• You need to sell your house, but you can’t because you have left it deteriorating 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 homes is surprisingly simple and incredibly effective. The easiest way to explain a home selling strategy (or home buying strategy) is through an example.
Here it goes:
The Handyman’s Special
• The Situation – You are a seller with a house in disrepair. It is currently worth $200,000. All other houses in your area are worth $300,000.
• Neighbors are after you to renovate your house because you are reducing the value of their homes.
• You have contracted with professional dealers to provide you with quotes for repairs. You can’t afford the $30,000 for the 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 home 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’s also assume (conservatively) that the bank would be happy to lend at an 80% loan-to-value ratio. This means that they will loan the buyer $240,000 to buy a $300,000 house.
3. The next thing you need to do is list your house for, say, $270,000. In your marketing, ask for people who are good with their hands. Yes, you 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 them (if they have eyes in their head) to 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 at a cost of $30,000, but if the buyer would be happy to do the work themselves, you would be happy to take $30,000 from them and sell it to them for $240,000 instead. . This means that you will accept a deposit of $30,000 in the form of “Sweat Equity”. The buyer does NOT need a CASH DEPOSIT. The buyer does $30,000 of work in his place.
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 the 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 is fixed up. The buyer only pays $240,000 to the seller. The buyer knows that the 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 this all end?
• The Bank sees a home worth $300,000 and a buyer who has a sales contract for $240,000. They are happy to loan the buyer 80% of the appraisal ($240,000). happy bank!
• Seller gets $40,000 more than he ever thought possible and didn’t have to spend a penny or pick up a hammer to get it. Happy seller!
• The Buyer receives a beautiful house decorated and renovated to THEIR tastes and the only money spent is about $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 buyer!
So the “Special Handyman” strategy for selling a home in this case resulted in a happy seller, a happy buyer, and a happy banker. Now that’s a WIN-WIN-WIN situation.