Ok, through marketing and networking you found a motivated seller, negotiated a stellar deal, spent hard earned cash and sweat equity turning a dump into a dream house, and now your ready for the real fun…
Selling your flip on the open market.
In our family business this is where my work begins. Having my license makes me the one in charge of listing all properties and the one on the front line during the negotiating. We strive to achieve that elusive balance between selling the property quickly and maximizing profit. Over the past several years we’ve discovered some things that have made achieving this balance a little easier.
How to Estimate Rehab Costs!
Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.
Setting the Right Price:
This should be a no-brainer, right? If you’ve bought the property right you should be able to list at a price that guarantees it will move. I’m sure no one reading this has EVER over-priced their property! <sarcasm>
Everyone knows that the first 14 days are the most crucial on the market, so resisting the urge to push the list price too far over the cliff to “test” the market is important. If you over-price your property and it continues to sit for days, weeks, and even months, you (the seller) lose the upper hand when the negotiations finally start. How many times has any of us said, “Let’s send them a low-ball offer. That house has been on the market forever!” When your buyer does finally come along, it can be an uphill battle to regain important negotiating ground. So make sure you have a good feel for the market value of your neighborhood before even starting your remodel. Try to price the property to bring an offer within the first 2-3 weeks. If there are buyers looking in that area, you should have it priced to sell to one that is already waiting!
Leave Some Things Undone:
I know this sounds a little crazy but hear me out. It’s ok to leave something on the table for the buyer to ask for. During the 3rd party inspection your great property is going to get torn apart on paper. It’s the inspectors job. No matter how hard you try and prep for it, the buyers are more than likely going to come back with an amendment. It’s part of the dance. So, let’s say there was an outdated light fixture you didn’t quite get to or even an older hot water heater that probably could be replaced. Leave them! This way when the buyers come back with their laundry list, you, in all your generosity, can agree to do some of those items which you were already aware of and willing to do anyway. So, the buyer feels good that they are getting something more out of the deal and you aren’t pulling your hair out because the items you just agreed to were probably part of your budget anyway. So it’s a win-win, everyone feels good situation. If you’re not sure what those items might be, ask this question, “If I don’t fix or replace that, will it cause a buyer to not make an offer on the house?” If the answer is “No”, then you might just leave it undone!
Head Off Conflict Before It Comes
Each transaction we do, we learn something new. When I first started in this business I just wanted everyone to like me, like our property, and feel good about every aspect of the transaction. What a fairy tale! So, several years later I’m happy to say that I am much more realistic, and prepared. We’ve come up with an instruction sheet to agents that now accompanies every one of our listings. This helps to qualify the buyer’s that may potentially make an offer on your flip and head-off any deal breakers. It contains the following information:
- The correct seller name (We are an LLC and agents constantly ask us whose name it should be in).
- Instructions on seller’s disclosure and what box to check on the contract.
- Instructions on submitting a pre-approval letter (NOT a pre-qualification). Additionally, here is where I warn agents that this property is a flip and that their lender may have seasoning requirements that this property does not meet.
- Title company information goes here along with instructions if they choose another title company then the buyer needs to be prepared to pay for the title insurance.
- Option period/Fee: In Texas the buyer pays the seller a certain amount to have the property taken off the market. The buyer then has the unrestricted right to have an inspection and complete their due diligence. Agents will always try and get 10 days for $100. Guess what? $100 doesn’t even pay your carrying costs for those 10 days, and 10 days is entirely too much time. So we line out a schedule for them, basically telling them to put their money where their mouth is. It is as follows:
5 days @ $250 6 days @ $300
7 days @ $350 8 days @ $400
9 days @ $450 10 days @ $500
- Our response time goes here. We choose not to work on Sundays. This is clearly stated so that amendments are not sent over on Saturday night with an expectation of a response Sunday morning.
- Where and how to submit offers. My contact information goes here.
So there you have it. From pricing to spelling out expectations of the transaction, it’s a sure fire way to make your deal run smoothly. I realize everyone has strategies that work for them. This is just what keeps our business humming along in the market and area we are in.
I’d love to hear some things that work for you!