I am currently flipping a house in St. Louis county and a buyer literally parked out front and said they want to buy the house (when its done) Its is a 3/2 ranch with 1700 sq ft, no basement and detached garage. I still have 4 weeks left on the rehab and was initially planning on renting. Depending on the price I would profit around $50k. This is my 2nd flip and the 1st has been on the market for 4 weeks.... kind of ironic, right?
So I ask you bigger pockets...
1) What would you do: sell or rent?
2) What do I need to do to sell without realtors involved?
Obtain a non refundable deposit, enter into an Agreement of Sale, determined if this is a cash sale or a mortgage is required. If a mortgage is required have him apply for a mortgage and have the loan originator tell you his credit score. If a mortgage is involved have the closing date within 45 days. You don't want to be involved in a prolonged mortgage process.. Buy a lottery ticket, your the luckiest guy around.
Hello Travis,
If I had someone wanting it before it was finished it I would sell it. Get him to give you a non-refundable deposit to show that he's actually interested and go from there.
It all depends on your strategy some would sell and some will rent it out. How solid are you financially? Positive monthly cash flow is nice but if you need the capital you can make some money and move on to the next one. there's no wrong play here long term cash flow vs instant cash to fund more deals?
1. I would probably keep it. you may be able to get a HELOC after you finish and have some money for another deal and have some cash flow giving you both. again just my opinion no wrong play here
2. all you need is a purchase agreement signed by you and the buyer with earnest money and a lawyer or closing company to handle the escrow/closing.
3.yes you need to require a non refundable deposit I would get at least $1000 non refunable and a close by date.
Get with a title company to handle the purchase contract and earnest money. With that kind of profit, I'd sell in a heartbeat and start looking for the next project. Definitely request a POF or mortgage pre-approval (not pre-qualification) right away before wasting more time. Who the heck knows if the guy can even qualify for financing? Lots and lots of people can't.
Have the buyer show a bank statement they have the funds and the buyer can put the EM in escrow and then you show the buyer you are the seller of record.
@Travis H. I agree with @David Beard completely. Sell and use the money to buy 1 or 2 more you can buy and hold. What an awesome thing to happen. I'm impressed with your first flip only being on the market for 4 weeks. Sounds like you are on a roll. Keep rollin'!
It depends on your market. If you are in a cold market, I would qualify the buyers and sell it to them. If its a hot market, then you may be selling it for cheaper than you should be.
Also if they are requesting changes to your original remodel, be sure to get a non-refundable deposit that covers the costs.
Obtain a non refundable deposit, enter into an Agreement of Sale, determined if this is a cash sale or a mortgage is required. If a mortgage is required have him apply for a mortgage and have the loan originator tell you his credit score. If a mortgage is involved have the closing date within 45 days. You don't want to be involved in a prolonged mortgage process.. Buy a lottery ticket, your the luckiest guy around.
If you are trying to build your rental portfolio, then the question becomes: how easy will it be to find another property that would be just as good a rental and for a good enough price (like for quite a bit less than what you will get paid for selling)? If it's easy to find the next one, then sell; otherwise, keep it.
To sell without involving a real estate agent, you need a few things. First, an agreement of sale document; lots of times you can actually use the agreement that real estate agents would use - check if your state's realtor association will give access to a copy. Then you will have to determine whether this buyer is qualified financially; BFI (Buyer Financial Information) will be needed, which would include things like bank statements. But if the buyer has a mortgage pre-approval letter from a lender then you have less to worry about regarding BFI; you still want to make certain they have adequate down payment money. Negotiating price and other terms into the agreement (like any contingencies) do not require an agent. Then you go into escrow - title company or closing attorney depending on location. Then you get to make sure the buyer satisfies any contingencies so there is no reason to back out - getting a mortgage, inspections, certificate of occupancy, appraisals, etc.
Now, the buyer may already have an agent that is working for the buyer, and they might also have signed a representation agreement that puts the buyer on the hook for paying the agent a percentage of the purchase price. Check into whether this is the case with this buyer or not.
If I ask him for a non-refundable deposit do I cash it immediately? Thanks
Maybe - there may be certain instances where you would have to refund that money (like some title issue might come up). Get the down payment in certified funds, but if you cash it don't spend it ...
I say sell it if you can make $50k. Here in St. Louis you can buy a nice house in a good area for all in at $50k or less. Get your rehab funds back to do it again and a 'free' rental-sounds like the way to go to me.
That said, I am working on a house that I plan to keep as a rental that if I flipped it, I would make $30k-$40k after some increased rehab costs. I plan on keeping it and then refinancing with either a 30 year mortgage or a LOC to get my money back out. I figure I'll save on capital gain taxes and still get to use my money again. But I haven't had an offer to buy the house, so that would be a much different situation.
I purchased a property from a seller that didn't want to use an agent and we worked directly with a title company. They gave us all of the documents and walked us through every step of the way. I think we used US Title that time and I've had some pretty great experiences with Continental Title for some possible contacts.
Make sure that you both are very clear as to how to finish the property.
I have twice had a buyer before the property was finished. Once went fine, the 2nd was a disaster, because he didn't like certain things and it just became a mess.
personally if I could complete a flip and resell in that quick of a time frame selling for an easy $50k maybe a no brainer.
Now I would say depending if you have mortgage or loan out on the property, if you are interested in renting it out then maybe seller finance may be an option for you.
You could collected a down payment(what ever your market standards are) and collect a month mortgage payment, you have all of the qualities of a rental with none of the repair hassles. title company, Mortgage loan originator or attorney can help structure this for you.