January 25, 2011 in Investing In Real Estate
I have always believed that there is a buyer for every house; that there was no such thing as a house that was too ugly to sell if it was priced right and enough people knew it was for sale. Well folks, I’ve changed my mind about that!
I put a house under contract just before the holidays. This was a very motivated seller. We will call this particular house the “really ugly yellow house”. And it was really ugly! Not only that, the layout was far from ideal. But real estate investors can see past ugly can’t they? They all know how about installing pretty siding don’t they?
I got the house for $23,000 in a $75,000 neighborhood. I knew that there was probably some wiggle room in the purchase price if I needed to ask for a price reduction, so I wasn’t too worried. It was a small 3 bedroom house with an older wooden detached garage, and it needed an interior rehab.
There was also a huge tree in the backyard that had been cut down. My idea was to put an ad on Craig’s List and offer free firewood just for cutting it up. In this economy, you would think that idea would be a winner. I got a ton of calls, but no one wanted to actually have to do the work; to cut the wood up. It seems they only wanted the wood if it was cut up, neatly stacked and ready to be hauled away.
I did everything to market this house. I put this house out to my large buyers list a couple of times, I posted it on Craigs List (and kept that listing current), and I hired someone to put out a whole bunch of handwritten bandit signs. I got lots and lots of calls, and a lot of people looked at the house. There were also some folks that drove right by the house and didn’t even stop. Once again, it was the “ugly factor”. But there were no offers.
One day after having the house for several weeks, I got on the PVA (the Tax Assessors site) and looked for people that were landlords. It was pretty easy to spot these folks. I also looked at the sales history of the houses on the surrounding streets 4-5 blocks in each direction. After doing this, I had a list of a people that were obviously rehabbers since they showed up on multiple properties in the area. Typically their name would appear as the owner of record, and after a few months the house would show a new owner. Sometimes the owner of record was an individual and other times it was a company or a land trust.
I sent each one of those folks a letter telling them about the house. I even called one builder/remodeler that had several houses in that neighborhood and told him I had a great deal. Since I had to leave a message I gave him the address, told him the price and some other pertinent information. You guessed it. I never heard back from any of them. Even after my now very, very motivated seller lowered the price $5,000, I still wasn’t having any luck. My wholesale purchase price was now $18,000. I just wanted to get this thing sold and move on.
Last week, my contract with the seller was finally up again. He had given me an extension and quite frankly, I was baffled as to why I hadn’t found a buyer for this house. I knew the house would be harder to sell when I put it under contract, but I never thought it would be impossible. Even though he knew from the beginning that I was planning to wholesale the property, I really hated that I hadn’t found him a buyer.
I got a call a few days ago from him letting me know that he had decided to list the house. I checked the MLS today and this is what I learned; the house that several hundred real estate investors didn’t like at a price of $18,000 to $23,000 was now listed by a Realtor for $29,900. May the force be with you.