

So I'm finding several properties on my local MLS where it looks like a rehabber has purchased a property, did the demo work, cleaned it up, put on new siding, exterior windows, sometimes a new roof, framed out the structure, and now are advertising it for sale at this point. The only reasons I can think of why someone would do this is A: They realized they are way over budget and are heading for a loss, they want to recoup their investment and move on, leaving someone else to deal with it. or B: they are catering to designer investors who just want to put their finishing touches and design on the property without having to the nasty demo work and such.  Is it 1 of these two reasons or am I missing something?

Wayne Brooks · Answer

@Joe Funari An agent certainly does Not have to tell a buyer why a seller is selling, neither legally or ethically ....if anything, that might open up the agent to not fulfilling their fiduciary responsibility to the seller.

James Wise · Answer

Yea you see this when guys get in over their heads or run out of money.

Joe Funari · Answer

@Ralph Stowe I have come across this several times over the years. First, call the listing agent or seller if FSBO and get the real story why they did portion of the work. A Realtor will have to give you an honest answer as to why they are selling if seller disclosed it. Most of the time its the seller purchased too many properties at the same time and was cash strapped to complete the rehab because they over extended themselves and didn't calculate the rehab draws correctly from their hard money lender. One such house I helped a fellow investor purchase was gutted down to the studs, foundation and roof was repaired. It was priced right too and my client hit the ground running on rehabbing it for a rental once they closed.

Jonathan R McLaughlin · Answer

One other possible reason is they didn't get permits and/or ran afoul of some other zoning and it screwed their numbers some how.

John Teachout · Answer

There's any number of reasons someone would bail out of a half done property but I highly doubt it was the original plan. Sometimes once someone opens a project up and sees what all needs to be done they just want out as they realize they didn't correctly assess the repairs or as others stated, ran out of money or realize they will.

We bought a "cheap" house and then discovered that the renovation was going to be much more extensive than we anticipated. So we tried to sell it, couldn't, let it set empty and now some years later are finally doing the extensive repairs. We'll spend about 3 times what we paid for it to put it in order so we will have to hold this property for 80 years to make it pay. lol.

Lee Bell · Answer

I wouldn't count on the agent to tell you anything. Do your own inspections and research and make sure you're not getting Pandoras box.

Ralph Stowe · Answer

That does make a lot of sense. So there is still potential for a profit in these types of properties. You're not just having to clean up someone else's mess. Thanks, Joe.

Selling mid-flip. Why?

Most Popular Reply