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Desperately looking for a buyer of my investment property
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Question:
I bought a SFR under market value but now realize that I needed to have much more margin than I do. The market value is $400k and it is 100% financed, I used a HELOC to fix it up. I had one in escrow that at the time would have made me about $25,000 in profit but it fell through and left me at sitting on it now at the end of the season. The mortgage and tax payments start to hurt. Should I reduce the price by $15,000?Answer:
You have to cut your losses. Any home can be sold - even quickly - by adjusting the price.You have to reduce the price, but by more than $15000.
Your financing of $400,000 probably costs you around $2000 a month, add some for tax and insurance and you come to $2500, right? Many sellers now make the mistake that they think if they wait long enough, a buyer will come. They think I wait up to 6 months and pay 6*2500 = $15000 to the bank and get full price then, so why sell now for $15000 less? The mistake is that this waiting puts a straing on their lives, and the house gets the reputation as not sellable. If you rent it out, then you have to add the cost of cleaning/ repairing at the end of the rent term.
You need to sell, and you need to sell NOW. The common perception is that in order to get buyers notice your house, you need to reduce by more than 10%. You should probably reduce your price from $400,000 to $349,000.
When a buyer looks at your house and compares it with comps (you did get a comparative market analysis, right?) for $400,000 then they will see a house in the "LOW 300s" versus a house in the 400s.
Notice: price it at 349k, not 350k.
Some more ideas to consider to improve your chances:
- offer the real estate agent more than the standard commission to make them work harder. 5% instead of 3%
- try an auction; auctioneers may be cheaper than brokers
- create fliers and place them at near-by gas stations etc ('guerilla marketing')
- offer an extra incentive to the buyer like a free Hawaii vacation. The vacation costs you only around $500 for 2 people but for the buyer it is perceived as a much higher value. The reason is that the main value of the vacation is the value of 'time off work' which is - to most of us - worth more than the Dollar value of the airfare/ hotel.
Do not delay things. As I wrote, you need to sell NOW, because with interest rates rising, affordability will only go downhill next year.
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