Imagine this:
• You need to sell your house, but you can’t because you’ve left it run down over the years and it needs a lot of tender loving care.
• You can’t fix it because you don’t have the cash.
• You are behind on your mortgage payments.
If this sounds like the house you have now, read on. The solution to selling these difficult houses is surprisingly simple and incredibly effective. The easiest way to explain a home sales strategy (or a home purchase strategy) is through an example.
Here it goes:
The handyman special
• The Situation – You are a seller with a house in poor condition. It is currently worth $200,000. All other houses in your area are worth $300,000.
• Neighbors are after you to renovate your home because you are driving down the value of their homes.
• You have hired professional dealers to provide quotes for repairs. You can’t afford the $30,000 for repairs, and you can’t possibly find the time to do it yourself. He’s too busy working to try to pay the mortgage payments for that!
Here’s what to do: “Make your house easy to buy, so it’s easy to sell.” With the Handyman Special strategy these are the steps to follow:
1. Suppose if your house were in good condition it would be worth $300,000.
2. Let us also assume (conservatively) that the bank would be happy to lend at a loan-to-value ratio of 80%. This means that they will lend the buyer $240,000 to purchase a $300,000 home.
3. The next thing to do is list your house for, say, $270,000. In your marketing, ask for people who are good with their hands. Yes, it will get a lot of interest because it is well below the $300,000 area value. However, when a buyer comes to inspect, you should expect that (if they have eyes in their heads) they will balk at the price when they see the poor condition. from your house
4. Now explain to the buyer that you were going to fix it for $30,000, but if the buyer would be happy to do the work themselves, you’d be happy to take $30,000 and sell it for $240,000 instead. . This means that you will accept a deposit of $30,000 in the form of “Sweat Equity”. Buyer does NOT need CASH DEPOSIT. The buyer does $30,000 worth of work for you.
So what’s in it for the seller? The seller no longer needs to pay $30,000 for repairs and renovations. The seller will get $40,000 more than expected ($240,000 instead of the current value of $200,000). Title to the property will remain in the seller’s name until renovations are completed to the seller’s satisfaction. The seller does not have to spend precious time doing DIY renovations.
So what’s in it for the buyer? The value of the house will be $300,000 when it’s fixed up. The buyer only pays $240,000 to the seller. The buyer knows that DIY is much cheaper than the $30,000 quoted to the seller, say $4,000 to $8,000, using their own skills and networks (family, friends, professional contacts).
The buyer will end up with a home worth $300,000 for which they paid only $240,000 (plus repair costs). He/she has $60,000 of “Equity” in the house even before moving in (this is 20% of the value of the house).
Conclusion: How does all this end?
• The Bank sees a house worth $300,000 and a buyer who has a sales contract for $240,000. They are happy to lend the buyer 80% of the appraised value ($240,000). happy bank!
• Seller gets $40,000 more than he ever thought possible and didn’t have to spend a dime or lift a hammer to get it. happy seller!
• The Buyer receives a beautiful home decorated and renovated to THEIR Taste and the only money spent is around $8000. NO DEPOSIT required. The bank gave them ALL the money they needed to buy the house at the asking price of $240,000. Wow, a beautiful $300,000 house for only $8,000 cash. happy shopper!
So the “Special Handyman” strategy for selling a house in this case resulted in a happy seller, a happy buyer, and a happy banker. Now that is a WIN-WIN-WIN situation.
