What would you do? Here's the scenario:
I helped a first-time rehabber to buy a house several months ago. Built in 1920, 4 beds, 2 baths, 2016 sq ft, master suite. It's in a very high end town near Boston. He financed it with hard money.
The fatal mistake is that he rebuilt it to its original layout. The beds are small and all of the closets are really tiny - about 7 feet wide and maybe 2 feet deep.
Picture this: It's a rectangle. Across the north end is an eat-in kitchen.
Across the east side are 3 beds, one of which is extra small. There's a shared bath just outside the bed in the corner.
Across the west side is a master bed with master bath. Both baths have tubs - no walk-in showers.
In the middle is a 750 sq ft (!!!) great room, with the original huge stone fireplace.
The basement is original and not full height. The stairs from the kitchen are a lot more like a ladder than steps, making it hard to use for much of anything, though there's a bulkhead too.
There are no other rooms. No storage - not even in the attic, because the blown-in insulation is deeper than the joists. Just beds, baths, kitchen and HUGE great room which is a colossal waste of space.
When we bought it, the comps said it should sell at $600,000, but due to the fact that he didn't do anything to make better use of the space, it's not selling. In fact, we've reduced the price in $25,000 increments and have been at $475,000 for 3 weeks. We're getting showings but no offers.
He's literally begging me to release him from our contract so he can sell it to a wholesaler. My counter offer is to let me present it to the wholesalers and reduce the commission, because there's none for a buyer's agent.
He's not happy with that. He still wants release.
Mind you, I've done 11 open house events so far, spent hundreds of
dollars on FB and Google ads and put at least 1,500 miles on my car for
this sale. I have never put so much time, work and money into selling a property - not even close.
I just feel like I've done way too much to walk away from a binding contract without compensation.
So what would you do?
That is definitely a tough situation. Personally I think I would let him out of the contract, I know you invested alot of time, money, and energy into the property but if a client isn't happy I let them walk.
That being said if his goal is to try to wholesale it then why not try to market it to wholesalers and see if you find one willing to do it? You can cut your commission down or ask the wholesaler to pay a finders fee. A wholesaler won't pay sticker price (which is $475 now) so you'd have to cut it way down. Maybe bring a few wholesalers in, get a couple offers and then cut the MLS price way down and try to get an offer. Or call past showings (if you haven't yet) and ask what would be the number they're clients might be willing to pay. You never know you may get lucky digging back into those first open house sign in sheets. Someone may have liked the house just not at $600,000 and lost track of the property.
It's definitely a tough situation I'd say put in a last ditch effort to find a buyer for your client even if its a wholesaler and if that doesn't work then I would cut my losses.
@Jonathan Bombaci I have reached out to every open house visitor and Realtor who has ever come to the property and have done so with each price drop. Still no offers.
My most recent offer to him was exactly what you suggested - let me market to wholesalers and collect my commission on that drastically reduced price. I did state that I'd cut my commission as there would be no buyer's agent to pay.
He's still begging to be released. I'm normally willing to walk away from a bad situation, but I have invested SO much into this listing, I'm really resisting it.
Yeah I figured you already called everyone on those lists just trying to throw out some suggestions.
I’d probably just start calling / e-mailing some wholesalers and put the word out to the agents in my brokerage just to see if we can get any interest or any offer on the table. Im not sure what else can be done..
you posted this in a Hawaii forum ??? so I thought maybe you had something going on Oahu.
that being said.. I would explain to him that if you just lower the price to what a wholesaler will pay you will find the same buyer and also let him know most wholesalers IF not ALL would never close this unless they find an end buyer..
But if the relationship is strained I personally would just walk away. I would never look at it like hey I did this and put all this time into it..
that's just the cost of doing business.. you make that up with the lay downs you get.. That you put small amount of time into.
My wife always tells her clients that list with her that they can unilaterally cancel at any time for any reason.. Does it happen very infrequently like maybe 1 time in 2 or 3 years.. But it does help her land listings..
I'm sorry and really sympathize with your situation. What is the benefit exactly of him selling this to a wholesaler?? This wholesaler would be able to resale it to the open market again and make money? That's not the end user of the house. Ask him how that will alleviate his liquidity issues?
Were you able to discuss with him what the root of his actual motivations are to request this release? I think it might be something else here.
To me, there's no way he's not seeing the amount of time and effort you've spent in trying sell this home. I think it's worth fighting for, you've invested a lot of yourself in this and you deserve to see the project through.
@Jay Hinrichs I have no idea how this ended up in a Hawaii forum. I selected the real estate agents forum!
@Lien Vuong His goal is to dump it fast. He has a HML deadline coming quick. If he doesn't get rid of it in time, I believe there's a balloon payment of some sort.
I think Jay is on to something. A wholesaler isn't going to buy and close - they're going to try to find another buyer, which is exactly what I've been working on. I don't think a wholesaler has any avenue that I don't. In fact, we syndicate our MLS listings to hundreds of web portals.
I just suggested to him that we do a radical price drop to $395,000 and update the listing to reflect that we're expecting multiple offers at this price and also expect to close well above $395K. We'll see what he says.
Actually, as I think about it, a few weeks ago, he mentioned in passing that he's talked with wholesalers.
I'll bet that he already has an offer that he wants to take and it just looking to screw me out of commission.
Yeah, as most of us know, you will typically Always Net more from the mls than selling to a wholesaler.....who is hoping to sell to an investor who is Always looking for a below market price. And of course, the wholesaler is just Hoping to find a buyer.
Maybe, and I’ve never done this, find out if he has a Specific wholesaler he thinks can do a deal, and at what price (for whatever that is worth)......if so, maybe give him an exclusion from your listing for that one wholesaler for a set period of time. It’s doubtful the wholesaler can perform, drop the price to 5% or so above that price, keep the property listed. Should you get an offer from the open market during that period, they would have to become a back up offer....maybe a little tedious, but just an idea.
As you know, getting a decent amount of showings at $475k means you’re close to the right price, but still a bit overpriced.....the dollars sf seems attrative to buyers, but the physical obsolescence is turning them off.
People who don't appreciate you never will. Just walk away.
I think I'd probably walk away as well...maybe this person will have a successful rehab and recall you were gracious and will want to bring you back to sell the next one.