I'm looking at a couple of properties that meet a lot of the basic criteria that I want for my first potential investment and am starting to dig a little deeper and taking a harder look at them as possible rentals. Both properties handle the 1% and 50% rule nicely which got them on my radar.
I noticed today that both properties have been active listings for 2+ years.
BP Community: what do you think when you run into situations like these? What red-flags would you immediately start looking for to figure out why no one else has jumped in?
I'm immediately wondering if they are priced ridiculously high. That's the #1 reason properties don't sell. Then I'm wondering if they are built on some Super Fund site!!!
Seriously, if they are listed on the MLS and haven't sold for 2-years, there's something hinky somewhere. It may be price. It may be location. Or, it could be something altogether different. The first thing I would do is to check the listing history to see if it has fallen out of escrow multiple times. That usually a good sign that there is something about the property that is scaring investors off, after they get in and start doing due diligence.
My 2nd step is to ask my agent to check any addendums on the property. If the seller is aware of something, they are usually required to disclose it.
Hi @Hattie Dizmond . That was one of the thoughts I had shortly after posting this. I'm going to try to continue with my own research for a bit, if I get more serious about these properties though, I am definitely going to follow your suggestions and have my agent give me her feedback as well in regards to escrow in-outs and addendums.
Property A: Looks like it was listed far too high at first, it's been reduced in price 6 times since the original listing in '13. It's also listed as a duplex but I think, given the location, there may be some code violations going on and the area doesn't allow multi-family buildings. That would certainly drive off buy-hold investors, although you'd think some fix-flipper would have snapped up a 4,400 sqft. house and eagerly converted it. Comparable sized houses in the area recently have sold for $100K-$200K above the current MLS asking price.
Property B: Weird story here, listed at the same price for the last 2 years, no reductions that I can see. An REO that appears to be a carbon copy right next to it just sold for about $60K under asking price, that might be a big part of the hold up, although it doesn't explain 2 years worth of active hanging around on the MLS.
You won't really know until you explore them.
They could be ripe for the picking.
They could be sellers willing to wait for the end of days to get their price.
Time to go find out...
@David Dachtera , I like that quote.
@Alex Chin , I recently purchased a REO property that had been on the market over a year. The price looked great from the outside. After inspecting the property, I found the wiring, plumbing, and HVAC had been stolen. Other than that, the house was solid. Built in 2009. The price had not been dropped in over 8 months. The realtor told me he hadn't had an offer in 6 months. I made and offer $25000 less than asking price and they accepted. I spent 3 weeks repairing and sold it the day I put it on the market. Those are issues that keep the buyers that have to use conventional lending from purchasing and also scare some investors. Just a bargaining chip to me. Keep us posted.
Its definitely a red flag, which means opportunity.
Our job is to find problems we can fix for a profit much like what Michael just described. Identify the problem, make your offer on your numbers, make sure you do your DD and hope the sellers are frustrated and will take whatever you offer.
Gentlemen, thank you for the responses
@David Dachtera - Yeah, I think for one of the properties, they're waiting until someone meets their price. The other however...so many price reductions, in my mind, that sounds like a motivated seller! :)
@Michael Hicks - Would you mind sharing what you budgeted for redoing the utilities? I'm guessing that might be the case for one of the properties, that could easily be the case for one of these.
@Darrell Shepherd - Oh yeah, for the average home buyer, problems like messed up sheetrock, broken windows, graffiti on the walls...that chases them the hell off. For an investor, those are a sweet siren song that screams a fix-up and $$$ :)
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