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Hi All, I am somewhat new to the Cash Flow Depot and I’m excited to be a part of your community. I just got a great lead from an old friend who’ s daughter in-law has to sell her mothers home. It is in SF and just got out of probate. I suggested to do a highest bidders open house and see how it goes…I imagine it would go well, being that SF is thriving right now over any other city in the country. However, she was contacted by a Probate Realtor that charges 5% and splits it with the buyers realtor. Plus, he’s willing to spend up to 6k on clearing it out and small repairs. He thinks the house can go for $850-910k. Now she’s conflicted on who to use. I really want to earn her business and know that using an investor or doing an open house would be her best bet. Nothing is owed on the house and it was built in the 30’s. But, it’s in a good location in SF. Does anyone have any other ideas, suggestions or input? Thank you in advanced! Anne
This sounds like a great opportunity.
Tell the seller how a highest bidder sale works. When you get 100s of people in the house and bidding the price up. over a 2 day open house the price will go up up up. Seven days of marketing, a 2 day open house then you will have a contract for her house. A Highest Bidder Sale is fast and efficient.
It’s really not necessary to do any clean up or clearing out probably. Buyers can see through all that. But you do need to make the entry appealing
When there are a lot of people at the house at the same time, buyers will be competing with each other for who gets the house. This helps the price go up and up.
Tell the seller you will do all the marketing, get the house ready, put signs up to attract buyers, do online marketing, be at the open house with a mortgage broker during the 2 day open house and you will only charge a flat fee of $30,000 versus the roughly $50,000 the agent will want.
Sure, it’s not a lot of money for you but it is much less then the seller would pay to a real estate agent. Plus, you could advertise that the buyer pays all closing costs. An agent would never do this – they will expect the seller to pay for at least 50% of the closing costs so this is another way you can save the seller a lot of money.
You could discuss with the seller that if the house sells for more than $900,000, she agrees to pay 50% of any proceeds over $900,000 or that you get an extra $10,000 or what ever you both agree to.
Let us know how it goes. Good luck!
Thank you- this is really helpful. I will most definitely keep you posted!
Location in SF is key. See this incredible example:
A 1-1 “completely gutted” burned out home in San Francisco is on the market for $800,000
Thanks Dee- incredible it’s going for 800k and very inspiring!
Anne, of course an asking price is not the same as a getting price. The housing bubble is beginning to hit San Francisco hard. See this October story:
Just like trying to predict where an auction might top out, and how long it might take — it’s equally hard to guess how far and how fast a leaking housing bubble will deflate. But in general, the longer one waits during such a deflation, the farther down the pricing levels will go. Oh yippee….
Hi- quick update…I found out the house is 100 yrs old. It’s in decent shape (some repairs needed), no leans, taxes up to date and they owe $220,000 left on it. It’s in a good part of SF though. They want to sell it fast. My question is, would it be better to use my investors -vs- a highest bidder sale, because it may be faster? I’m just wondering with this time of year (as we near Thanksgiving) if the ‘highest bidder open-house” would draw a lot of people. Thoughts?
How well you do the advertising and publicity is what governs how many people will show up to the two days of short hours open houses. Since you’re brand new, I’m guessing you might not have finished reading through Jackie’s ebook on how to do highest bidder sales. When you finish reading it, you’ll see how quickly the process can go.
There’s a big difference between trying to get a good price out of investors (from your existing list) one at a time versus having them all compete (including many others from your advertising that you’d never have known about otherwise) during your well-organized and fully disclosed Sunday evening’s round robin phone bidding session. Of course, the longer you wait to read through that ebook, the more the price level in the area will likely drop. So speed is your friend.
I was in Panama City (other side of the country) on Thursday and Friday. Sorry I could not reply sooner.
There are so many benefits of doing a Highest Bidder Sale – that’s why I recommend doing them. You should definitely do a Highest Bidder Sale!
You will have enough time to do marketing this week so you can do the open house next weekend – November 18-19th. Let me know if you need a list of things to do to prepare for a Highest Bidder Sale.
You will have this house SOLD by November 18th if you do a Highest Bidder Sale.
When you do the open house, the current investors you have on your list will be invited to bid during the open house of course, but you’ll also attract many more investor/bidders so you will build your buyers list. Be sure to collect names, phone numbers and emails of everyone who comes to the open house.
Some of these buyers could be private lenders too.
The more bidders you have the higher the price will go up and up. You and the seller will make more money if you do a Highest Bidder Sale compared to just wholesaling the property.
About 50% of the time, the high bidder is someone who lives right in the neighborhood who wants to get the house for their children or parents to live close by. The signs will attract these people to the open house.
I know someone who lives in Panama who would be interested in this house for his daughter. Send me details about he house by email ([email protected]) . I will make sure they are at the Highest Bidder Sale. (cash buyer)
Very often, when you do a Highest Bidder Sale, other people from the neighborhood will come to see what’s going on. When they see 20-30 people at your open house at the same time (sometimes more) they say Hey, can you do this for me too — I want to sell my house. You may get two or three options on other houses in the neighborhood if you do a Highest Bidder Sale. The visibility of the Highest Bidder Sale will get your more deals!!!
There are so many PLUSES to doing a Highest Bidder Sale – you should go for it!!!
I can get other CashFlowDepot members to come help (for free) if you need assistance. They will enjoy the “on the job” experience. You do need at least 2-3 assistants to help greet people, check signs, go get lunch, etc.
I’m so happy and relieved to hear from you! This is my very first transaction with your technique and I’m excited and nervous at the same time! I read your book 2x and still review it often to make sure I understand everything, since I’m so new (it’s like learning a second language). Dee was helpful and great with advice too. So, I went through the home yesterday. Here’s what I found out:
1. It is in bad shape. The prior owner was kind of a hoarder and the floors need to be re-done, roof, deck, tons of stuff in the house…I was stunned as I walked through.
2. There is $220,000 still owed on the house, but the property taxes are all paid off.
3. The owner DIED IN the house from black MOLD (yikes). Does that need to be disclosed?
4. The house has a basement that is turned into a fully working apartment…looks in good shape with a nice kitchen. Owner got $3k a month from rent in the past.
5. The daughter who is selling it is 22 years old, and seems to be in a rush to get $$ and disconnect from the past.
Highest bidder sale seems the best route – I will need much help if you can guide me with tips, etc.
PS: I will email you more info and pics per your request. 🙂
Anne, loud clanging alarm bells went off when you mentioned the previous owner died as the result of mold problems in that house. I’m guessing that California probably has very strict rules about disclosing such things, and that would be completely understandable. Take a look at this article on how to find competent mold experts to first evaluate how bad things are, and a discussion of the really wide range of costs involved to make such a place inhabitable again — without even adding in the other fix-up issues you mentioned. I would guess that the person who was willing to spend only $6,000 to do a quick fix-up had no clue how big a rehab project this house would be:
Jackie had an expert a few weeks ago on a Monday evening call, Mitch Stephen, who raises private money for such project houses in distress, and immediately resells them on his own seller-created note so that the new buyer can do all the rehab. But he only takes new students a few times a year, and I’m thinking this house is not ideal for beginners — because of the large dollar amounts that need to be raised, the high risk and time-consuming aspect of the rehab (which not all buyers are capable of even managing), and the knowledge needed to structure that seller-created note.
On the other hand, if anyone else on Cash Flow Depot sees an easier way to do this deal that would only require a low cash outlay, low risk, quick turnaround approach (which is one of the things CFD excels in) that would be appropriate for someone just starting out in this business, I would certainly welcome their advice contribution to your challenge.
You will need to disclose that the owner died in the property. But because you don’t really know what caused the death, you cannot reveal that one way or the other. Was it mold? Was it a drug overdose? No one knows for sure.
You will ABSOLUTELY need to get the house professionally inspected. Get the seller to pay for this. And make the inspection report available to potential bidders during the two day open house. The inspection report will reveal what problems exist at the house. This way, the bidders can make a non-contingent bid based on what shows up on the inspection report.
Most likely, you will be selling to an investor (non-owner occupant) who is a cash buyer or who has access to private money to close really fast.
If you do the open house the weekend of the 18-19th, you should be able to close by the end of November.
Thanks for all the great info! I wanted to ask about charging a flat fee as mentioned above. Do you still draw up a contract to buy the property when charging a flat fee?
How do you go about handling this in escrow? Do you assign the contract to the new buyer or do you terminate the initial contract based on the marketing fee invoiced to escrow at closing?
Great questions, I believe you still have to draw a contract when charging a flat fee. I will let Jackie or the others answer your remaining questions as they are more experienced and will give you better feedback…
But to update everyone with this house, the seller who inherited this house has certain requests. She was adamant about NOT having an open house / highest bidders sale, as she feels the house is unsafe since it’s very dilapidated and doesn’t want a lot of people in the house. Despite my many efforts in telling her that this was the BEST & most IDEAL way to get the HIGHEST amount for her house she’s not interested in this strategy. My guess is that she may be emotional since her mom passed in the home, which is playing on her decisions. But anyway, she wants me to reach out to investors individually. She is having an inspection done on the house next week. The least amount she wants is $900,000. Not sure if it’s realistic, but that’s where she is insisting on starting. I will reach out to my investors and any feedback would be great. I’m at least grateful to still be in 30 day contract and so far this has been a good learning experience.
Anne, in putting phrases together from your different posts, I picked up on “tons of stuff,” “hoarder,” “dilapidated condition,” “inspector coming,” “owner insists on $900,000,” and “owner wants no crowds” such as the HBS method relies on. What I didn’t see was if there was sufficient lawn space for an estate sale company or auction house to sell down those “tons of stuff” or whether such stuff needed to be trucked to such company’s warehouse or auction house — unless the owner has made other plans.
Extreme clutter like that ALWAYS hurts the price, AND makes doing a proper quality inspection that much more difficult. (I’ve even seen stories over the years of elderly hoarders who died under a collapsed pile of their own stuff, and weren’t found for months.) It also makes it much more difficult for one-at-a-time investors to do a sufficient walk-through. The result are offers that suffer an extreme clutter penalty as well. So it appears that the owner is doing almost everything possible to get the worst possible results.
Now I won’t pretend to know the various neighborhoods in SF, or how their extreme values may vary — to judge how reasonable or out-of-touch the owner’s $900,000 hope figure is. I’m sure that some investors are used to hiring their own estate sale or auction company people to clear out the tons of clutter — and pull some profit from that effort — which the in-a-hurry owner seems to be determined to throw away.
You might want to ask the owner what, if any, plans are in the works to clear out the tons of stuff. That could change the picture significantly. (Some rehabbers will pitch it all into however many dumpsters it takes; some will hire out the estate artifacts sell-off work.)
It also may be that the owner is not desperate enough yet, in which case she (I think) might need to fail first with her worst possible strategies (if they don’t come close enough to her $900k hope figure), before you can do business with her. In that case, you might well keep in touch with her and watch for deteriorating circumstances and more tolerance of your plans by her.
Any other insights on this case are certainly welcome. I make no pretense of having the ultimate analysis.
Even if the seller does not want to do a Highest Bidder Sale at the property, you will sell the house must faster and have a better chance of getting your price if you advertise to your investor list that there is an open house for 1-2 hours only on a certain date and time. Get them all there at the same time instead of making 10-15 trips to the property. Do this AFTER you get the inspection report so you can show it during the open house.
I’ve seen pics of the inside of the house. It’s really not that bad. (I’ve seen much MUCH worse).
Sounds like the seller is wanting a retail price for a fixer upper house.
Be sure to tell your investors to make an offer. If you can present a CASH offer to the seller, she will hopefully get more realistic.
Let us know how it turns out!
Hi- Thanks so much for your response! Yes, once the inspection is done we can proceed with offers – due to Thanksgiving the inspection is next week. I have investors that I know are excited to see the house and make an offer. But, yes my client is wanting a ‘retail’ price for a fixer upper! I need to manage her expectations and once the offers start coming in maybe she’ll get more excited and determined to take it and disconnect from her past.
Keep you posted and have a great week!
Im a real estate investor and broker in the bay area.
I recommend that you have inspections and then have a contractor/ friend bring the seller down to reality by submitting costs for fix up. Grab some comparables in the area — houses that have been fixed up and then reverse engineer it. x minus fix up costs equals “fair market value”
Most savvy bay area investors will add value in the bay area by fixing up at wholesale prices. Be sure and submit retail pricing for the fix up. If there are foundation problems or structural issues, make this a big deal – because they are. Foundation bids may come in at $ 150,000 but can be handled for $50,0000. Savvy investors know this and capitalize on it. Also the time of year is important, this is the worst time to sell retail. If the owners want to sell now, they would be best served to take your approach and create demand.
A realtor will charge 5% minimum. Just show them that you can create this added value without the steep fees.
Im happy to chat if you have any questions about this approach. chuck 415 336 4933
Very nice to hear from you and sorry for the delay in response. I just returned from Spain, visiting family and had a great month there with the holidays & New Year. But, glad to be back! Thank you for your feedback on the SF home I’ve been working on. You have some great tips and suggestions (as Jackie did too). So far working with the seller has been arduous. I informed the seller that she needs to have inspections done as the house has major issues and needs a lot of work. I also made a very easy to read / simple list of what work she likely needed and totaled all the costs. But, she then insisted on holding off until February, as she thought it may be a better time of year. Despite my suggestions, she has a mind of her own. She also feels she can still get top dollar ($900k) despite the condition of the house. Ironically, I did have an investor I know who was looking to buy quickly and made an offer to buy “as is” for $850,000, in December (after my fee of 10K – total offer $860k). This was huge, as the comps were lower in her area and it was more than what Zillow and Redfin listed for her house. Houses in her condition are going for $475-$650K. When I told her the offer and she said she would still take nothing less than $900,000- and was adamant. It surprised me and I’m not sure she’ll get offer again. So, here we are in mid January, she’s still paying the mortgage and property taxes and missed a great opportunity. Her home still needs to be inspected and cleaned. But, all I can do now is wait and move ahead when she’s ready again. So we shall see…hope it pays off in the end! I think once the inspection is finally done, she will be more realistic with what she can get.
I will most definitely keep your name & number and contact you with questions! Thank you. Anne
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