Why Would People Be Crazy Enough To Buy?
I've only been here a few months, and purchased my first foreclosure/rehab last month.
After doing all the work ourselves I realize I am just getting a little burnt out, but I am starting to doubt myself. I have been reading tons of posts on all different forums, and just need some honest encouragement.
If I buy a house (at what I think is a good deal, based on research), why would anyone be crazy enough to pay $10,000+ more for the house when I try to sell it? If they wanted it, wouldn't they have bought it at the same time I was trying to buy it?
I am just getting very cold feet when I am starting to think about actually putting this house up on the market- I'm afraid I'll find out nobody is crazy enough to pay me more than what I paid just a month ago.
HELP!
Kim
Hopefully, your purchase price was well negotiated... and kept an eye toward the improvements you would be making...
In my opinion, it's very rewarding to purchase a property that needs some work... and once the work is done (and done well) it has a marked increase in value.
Most of the retail buyers want a home that is in move-in condition. They do not want to have to even paint, much less repair holes in the wall, etc. MANY people cannot see the potential in a home, or imagine themselves living there when it is a filthy mess. Many wholesalers delight when they see holes, piles of filthy rags, and toilets that have overflown, because they know the competition was just lowered, and so was the price.
YES, you CAN make money. Talk with your local realtor to get a market analysis in it's repaired condition.
Just had a realtor run some comps that come in at an average of $28,000 more than I paid for the property. I hope they know what they are doing!
Still can't hardly believe someone would pay so much more for a property just because everything was painted and had new carpet- I will let you know what happens.
Thanks
Hey, just a quick thing here... And, you probably already know this, but make sure you keep up with the receipts, and lists of work done, and how much you spent, so your buyer can justify the increase between what you bought it for, and what you sell it for. Bankers like to see a reason for the jump in price in such a short time.
I got into this business because I am a bottomfeeder. I just wasn't making enough $$ scavenging (yes, even from Dumpsters) and selling books and other junk on Ebay. So I looked for ways to add zeroes to each transaction. Distressed real estate (or sellers) is a natual next step.
You are paid for your services, as you should be, unless you miscalculate the numbers, which can happen. You work the margins, the hinterlands of society, looking for deals where Realtors and typical house buyers fear to tread. You offer a one-of-a-kind service. You help foreclosees and other motivated sellers out of their pesky-to-horrible 'situations," and gain in the process.
You are a middleman, an alternative to polished Realtors and banks with all their expensive, time-consuming paperwork and details, in their SUVs skimming 6-7% off of every deal without ever risking their own money. You bring buyers and sellers together in less "formal" ways. When you sell on terms, you provide housing for people who aren't attractive enough on paper for banks to want to lend to. That alone is a valuable service.
You learn the hotline numbers and ways that people in foreclosure might be able to keep their homes if they want to do so, and you let them know that if all else fails, you might be able to help them save their credit by short saling their house, or buying Sub2, and thus avoiding foreclosure. You learn enough to you can help people stand up to the mighty banks and a system that's sometimes stacked against the downtrodden.
Of course, you can't continue unless the numbers work for most deals; this cannot be charity for long. If the rehabbing isn't as fun anymore, hire an industrious neighborhood kid to help, and pay him/her well (for a kid, that is!), and turn them into birddogs in the process. Advertise that house now, keep the callers' info, and start a file of who's looking for what kind of house. Tell people "it's not finished yet, but I'll sell for less if you buy it now, come on over." Then offer them your finished asking price anyway, or whatever price your comps (plus a little for offering on terms) will allow. You never know. Maybe they didn't want the walls painted the color you chose anyway.
You're performing a valuable service. And it's all legal. Don't talk yourself out of your fair share. Good luck![ Edited by loon on Date 04/22/2004 ]
Bigbear,
You are thinking very negative and in turn will probably get exactly those results. You took the risk of buying the fixer, putting in your $$ and labor to improve it and now you deserve the rewards. I don't mean to sound harsh, but this has nothing to do with the property and everything to do with your attitude towards money. You seem to think that you don't deserve to make a profit.
Last fall I bought an REO and intended to fix it up. But then I had this crazy idea to just stick a for sale sign in the yard...with out doing any work. Four days later I had it sold for $13k more than I paid. My buyer's were thrilled, they felt they got a good deal and they never even asked (or cared) what I paid for it. And yes, I did tell them that I only owned for a short time.
Kevin-
Just curious- why do you think someone would be willing to pay $13K more for your house than you paid just weeks earlier? You think it's just a matter of timing?
It is real simple. Not everyone can be everywhere at the same time and have the same skillset . Somebody's gotta be first in line.
If what you feel was the standard then ticket scalpers would not be able to get as much as 10 times the face value of a ticket.
bigbear,
What you're currently doing his realizing your fear. Your fear just happens to be the fear of success. What if someone actually pays my asking price for this? You're also thinking too much. Simply go with your knowledge and do it. Don't worry about "why' people do what they do. You bought at a discount and are selling for retail. The majority of buyers buy at retail. There is nothing strange about this.
I was once at this estate auction and this item came up that I wanted. However, the friend that I was with starting bidding on it first, so I didn't bid at all When it got to $50, he said he wouldn't pay that much for it. So I bid $60 and got it. A week later, he asked me if he could buy it for $75. Why? I don't know and didn't care. I made $15 on it.
Roger
Kim,You are facing what many new REI's face. Paralysis by analysis. Believe in yourself and trust what your real estate agent tells you about comps. You need to believe it is worth what you are asking in order to convince your buyer(s).
Guys, come on now.
I go out on a blind date, the only kind I attended as a young man. The girl is just the most wonderful thing you have ever seen in your life. And, strangly she responds to your foot in mouth approaches and a wonderful night is had complete with testimonials in the morning. I believe that is called exchanging telephone numbers.
You are having coffee and you inform your friends of the wonderful evening you had with this refugee from heaven. You mention her name and I will be damned if Archy (the Cockroach) does not jump up and down and says he knows her and she is the dog of all time. As a matter of fact she wears a license and a collar every time she leaves the house. blaw, blaw, blaw. You are destroyed.
The Moral: Beauty in women as in houses is in the eye of the beholder. You lucked out you got the house with possibilities before someone else came by and snatched it up.
Remember a remodel, Shutters at the windows, a new front door, Baldwin locks and a gas light. damn thats pretty and a little bit of lipstick on the curb line and the house is sold and best of all for a profit.
The above remarks were culled from life.
Loon says it prettier, but the essence is the same.
Lucius 8-) 8-) 8-)
There is a tv show called "Sell This House" which shows prospective buyers who see a home both before and after a makeover. Before the makeover, buyers were not willing to make any offers close to asking. But after, some buyers would offer above the asking.
What's amazing is that we are not talking gut-renovation here but rather simply getting rid of clutter and rearranging furniture.
If a lot of buyers cannot even see past clutter or misplaced furniture, one cannot expect them to look past peeling paint, or outdated kitchen cabinets.
Just my 2 cents.
There are many reasons why the same items sell for different prices. Here is a very simple scenario relating to real estate. Bob buys a bank REO at a big discount because it needs work and he buys with cash. He fixes it up and then sells it for 50% more than what he paid the bank. The buyer is Bill who has very little cash but good credit. Bob gets his cash back plus some and carries a note. Bill may not be aware of bank REOs or even if he is, the bank will prefer Bob's cash offer.
Hope this helps, Kim.
Regards, Ed
Wow- you guys/gals are GREAT! You can't imagine what it did for me to get up this morning- sign on and see all the encouragement everyone offered.
My business partner says he is confident we can sell- but being a woman, I sometimes tend to 'over analyze' things.
I'm hoping to put this property up for sale in the next few weeks and after your words of wisdom I am feeling a little more confident. I need to get one sale under my belt to actually see the whole process and hopefully see success!
Thanks again!
Greetings bigbear,
Just to quickly add to the excellent posts above. Don’t forget the other side of the equation – the "sellers" motivation. Why do some people sell 20%-30% (or more) below FMV? Why do others allow their home to go into foreclosure, when they’re sitting on $1000s in equity? Why don’t homeowners do a little fix-up themselves before they sell? To put it simply, we’re all just looking for a different type of buyer than seller. And the difference translates into profit for you.
Some excellant replies. I'll just add 1 more thought...People want to buy as much house as they can afford. If a house is priced very low for the area the market looking at the house will be small, investors only. At a higher price end users start to look at it, more eyes means more chances at finding a buyer.
I recall my father telling me when I was a young man trying to sell an old junky car for $500, he said son, it's not old junk it's a classic, ask $3000. Suddenly lots of people wanted to look at it, a shrewd negotiater was able to talk me down to $1500. Noone wants an old junky car, everyone wants a classic. Noone wants an old junky house, many people want a freshly remodeled house.
Kim/Bigbear -
To reduce your it to the ridiculous level,
why would someone pay, say $200,000 for
a new home when it is only contains $90,000
of lumber/materials in it's structure?
A: Because the people can't build it themselves.
Even if they were really really handy and could, they don't have the time or desire to.
Your instance - why would someone pay an extra $20,000 (or whatever amount you choose) to buy your house when you bought
it for less a short time ago?
A: Most people are way too busy with their
work and family to spend time looking for
bargains and then getting involved fixing up
a place, like you do. They are paying you
for the convenience of moving into a
'ready to live in, needs no work' house.
SInce your place is fixed up, the guy can spend weekends watching
the baseball game instead of slaving over
his 'honey-do' list which he'd have if he
bought a place that needed work.
People pay a premium for convenience.
Why else can the local 7-11 'mini-rip' charge
$1.25 for a 12 oz can of soda (and get it)
when you can drive an extra 10 minutes down the road to the big grocery store and buy
a whole 2 litre bottle for 99 cents. Do you
think the 7-11 owner loses sleep at night
saying to himself, "No way I can stay in business- why would someone pay
me the outrageous price of $1.25 for a small
can of soda". Of course not.
Convenience sells.
This thread has had some very good info.
I will now add two real life situations.
My first rehab deal my wife would not get out of the car. The key is that it had no curb appeal so most people would not even go inside. I cleaned up the yard and painted the outside. I had an offer before I finished inside.
My second rehab. After I did the rehab I sold it to a couple who had tried to buy it as an REO. I bought it with a know septic problem. They were able to get a loan for my selling price with no problem.
But when they tried to buy it the bank wanted to know how they were going to pay for the repairs, make a mortgage payment and pay rent. (The septic issue ment they could not move in).