Quickly Selling Real Estate by Owner When Fast Cash Is Necessary
The good ole’ days were uncommon. You could put up a sign in your yard and get fast responses from interested possible buyers, or hire a listing agent and not worry about their commissions eating up your cash. Times have changed.
Real estate has become competitive. In some areas, it’s a sellers market. In others, buyer’s 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 bigger on a daily basis.
But what if you are in a hurry to sell? Does that average you are motivated? Let’s take a look at what consists of a motivated seller, and whether or not some of these seller techniques will work for your situation…
- You are facing foreclosure
Times can be tough. 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 a foreclosure, also known as a preforeclosure) You are out of options, and you don’t want the foreclosure to end up destroying 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 additional 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 regularly receiving complaints about the tenants in one of your similarities. Police are becoming a normal sight in front of the character. Perhaps the renters are turning your intended investment into a drug house. You don’t want to deal with the situation and would rather take cash out of the investment and walk away.
- You are getting divorced
Let’s confront 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 so you can 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 who is retiring from the business, or a combine with a home that you’ve had for years, you just want some cash for your equity so you can move to warmer climates and bingo.
- You inherited real estate
You just inherited a house or multi unit character, 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 character in California while relaxing in your home in Maine. Unfortunately, good help is hard to find and the character 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 just want some additional cash
You don’t have a need for the character in question and you simply 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 an owner who has too much pride to accept that the market will not sustain their outlandish character valuations. The fair market value may be high, but nobody is sharp. 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.
Where are my target buyers?
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 similarities, writes an offer, then assigns the contract to one of their many cash buyers. Often, the wholesaler will have hundreds, or already thousands of investors in their contact list who are ready to buy closest. Their investment partners have been qualified by the wholesaler with proof of funds, and will have shown the wholesaler multiple deals that they have closed in the past.
There are wholesalers that buy similarities in multiple states, while other wholesalers are limited to a single state. Some of them already stick to a specific city or regional area. They are known for the use of phrases such as “we buy houses, any area, any condition”. While many wholesalers stick to deeply discounted similarities, 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 truly “motivated”.
Another option for a quick sale is Craigslist and other classified websites. If you are going the classifieds route, you have to 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 true 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 average that you have to use 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 by a more direct route. Go to where they hang out. There are forums such as EquityPaper, and BiggerPockets that 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. If you list your home in these specialized member areas, or marketplaces, you can get fairly quick responses from interested buyers.
calculating character value to an investor
When listing your character, there are some things that possible buyers will want to know in addition to the standard character details. ARV (after repair value) is one of them. To find your ARV, go to Zillow, Trulia, and Redfin. On each of those websites, search for your character and write down the estimated value for each of them. Add all 3 of those values, then divide the sum by 3. The consequence will be your ARV.
After you have your ARV, you want to determine what the new buyer will have to put into the character in repairs. If your home is in great condition, you only need to explain 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 character needs some updates such as flooring, new toilet, etc, then you will multiple the SF by $15. Broken windows, doors, etc will be $20. If the house is a disaster and a complete rehab, then 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. This can be anywhere from $2,000 to $50,000 or more depending on the location, value, and other factors for your character. Many good wholesalers will stick to the $10,000 pricepoint or close to it however. So take your new ARV and subtract the buyer profit for an expectation on how much money you will be offered for the character.
Creative financing for a fast sale
Assuming that the final number from the calculations listed above was not already close to taking care of what you owe on the character, then you need to learn to be creative. Some wholesalers and flippers will nevertheless take on a character 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 character. Sub2 investors are looking for leverage so that they do not tie up their credit, but can acquire a rental character at the same time.
A seller may have a concern when dealing with a sub2 deal. For example, what if the buyer does not pay the mortgage and it ends up as a bad credit item for the seller? Well, there are protections that are in place for sellers during subject 2 existing financing deals.
- A single late payment can be a deal breaker. It can be made so that in this event, the buyer is in default and they lose the character back to the seller. This single possibility is reason #1 for it being a scarce scenario. Most subject 2 investors are seasoned. They have been doing it for years, and have made millions by rentals with such deals.
- Limitation clauses such as one requiring the buyer to refinance the character in their own name within a set time period reduces the risk already further. Let’s say that in 2 years time, 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 by traditional lending methods. already in the worse case, they can obtain hard money after that time in order to leverage additional time to flip the character or get other financing.
Contract for deed, or lease option
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 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 simply 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 hard. It can be quite lucritive, and amazingly fast when you learn to be open-minded and creative.