When a sale falls through and the house loses its mojo

4 Replies

I could use some creative thinking on this one. My buddy flips houses and uses the proceeds to buy rental properties. His most recent flip in McKinney Texas was a historic home (for Texas standards) built in the early 1900s. When he put it up for sale, he got a lot of interest with one being full ask. Long story short is the people did not have the down payment they stated they had The bank appraised it for $60k less than what they offered and the deal fell through. The loan was a VA loan which means he did not get the earnest money. On top of that, he spent another $5k based on repairs that came out of the inspection. The deal took 3 months to fall through. When he put it back up on the market it lost its mojo and everyone thinks the deal fell through because there is something wrong with it. He has lowered the price to his break even and it is still getting no interest. Now he is looking to rent it out but he has a ton of his money tied up in it that he would use for another flip. Here is the kicker. The property has a main house and guest house. Both on separate electric meters so it would be a great rental. However, he is just wanting to get his money out of it. Any thoughts on how he can unload it or get the money back out of it without refinancing would be appreciated.

McKinney is mostly a pretty good area.  Some exceptions in the 'historic' (read older) areas.  Sounds like it he may have over paid either for the property, the repairs or both and now is trying to get more than it is worth.  Might think about selling it owner-financed and then selling the note to get as much working capital as possible.  Or rent the two spaces and wait for appreciation to bail him out. 

Hard to analyze without more property details thus hard to be specific in any recommendations.

Fix loss and move forward Take what market is ready to offer It may be not easy to sell 60K above appraisal Learn this lesson And go to another deal

Yes in your case I might also think to do an owner financing and sell the note. You will have to discount it but at least you will have or he will have some money to move on to a deal where he can make a better decision and selection of a property that will produce a better outcome from a profit view point. Sometimes that is just the way things turn out, live and learn.

Thanks everyone for your advice.  Yes, he is looking at renting it out until he can sell it for at least what he put into it.  Owner finance is something he is staying away from as he does not want to be held into a long term contract with anyone.  I think he is going to rent it out for a year and then try and put it up on the market a year from now.  We will see what happens!

Thanks again!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you