Flip with no value add

12 Replies

Hi, each time I resell something I have a lot of questions on what have been improved in the property. Sometimes I have done very little to it, and feel a guilt of inflated price. Did you ever have a flip with no value adding needed or a very minimal upgrade? How did your sell go afterwords? Did it reach the market price or the buyer was pushing hard for every penny? In my cases, MLS contained previous photos from the foreclosure sale and it was clear what have been done to the property.

In my opinion, the only strategy is honesty. If you didn't do much, you didn't much. Stop feeling guilty about it - if you got a property with minimal rehab needs for a great price, good for you. Your resale value should be based on the market price and a solid understanding of the comps. If it's priced in line with the comps, you should be able to find a buyer at or near market price, no matter what you purchased it for.

Originally posted by @Aaron H. :

In my opinion, the only strategy is honesty. If you didn't do much, you didn't much. Stop feeling guilty about it - if you got a property with minimal rehab needs for a great price, good for you. Your resale value should be based on the market price and a solid understanding of the comps. If it's priced in line with the comps, you should be able to find a buyer at or near market price, no matter what you purchased it for.

 of course, I disclose everything. But "should be able to find a buyer close to market value" is somewhat far from reality. Several offers I had on several properties cut my potential profit by 2. Eventually I did find a buyer, but almost all agents say: "but you've got it for X and you want 3/2 of X! That's a lot! We give you 5/4 of X as you deserve only this." Most of this kind of offers were turned down, but they do exist in large quantities.

I am interested in others people experience in this.

Originally posted by @Kate J. :
Originally posted by @Aaron H.:

In my opinion, the only strategy is honesty. If you didn't do much, you didn't much. Stop feeling guilty about it - if you got a property with minimal rehab needs for a great price, good for you. Your resale value should be based on the market price and a solid understanding of the comps. If it's priced in line with the comps, you should be able to find a buyer at or near market price, no matter what you purchased it for.

 of course, I disclose everything. But "should be able to find a buyer close to market value" is somewhat far from reality. Several offers I had on several properties cut my potential profit by 2. Eventually I did find a buyer, but almost all agents say: "but you've got it for X and you want 3/2 of X! That's a lot! We give you 5/4 of X as you deserve only this." Most of this kind of offers were turned down, but they do exist in large quantities.

I am interested in others people experience in this.

 A house is worth what someone is willing to pay for it. It has nothing to do with what you bought it for or how much you put into it.

You seem to have a "sales" issue, not a "value" issue. 

Read some books on real estate sales and learn how to negotiate.

I just bought a house for $180k and within 30 days sold it for $225k. It had a bad roof and the buyer fixed the roof at his expense. That house was worth $225k to him. No real estate agents involved. I saved $12k in realtor fees. It does work, provided you are willing to read and learn how to do it.

But "should be able to find a buyer close to market value" is somewhat far from reality. 

The price a buyer is willing to pay for the house is the definition of "market value." If noone will buy at the price you want, it's priced too high. That can certainly be frustrating, but it's also reality.

Disclose, disclose, and disclose. Show the buyer receipts. Honesty is everything. 

If you are selling with a small market up that is OK.  Some flipper who wanted to double value in a few months, he was not even honest with people who wanted to help him.  Interest party has the attention span just for a few minutes, if something does not make sense he is gone the next minute. 

These days all data are public domain information.

Originally posted by @Aaron H. :

But "should be able to find a buyer close to market value" is somewhat far from reality. 

The price a buyer is willing to pay for the house is the definition of "market value." If noone will buy at the price you want, it's priced too high. That can certainly be frustrating, but it's also reality.

 sorry I have to oppose to what you say. There are many buyers that don't feel good about others getting a big profit. I recently sold a house in 700k range, I had is for 8 months, and originally got it for 480k. Even 600k offers are way far from the market price and comps, and I had a lot of 600k offers. People are just uncomfortable paying 200k more then I paid. It has not much to do with market. Eventually someone who checked all surrounding properties and saw that mine is about 30-40k less have submitted an offer closer to the market price. So no, this is not a definition of market value.

Originally posted by @Sam Shueh :

Disclose, disclose, and disclose. Show the buyer receipts. Honesty is everything. 

If you are selling with a small market up that is OK.  Some flipper who wanted to double value in a few months, he was not even honest with people who wanted to help him.  Interest party has the attention span just for a few minutes, if something does not make sense he is gone the next minute. 

These days all data are public domain information.

I disclose that I did a minor work, that's not a question. But we are talking about a VERY inflated price, which is in fact a market price. I think it can hurt in the future, if I don't disclose everything. So I do tell the buyer all details about the property. The issue is that I am receiving a lot of low ball offers, where agents say "you will make 100k on it anyway", as opposed to what I can really make (200k).

I have never met a buyer who mentioned anything about profit I was making. Granted I haven't met everyone who has viewed every house I have sold, but if a property is listed for correct value, at some point a buyer will purchase it, no matter what you paid for it or what your profit is.

Originally posted by @Brian Pulaski :

I have never met a buyer who mentioned anything about profit I was making. Granted I haven't met everyone who has viewed every house I have sold, but if a property is listed for correct value, at some point a buyer will purchase it, no matter what you paid for it or what your profit is.

 does your state have to disclose the price you paid on it? 

Originally posted by @Kate J. :
Originally posted by @Brian Pulaski:

I have never met a buyer who mentioned anything about profit I was making. Granted I haven't met everyone who has viewed every house I have sold, but if a property is listed for correct value, at some point a buyer will purchase it, no matter what you paid for it or what your profit is.

 does your state have to disclose the price you paid on it? 

Yes every house I have sold, any buyer can see what I paid.

I had one I paid $110k for and listed it for $320k. Had a full price offer day one, and 10 people show up to the cancelled open house. No one seemed turned off by a $210k price swing in less than a year.

Had one I paid $91.5k for and listed for $250k after 3 months and again sold it in a couple days for full list. Maybe I simply didn't hear from people who were unhappy with me making money, but the buyers were extremely happy with the houses.

Originally posted by @Brian Pulaski :
Originally posted by @Kate J.:
Originally posted by @Brian Pulaski:

I have never met a buyer who mentioned anything about profit I was making. Granted I haven't met everyone who has viewed every house I have sold, but if a property is listed for correct value, at some point a buyer will purchase it, no matter what you paid for it or what your profit is.

 does your state have to disclose the price you paid on it? 

Yes every house I have sold, any buyer can see what I paid.

I had one I paid $110k for and listed it for $320k. Had a full price offer day one, and 10 people show up to the cancelled open house. No one seemed turned off by a $210k price swing in less than a year.

Had one I paid $91.5k for and listed for $250k after 3 months and again sold it in a couple days for full list. Maybe I simply didn't hear from people who were unhappy with me making money, but the buyers were extremely happy with the houses.

mine were selling fast as well, but there were many offers which brought my purchase price up. Even one renovated, I paid 134k and sold for 295k in 5 months. I had one offer claiming that  they know how much i paid. 

So the one you've got for 110 and sold for 320, did you improve it? what was the time frame? Btw, I stopped to see this kind of price gaps this spring. How is your neighborhood doing? Can you still make a profit of 100k on one house?

My houses all were renovated, maybe buyers question it when a house has had no renovations done and the flipper wants to sell at retail when they bought well under? I have never done this as I have never found a house that didn't need work for a good price.

I still think if you as a flipper find a good deal, and it needs very little, you turn it on the market for what it is actually "worth". Even if a bunch of buyers don't want to buy because of your profit, someone will come along who doesn't care what you make and only want a house that fits their criteria.