Preselling a Flip

[Peter Christiansen]

Hello everyone,

Although this is my first post, I've been a member for awhile and greatly benefited from all the information on BiggerPockets!  My partner and I have completed a number of different projects using various strategies (wholesaling, new construction, fix-and-flip, buy-rehab-rent-refi, etc). 

We now have a new project that seems to be somewhat unique as I couldn't find any previous discussions using the search function.  We have a property under contract and were planning on doing a typical fix-and-flip.  However, we are in discussions with a potential end-buyer who would be buying the property after completion.  Although I couldn't find anything by searching, I'm sure some of you guys have done a deal like this? I would be very interested in how you guys might have structured a deal like this.  Ideally, we would lock-in the sales price before actually closing on the property and get a contract in place for the end-sale.  The end-buyer could then pick out their finishes, colors, etc.  In order to minimize our risk of the buyer canceling the contract, I was think a decent down-payment and a detailed spec-sheet.

Thoughts?

Thanks,

Peter

[J Scott]

There are a lot of other threads on this topic...

Generally speaking, the consensus is that you should get a very detailed scope of work for what the buyers want (and what you'll customize), collect a very large non-refundable deposit upfront to cover the cost of having to redo all their customizations should they back out (and also being compensated for the lost time), and then be prepared to have the buyer micro-manage you throughout the process and mess up your schedule with change-orders and last-minute issues.

Personally, I think that unless you have a lot of experience in this business, trying to customize a house for an end-buyer is going to pose more headaches, risks and wasted time than it's worth.  But, if you decide to move forward, make sure you're at least well-compensated for those headaches, risks and wasted time.