Should I get a property under contract even if I'm not sure if I can sell it?

Question

Is it worth just rying to lock up a property under contract and see if I can make money off of it?  I have a good feeling that I could but just a little skeptical.

J Scott · Answer

In my opinion, if you're honest with the seller that you'll be looking for an end-buyer and will have to back out if you can't find one -- and the seller is okay with that -- I see no reason not too.

Joel Owens · Answer

You can look at an NDA (non-disclosure agreements) or a NDNC (non-disclosure & non- circumvent ) agreement.

If as you say it is a monster of a deal you can unload it quickly. Simply tie it up but be honest about your intentions. The seller might not care and just wants it sold.

Tracy Royce · Answer

Perhaps not truly market, but start calling around to get feelers if there's any interest. Just give them specs as to price point, area, condition, SF, timeline, etc and let them know you'll call them back once you have it under contract. Good luck Matthew!

Matthew Newman · Answer

Tracy Royce I will do that.  I was already thinking that, i just didnt know if you were allowed to market a property before I had it under contract.

J  Scott it is really tough to say.  The house is a 2 br and 2bt horse property that needs repair on over 40 acres of land and the property next door is 4br 4 bt beautiful home on same size property sold for $1.7mil november of 2011.  There are no other properties in the area that are even 1/10th the lot size.

If the owner still will only go as low as $600k what would the appraisal have to be to make this a good deal?

Tracy Royce · Answer

Matthew if I were you I'd start posting about it and calling investors to see if they're interested. Perhaps not give them the address yet but see if they have any interest and let them know its a deal about to come down the pipeline. Get a title report and perhaps pull comps. If it seems legit then tie up the property, even if its just for a short period. I know some wholesalers that will ask for a 10 day time frame to try to get a buyer, fully letting the seller know they have every intention of assigning it to someone else. If this guy does that sort of equity, if you can't find a buyer in a couple weeks, I'm sure he can find an agent that will put it at a price that will sell it very quickly. No harm, no foul.

J Scott · Answer

Are you confident enough that it's a good deal that you'd be willing to spend $400 for a new appraisal?

Clearly, if the house is worth $1.4M and the buyer is willing to sell for $600K, you have a great deal on your hands.  But, that's a big IF...

Xing Zhu · Answer

I don't think anything is wrong if you are willing to buy in case you don't find a buyer. You then get more time to look for a buyer.

Matthew Newman · Answer

thanks for your reply guys.  Im freaking out a little bit because it is my first deal and I feel that I have a tremendous opportunity.  The owner really wants to get out of California and wants to sell ASAP.

He has an appraisal that he sent to me that is was done on 7/4/2011 that says the property is worth $1.4million.  He is willing to part with the property for $600k if that is what it takes to sell fast.

The appraisal looks very legit but it was taken a year and a half ago.  I cannot imagine property values have dropped much lower than that currently.  Do you think I would have a problem selling this property?

Bryan Hancock · Answer

What J said.  If you're honest about your intentions then there is no issue with it.  If the seller is hoping you'll solve their problems and you're just wasting their time it is completely unethical to tie the property up in this manner.

Note that if your *intention* is to sell to someone else and have no reasonable chance of buying the property you're a broker; plain and simple.  Substance rules over form no matter what your contract says.

Should I get a property under contract even if I'm not sure if I can sell it?

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