Sell your house for Cash without an agent?
http://www.realestatejournal.com/columnists/housetalk/20060731-fletcher.html?mod=RSS_Real_Estate_Journal&rejrss=frontpageBe Wary of Signs and Ads OfferingTo Pay Cash for Your Home
By June Fletcher
Question: I see a lot of offers like this: I want to buy your house, will pay cash. Is this a good deal?
-- Walter Reid, Silver Spring, Md.
Walter: Fletcher's Rule Number One for Evaluating Too-Good-To-Be-True-Sounding Deals: Don't think about what's in it for you. Think about what's in it for the other guy.
In this case, why would someone offer fistfuls of moolah to a stranger, sight unseen, for a place that could be crawling with termites, dripping with mold, or overlooking the freeway? Would it make any sense at all unless the buyer could nab the house at a huge discount and flip it for a quick profit -- or find another way to take advantage of the seller's desperation?
And desperation is crucial here, because most owners don't even notice those quick-cash-for-your-house notices posted on trees, buried in the classifieds or clogging their email inbox until they're in trouble. Perhaps they're going through a nasty divorce, have problem tenants, or face too many repair bills. Or maybe they're falling behind on mortgage payments because of illness or other financial disaster. Threatened with foreclosure, they don't have the time or funds to fix up and sell their properties the traditional way. Suddenly, a heavily discounted deal looks better than none.
And how much of a price reduction can you expect? According to one formula in "Buy It, Fix It, Sell It, Profit" by Kevin C. Myers (Dearborn Trade Publishing, 2003), investors calculate their offer by subtracting costs for purchase, rehab, holding, sales, profit and unexpected contingencies (or the "Oops Fund," as the author describes it) from the maximum retail value of the house, as determined by comparable sales. As a rule of thumb, Mr. Myers writes, skilled foreclosure investors buy properties at savings of 20% to 50% off retail value. Some may offer a slightly better deal, but only if the seller finances the cost of needed repairs.
Compare that to the 5% to 10% deduction from asking prices that real-estate agents say buyers typically seek in a balanced market (that is, one that favors neither sellers nor buyers), and you can see that wholesale investors are really only a last-ditch alternative for most homeowners.
While it may be tempting to take such an offer, know that you usually have other options. Even if you're far behind on your mortgage payments, most lenders are glad to work out a repayment schedule with you -- in fact, Fannie Mae and Freddie Mac actually require their lenders to pursue one. And if you plan to sell your house, they may even throw in a little extra money to help put it in saleable shape, especially if the upgrade will bring an outdated feature up to current building codes.
Then, check out comparable homes that have recently sold, take a deep breath, and set your home's price a bit below market value. Experienced real-estate brokers say that doing so signals to buyers that your house is a bargain, and may spark a bidding war, even in a down market.
-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Her "House Talk" column appears most Mondays on
posted by Mike Young @ 9:37 AM
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