Unless you know all the options.
By Peter B. Crouch
We have all seen the TV shows“Flip This House” or “Flipping Las Vegas.” Being an entrepreneur and flipping houses definitely has its appeal. Recently, however, a client gave me a few of the “flipper” solicitations he had received in the mail. These were from real estate investors or companies wanting to buy his house—all at a “fair price.” Some were from companies who also advertise on TV — with bylines such as “We Buy Your Home in 7 days!,” “Is Your Home Less Than Perfect?” and others with a similar appeal to those who need money quickly or do not want to fix the house/remove the contents. Some of the mail items were even aggressive/intimidating, such as “How Much Longer Before I Hear From You!?!?” My client, who is an attorney, mostly chuckled as he ignored the solicitations. We wondered together, however, how many folks were susceptible to and/or succumbed to the appeal. Let’s be clear: flippers want to buy your house inexpensively, do some work (maybe) and sell it for profit.
fThe related TV and radio ads are “Learn to Flip Houses at My Free Seminar.” Seminars that teach people how to become flippers. Well, I went to a couple of those to check them out. First and foremost, the seminars I went to teach that the ideal seller has high equity and is in some sort of urgency scenario. So, who has high equity and may have some sort of urgency (such as health difficulties or need for a change of housing)? The answer is seniors!
Second, these two seminars both taught that the ideal property was to be purchased for 40-50 percent of “ARV – After Renovation Value.” Plus that the work required to flip should not exceed 10 percent of that number. Do the math, and then ask if that is a “fair price.” Let’s be clear: it is rarely a fair price.
So, if someone owns such a house or has such a need for speed, what are the alternatives? This is going to sound self-serving (yes, I am a real estate broker), but let’s look at the numbers. A recent client was offered $450,000 for her house as-is. We looked at the house and suggested that what it needed was to be emptied of contents, interior paint, hardwood floor refinishing, and a little landscaping. We arranged to donate most of the contents, paid a small amount to clear out the remaining items, and supervised those three vendors. Total cost to prepare for market: $12,500. It then sold with multiple offers for $628,000. Even after paying for costs, including real estate fees, the client made well over $100,000 more than she would have with the flipper.
Similar story with another recent client in Old Town. And one in South Alexandria. Other Senior Real Estate Specialists (SRES– a designation from the National Association of Realtors) have similar tales. All of these clients needed to move to smaller, one-level living. None were urgent, as they had liquid funds, other than their equity, to tide them over till the house sold.
So what if there are not other funds and you need to move quickly? There are often ways to make this work as well — without giving a flipper your hard-earned equity.
Some of our great vendors/partners will advance funds to help someone move — and do clean-out plus limited fix-up in preparation for market. They are paid at settlement, but the house obtains full market exposure and much, much closer to market value.
So, bottom line — know the options, and even if there comes a time of urgency, Don’t get flipped! You earned the equity in your home — protect it!
Peter B. Crouch is Associate Broker, 50-and Better Moving Specialist, SRES, at McEnearney Associates, Inc. in Alexandria. He is an Advisory Council member, sponsor and volunteer for At Home in Alexandria (AHA) and sponsor and volunteer for Mount Vernon at Home, Senior Villages.
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