How To Handle Your First Flip Sale

After the Rehab – Get a Realtor

Now you have the repairs completed, and you  need to market the home.  I always advocate the use of a Realtor.  He only gets paid if he sells your house, and his fee is well worth it.

Once you leave your kids’ soccer game to go meet someone at the house on Saturday morning, and they don't show up, you will believe me.

Make sure your Realtor has a marketing plan.  You don't want a Realtor that is just going to stick up a sign and put the property on the MLS.

You want to work with a professional.  They should be actively using all the online tools to market your house.  They should also be doing traditional marketing such as mail outs to prospects and open houses.

Ask for a written marketing plan before you sign the listing agreement and make the plan an exhibit in the listing agreement.  This is the best way to make sure what you are told gets done.  If it doesn't, then he is not living up to his end of the contract.

Marketing Your Flip

When you are marketing the home, make sure you keep the yard cut and the inside clean.  If you are having a lot of showings, then someone is going to have to use the bathroom at your home, so make sure the water is on.

Also, have your Realtor check the home at least once a week to make sure it is clean.  If it is not, have it cleaned.  This is a small price to pay for losing a sale because the bathroom was left messy.  No one wants to picture a messy stranger using the bathroom in her new home.

Your First Offer

Now you have the home fixed up and listed with your Realtor.  You start to get showings, and then the glorious day arrives in which an offer comes.

You jerk the papers from your Realtor’s hands and start to sign them as fast as possible, but wait a second.  What message does that imply?

Unless the offer is for full asking price and very tight terms, I always negotiate something, and I would encourage you to do the same thing.

Let's put ourselves in the buyers’ shoes.  They are going to make an offer that is not quite what they are willing to pay so that when you come back with your counter, they have room to negotiate.

But what if you don't come back with a counter?  Then they are going to subconsciously think that they paid too much for the home.

Even though they may be excited at first, when they get home that night, as they lie in bed, they are going to start to question whether they paid too much.

This doubt starts to transform into other doubts such as, will the house even appraise for that much?

Did we look at everything in the city in the price range and on and on.  Avoid this!  Negotiate on all but full price offers that have 30 days or less closings and no contingencies.  Make your buyers work for the deal.  They will appreciate it more.

What to Negotiate

You don't have to negotiate on price.  It could be on closing or inspection dates, occupancy dates or any of the details of the contract.  So if you don't want to scare the buyer with a price counter, pick other details to change.

Verify Buyer's Funding

One thing that you must always insist on having with your offer is an Approval Letter from the lending institution your buyers are going to use.

I typically like to see these from a major bank, not a mortgage broker.  I also look at the wording carefully because I want to make sure that the banker or broker has checked the buyers’ credit and verified their income.

If the letter of credit is subject to either one, I will reject it and ask for a letter that specifies that both have been audited and approved.

The last thing you want is for your property to sit off the market and then not close.

Other buyers get suspicious when a property has been under contract and comes back on the market.  They think that the home inspection must have turned something up that was bad.

Avoid having this perception by making sure you have a solid approval letter, not just empty words on the bank’s letterhead.

The Sale

After your long road of finding a great property at an unbelievable price, getting the appropriate financing in place, going through the closing process, making repairs, managing the asset, getting it under contract, going through the buyer's closing process and finally getting the check from the closing agent.  Success!

Actually, if you purchased and rehabbed the home correctly, the day you sell the property should be fairly easy.  Of course, there are steps that you need to take and things you need to keep a lookout for as you go through the closing process.

But as I have said previously, the most important thing is buying the property at the correct price and doing the appropriate repairs at a reasonable cost.  If you have accomplished these milestones along the way, then achieving your final goal should be relatively easy.