Listing a Flip During Rehab

16 Replies

Any downfalls to listing a flip as FSBO during the rehab process?

@Eric Williams

Great question. IMO I never list my properties before they are complete. Normally the buyers do not have the vision of what you are going to do to the property so you never really get the sale. 

Another negative is, sometimes it actually scares the buyers away as they see "behind" the walls and they will never value your house as much as the house that they haven't seen behind the walls.

All that too say I would wait and make a great first impression, just like in life I think first impressions are very very important when selling a house. 

Good Luck!

AC

Medium ac logoAndrew Cordle, Andrew Cordle | [email protected]

My concern is that it would also increase your time on market which some buyers might look as a downfall to your property and be swayed against viewing it.

Exactly what @Andrew Cordle  and @Christine Lovett  both stated. Most sellers want to think the house was in pristine condition before you started and you just spiffed it up a bit. Also, when DOM gets high, people assume there's something wrong with a place and that's why it's been on the market for however many days its been. They'll either skip it or, if they do view it, go in with the mindset that they're missing something that everyone else has noticed. That, or they'll go in looking to lowball because of DOM. 

You want to hit with a splash, not dribble onto the market! 

You can check out my credentials and see why I say what I am saying.

When I buy a rehab that im going to sell as soon as its finished, or when I list some properties for sale...

I do whats called list low and sell high... NOT very many RE Brokers know how to do this, and when I tell some agents, they just say WOW can you do that...

Example I listed a property for $90,000 and sold it for $180,000, another listed for $250,000 sold for $408,000...

I always tell my clients to list the day you buy the property.

If you list a $100,000 property for $30,000 will it sell for 100K or 30K???????

List right away gives all possible buyers in that area the chance to see your house will be available when its done. You want some exposure time, and if you know how to answer questions from buyers and agents, it does NOT matter if you had the house listed for 5 yrs.

It will sell for what it is worth at that given month in time and what those given buyers are willing to pay. You only need 2-3 buyers to get top price bidding in that month. No matter What anybody says its worth ( OR WHAT YOU HOPE FOR), those 3 bidders will only pay what the value is in that area for that house. So if you list a $100,000 house for $30,000 those 3 agents and buyers will fight over it.

I'm sorry Kevin, but that advice seems like it would backfire more times than it would work. Unless you are in a redhot market, I think you would turn off many buyers. Also, who is looking at a price range that large? If I can pay $408,000, I am not looking at $250,000 houses, generally. (Speaking as an end buyer.)

When I see houses so obviously mis-listed, I don't think I am getting a bargain and I most certainly don't make an offer. I simply walk away and find another property.

Eric, to list as an FSBO would not generate any market time, unless you also listed on the local MLS. I would not recommend listing it too much before it is finished, simply for the reasons stated above. Buyers cannot visualize. They cannot see what isn't there.

Good luck!

@Eric Williams, we do high end flips and see no problem putting FSBO signs out once we have gotten past the most ugly stages of reno. The rationale, we do high end flips and often people like to purchase early and pick different finishes. Why not put a sign up if there is a buyer that might be interested but has no idea the house will soon be available for sell? In our FARM, there are many people that move from one house to another, without ever leaving the area. They have time to wait for a house to be completed, but may want input on the final details -- back splash, interior paint color, etc. I never want to miss a sell just because someone doesn't know the house is for sale because of my lack of letting them know!

901‑545‑9092

You can list the property for sale anytime (with details on when it will be available and finishing touches that you plan to add), the earlier the better, as you may generate multiple buyer leads during the process. However,  I would hold off showing the property until the rehab is complete. Retail buyers have very little imagination for the end product. 

Tyler H., Definitive Properties, LLC | (817) 721‑8511 | http://www.sellfastfortworth.com

Your market and level of home will dictate the answer to this question, however, let me pint out a distinct difference in two factors here: Listing and showing!

No harm in listing the property for sale and building a potential buyers list, getting time to pre-qualify the buyers and perhaps get an idea of what they would pay and what finishes they would want. Showing them the home prior to its completion is typically a no-no in more ways than one. Buyers have little to no imagination, showing them the ugly behind what will be the beauty sticks in their minds, and you will, without question, lose some potential buyers by showing before it is finished.

If you are in the cookie cutter average home price point, finish and then list and show. if you are priced right and do a quality rehab, your home should sell quickly in any stable or appreciating market. There is also no harm in placing a sign in the yard and perhaps online stating "listing coming soon". I have done this several times in the past.

Medium be logoWill Barnard, Barnard Enterprises, Inc. | http://www.barnardenterprises.com | Podcast Guest on Show #130

What about listing directly to whole-sellers for cash offers only in as-is condition. Basically do the FSBO thing, but not on the MLS. Tell them no contingency and buy as is, giving rehab buyers a SOW to be done, and ARV etc.

I could see this working in LA or hot areas with lots of wholeselling going on.  Actually I have a house I just bought cash that I might try this for.  It's in North East LA, Mt Washington area, which is hot. 

 I mean I could spend 2-3 months flipping myself but why not see if another flipper would like to buy it now for cash and I can make some profit now?

I recently represented buyers purchasing a flip that was listed before it was completed.  It was probably 97% completed to be honest.  It got a bit messy because once we were under contract it seemed as if the seller forgot that he still had that 5% of work left to do!!!!!  And one of the things that was left to be done was get the AC system up and running.  they ended up needed to install a brand new condensor and air handler vs simply repairing what was there.  The seller could have gotten more money for this house if he waited and finished off ALL of the details.  instead, we had a brutal experience that resulted in delays and buyers coming very close to walking away from the deal.  

I can understand wanting to get it to market in advance and certainly this is the norm for new construction, but just make sure you do dot your i's and cross your t's.  I don't think the issue of days on market applies to you as a flipper because you are much more inclined to understand "pricing it right" and far less emotionally attached than a regular home seller so you will probably have it priced to sell right from the get go unlike so many homeowners with jaundiced opinions of what their homes are worth that arent based in any factual comp data.

Medium pineywoodsDavid DuCille, Pineywoods Realty | [email protected] | 813 812‑4712 | http://www.daveducille.com

Some good responses and stories here, I believe that there is more negatives than positives when it comes to listing a rehab before it is completed. For me, I want the positives to outweigh the negatives in anything I do!

Medium be logoWill Barnard, Barnard Enterprises, Inc. | http://www.barnardenterprises.com | Podcast Guest on Show #130

Originally posted by @Kevin Bowlers :

<< SNIPPED>>

Example I listed a property for $90,000 and sold it for $180,000, another listed for $250,000 sold for $408,000...

I always tell my clients to list the day you buy the property.

If you list a $100,000 property for $30,000 will it sell for 100K or 30K???????

List right away gives all possible buyers in that area the chance to see your house will be available when its done. You want some exposure time, and if you know how to answer questions from buyers and agents, it does NOT matter if you had the house listed for 5 yrs.

<< SNIPPED>>

Hey Kevin,

Your "list low, sell high" strategy is intriguing. We're always open to going against the grain when a profitable idea works!

Could you share more please:

- What are the common questions you get from buyers and agents (and your answers)? 

- What's your experience been with Mindy Jensen's observation ... "If I can pay $408,000, I am not looking at $250,000 houses, generally"

Very eager to learn more about how this works for you and how to apply it to what we might do!

All the best,

Monique

So you list it at 90k.  I offer all cash at 90k and close in 2 weeks.  How can you not legally have to take that offer.  Even if you get 1 other person interested in the property the chances of a bidding war going all the way to 180k is not going to happen.

I call BS.

The is Bigger Pockets and we like proof with all the wild claims made on here.

Originally posted by @Scott K. :

So you list it at 90k.  I offer all cash at 90k and close in 2 weeks.  How can you not legally have to take that offer.  Even if you get 1 other person interested in the property the chances of a bidding war going all the way to 180k is not going to happen.

I call BS.

The is Bigger Pockets and we like proof with all the wild claims made on here.

 @Scott K, 

The laws regarding and offer vs and accepted offer may vary from state to state, but in Texas, and offer may or may not be accepted. Only once accepted is an offer binding to the seller subject to the terms of the offer.

I have recent experience with a selling situation in which our asking price was lower than ANY of the offers we received. After several offers were compiled, our Broker sent out communications to each buyer's Realtor asking for their client's highest and best offer. Our little rehab sold for 10% more than asking.

Price it right!

Originally posted by @Keith Frank :
Originally posted by @Scott K.:

So you list it at 90k.  I offer all cash at 90k and close in 2 weeks.  How can you not legally have to take that offer.  Even if you get 1 other person interested in the property the chances of a bidding war going all the way to 180k is not going to happen.

I call BS.

The is Bigger Pockets and we like proof with all the wild claims made on here.

 @Scott K, 

The laws regarding and offer vs and accepted offer may vary from state to state, but in Texas, and offer may or may not be accepted. Only once accepted is an offer binding to the seller subject to the terms of the offer.

I have recent experience with a selling situation in which our asking price was lower than ANY of the offers we received. After several offers were compiled, our Broker sent out communications to each buyer's Realtor asking for their client's highest and best offer. Our little rehab sold for 10% more than asking.

Price it right!

I agree with this.  He said price a 100k property for 30k.  That's what I call BS on.  Multiple offers are fine and asking for final and best is all good.  But to run up the price to that level you would have to be shaddy end give out info that you shouldn't.  I hae lost properties with the final and best and the agent has never ever told me what I needed to beat.

It would really come down to your expected DOM and carrying costs.  I think the potential downsides are listed pretty well.  However if you are in a price range where the DOM is high and it costs a lot to carry the property - it might be better to line-up a buyer while you are rehabbing the property.  I agree that you would want the majority of work to be completed before showing.

I wouldn't expect top dollar - and would look for a larger than usual earnest money deposit.  For the buyer - picking the final finishes could be an incentive.