Real estate has become competitive. In some areas, it’s a seller’s market. In others, buyers take the reins. No matter what, though, there are many thousands more individuals in real estate now than there were back then. With investment seminars and flipping shows becoming more mainstream, the real estate pool is growing more prominent daily.
But what if you are in a hurry to sell? Does that mean you are motivated? Let’s take a look at what constitutes a motivated seller and whether or not some of these seller techniques will work for your situation…
- You are facing foreclosure
Times can be challenging. You may have been let go from that job and couldn’t replace the income in time. The bank sent you a letter giving you notice of a Lis Pendens (the beginning of foreclosure, also known as a preforeclosure). You are out of options and don’t want the foreclosure to destroy your credit.
- You are behind on taxes
Just as before, this is an immediate situation that can destroy your credit. Taxes will get collected no matter what, so bad credit doesn’t need to be added to the mix. Back taxes will not only eat up your equity but will also be attached to your future wages.
- You have bad tenants
You are constantly receiving complaints about the tenants in one of your properties. Police are becoming a regular sight in front of the property. Perhaps the renters are turning your intended investment into a drug house. You don’t want to deal with the situation and would take cash out of the investment and walk away.
- You are getting divorced
Let’s face it. Not many are fair in divorce proceedings. Who is keeping the house? Neither of you? So you have no choice but to sell quickly to avoid your soon-to-be-ex like the plague and get some cash for a fresh start.
- You are retiring
Whether you are a landlord retiring from the business, or a couple with a home you’ve had for years, you want some cash for your equity to move to warmer climates and bingo.
- You inherited real estate
You just inherited a house or multi-unit property but would rather have cash instead. You want a quick sale and don’t want to be bothered with upkeep.
- You are an out-of-state owner
You thought you could manage the investment property in California while relaxing in your home in Maine. Unfortunately, good help is hard to find, and the property managers all turn out to be drunks. The grass is high, and you are getting letters. It’s causing more headaches than it’s worth.
- You want some extra cash
You don’t need the property in question and want to pad your bank account.
These are all valid reasons that would make you a motivated seller. The only question I have for you, in this case, is… are you greedy?
A number one killer of real estate sales is owners with too much pride to accept that the market will not support their outlandish property valuations. The fair market value may be high, but nobody is biting. How is that quick sale going for you? The first step in selling your home quickly is acknowledging that you need to be open-minded. If you can be open-minded about the price of the sale, or the terms, then selling fast will be a breeze.
You have quite a few options. Some will take longer than others. Probably the number one way of selling quickly is seeking out a wholesaler. A wholesaler is a real estate investor who looks for discounted properties, writes an offer, then assigns the contract to one of their many cash buyers. Often, the wholesaler will have hundreds or even thousands of investors in their contact list who are ready to buy immediately. Their investment partners have been qualified by the wholesaler with proof of funds and will have shown the wholesaler multiple deals they have closed in the past.
Some wholesalers buy properties in multiple states, while others are limited to a single state. Some of them even stick to a specific city or regional area. They use phrases like “we buy houses, any area, any condition.” While many wholesalers stick to profoundly discounted properties, others work with low equity deals where Subject2 and seller financing can be put into play. These are some of the techniques that require you to be an open-minded seller that is genuinely “motivated.”
Another option for a quick sale is Craigslist and other classified websites. If you are going the classifieds route, you must be prepared for the ‘tire kicker’ responses. There can be a lot of newbie investors and people who are just looking that will take a lot of your time to screen out before finding a genuine buyer. When listing a classified ad for your home, make sure you include as many details as possible in the ad. Leaving out bedrooms, bathrooms, parking, and other features will only mean you have to spend time discussing these things when taking the multitude of calls you will receive.
If classifieds are not your thing, you will want to find buyers through a more direct route. Go to where they hang out. Some forums, such as EquityPaper and BiggerPockets, have premium subscription options for real estate listings and other networking tools. These are forums where investors get together to discuss real estate topics daily. You can get quick responses from interested buyers if you list your home in these professional member areas or marketplaces.
When listing your property, there are some things that potential buyers will want to know in addition to the standard property details. ARV (after repair value) is one of them. To find your ARV, go to Zillow, Trulia, and Redfin. Please search for your property on each website and write down the estimated value. Add all 3 of those values, then divide the sum by 3. The result will be your ARV.
After your ARV, you want to determine what the new buyer will have to put into the property in repairs. If your home is in excellent condition, you only need to account for simple things such as paint, appliances, and other things related to the buyer’s tastes. You would multiply your square footage by $10 to get the total credit the buyer will want. If the property needs updates such as flooring, a new toilet, etc., you will multiply the SF by $15. Broken windows, doors, etc., will be $20. If the house is a disaster and a complete rehab, the multiplier is $30. Now subtract that number from the ARV.
Whether or not the buyer is a wholesaler or a flipper, they need to make something off of the deal. Depending on your property’s location, value, and other factors, this can be anywhere from $2,000 to $50,000. However, many good wholesalers will stick to or close to the price point. So take your new ARV and subtract the buyer profit for an expectation on how much money you will be offered for the property.
Creative financing for a fast sale
Assuming that the final number from the above calculations was not even close to taking care of what you owe on the property, you need to learn to be creative. Some wholesalers and flippers will still take on a property with little to no equity.
Subject 2 Financing
Subject 2 is a technique that allows the new buyers to take over your mortgage payments and assume control over the property. Sub2 investors are looking for leverage, so they do not tie up their credit but can obtain a rental property simultaneously.
A seller may have a concern when dealing with a sub2 deal. For example, what if the buyer does not pay the mortgage and ends up as a wrong credit item for the seller? Some protections are in place for sellers during the two existing financing deals.
- A single late payment can be a deal-breaker. It can be made so that in this event, the buyer defaults and loses the property to the seller. This single possibility is reason #1 for it being a rare scenario. Most subject two investors are seasoned. They have been doing it for years and have made millions through rentals with such deals.
- Limitation clauses such as requiring the buyer to refinance the property in their name within a set period reduce the risk even further. Let’s say that in 2 years, the buyer is required to refi. By then, they will have accumulated enough equity by paying down your loan for this to be a possibility through traditional lending methods. Even in the worse case, they can secure hard money after that time to leverage additional time to flip the property or get another financing.
If you aren’t in a complete hurry for a bunch of cash, you can sell on a contract for deed or a lease option. This will ensure that the buyer is responsible for the upkeep, insurance, taxes, and everything else while giving you a monthly income stream with little risk. With either technique, you are getting a fast sale. The best part is that you retain the deed to the home until the buyer’s obligations are met. If they default, you can evict them and start over again with a new buyer. The best part is that you are earning interest with your equity at a rate you agreed on in the sale.
FSBO (for sale by owner) doesn’t have to be complicated. It can be lucrative and amazingly fast when you learn to be open-minded and creative.