for those of you who sold a home...

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arcticpineapplecorp.
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for those of you who sold a home...

Post by arcticpineapplecorp. » Wed Jun 19, 2019 6:16 pm

I have a friend who is selling his rowhome to move into an apt instead. it's a distressed property (more than a fixer upper). He called a realtor today and has an appt on Friday (sorry for the short notice). There is a mortgage with around $33,000 left on the property. It is assessed for $120,000 (if it were in good condition which obviously it's not). The realtor said he knows people who are interested in buying distressed properties. I don't know if this is a we buy homes type deal or not. I understand the "we buy homes" people at times only offer half of the actual value of the property (worse case scenario, besides not finding a buyer at all).

It would be nice for my friend to get the most out of this property (sell it for the most, rather than least) to not only pay off the mortgage, but also a couple of other smaller (really high interest loans. you don't want to know) around $3000 total. And if possible give a little cushion (I know, very little) in cash to make up any shortfall of income in the future when his financial picture changes (he works now, but is in his early 70s so not sure how long this will continue). Because as you can imagine, he has no retirement assets and very minimal emergency savings ($3000 or so).

My questions are:

1. Since it's going to be a cash offer, does the realtor need to know upfront (before he gets an offer) how much is left on the mortgage? The reason I'm asking is I don't want my friend to say he owes $33,000 and then the buyer comes back with an offer that's either for $33,000 or slightly above (like $40,000). Is it ok or not to keep this info close to the vest until an amount is offered? I'm kinda thinking it should be like a car purchase and you don't tell the dealer how much you have to spend or what you want your monthly payment to be, right? Am I off base with my thinking here?

2. If this is a we buy homes situation (albeit now with a 6% commission to a realtor) and they offer 50% of the homes value (worst case scenario I've heard) does that mean the bottom line, worst case offer to be accepted by my friend would be $60,000 since the house is assessed at $120,000?

3. I know this next question is not charitable (to realtors) but if the worst case scenario is half the appraised value, does it make sense to use a realtor to pay a 6% commission which I assume wouldn't be paid if dealing directly with a we buy homes type outfit? And finally, if he does use a realtor for this transaction, should he try to get more than 50% since he'd be left with only 44% of the home's value after the commission? I know he's not exactly in the driver's seat here but I'm just trying to help him walk away with something rather than nothing.

thanks. any help is much appreciated.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Watty
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Re: for those of you who sold a home...

Post by Watty » Wed Jun 19, 2019 6:27 pm

When selling a property with "issues" you really need to find a real estate agent that will be good with dealing with that type of property.

I once sold a house that had some minor flood damage a few years before but it had all been repaired but that was still a big issue.

Here is what I said about selecting an agent that would be good with handling that issue in a different thread;

1) I did telephone interviews with 6-8 of them with calls that were maybe 20-30 minutes long.

2) I selected three of them to come see the house and then give a presentation to me a few days later with their competitive market analysis and marketing plan. These lasted about a 1 to 1.5 hours.

3) I then selected which agent to list with.

I was upfront with them about my hiring process and they were all OK with it and eager to get the job even though they knew they would need to go through the hiring process.

As I went through the process and called some of them to let to let them know that they had not been selected for the next step they were all professional even though they may have been disappointed not to get my listing.

This was basically a hiring process just like for any other job. It might sound a lot more involved then it really was and took less than a week.

I ended up with an agent that worked out well and helped me get a good price for the house.

A few things from the process;

1) It was clear that some agents were better than other types of agents with different types of houses even if they were good real estate agents. My house had some prior minor flood damage which made lots of special issues with selling it so it was import to find an agent that would be good with handling that type of sale.

2) There is a lot of "chemistry" involved and there were a few agents that I just did not connect with when we were talking on the phone.

3) Before you talk to the agents be sure to write down a checklist of the points that you will be telling them. You need to tell them the same story and details since it will be confusing if you tell one of them that you want a quick and easy sale and tell another one that four months would be OK. They could legitimately come up with different marketing plans.

4) I learned a lot about the local housing market when going through the process. The three agents that gave competitive market analysis presentations to me each had about three comparable sales and several comparable houses that were listed for sale but had not sold yet. Amazingly none of them used the same houses for their comparable sales. There was almost a 15% price range that they suggested.

The lowest price was by a top agent in the area who was obviously just pricing it for a quick sale to make their work easier. I ended up listing it with the agent who suggested the highest price not just because it was highest but because she had good reasons for suggesting that price when I grilled her about that. When the house had been on the market for about a month without a sale I asked her about lowering the price and she talked me out of lowering it since the house was getting good feedback from the people who had looked at it and the price was not an issue, it was the prior flood damage. It sold in less than two months for near the asking price.

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Re: for those of you who sold a home...

Post by curmudgeon » Wed Jun 19, 2019 6:29 pm

If going through a realtor, I think you want to do a regular listing (acknowledging in the listing details that the house requires substantial repair, as-is, buyer may not be able to get a conventional mortgage, etc). Effectively what you are trying to do is get exposure to multiple "flippers", who will at least bid to a somewhat realistic price for the property considering the condition.

I've always assumed that the "we buy houses" people are trying to buy significantly under value (even "distressed" value), by staying out of the regular market. Now, it's possible that the realistic selling price of the property will be low enough that a RE agent doesn't even want to bother getting involved because of the low commission (given the ways it will be split), which might force your hand.

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Re: for those of you who sold a home...

Post by 123 » Wed Jun 19, 2019 6:34 pm

The real estate agent is motivated to get the most for the property because that's what his commission is based on.

Some caution may be needed when dealing with a property in very poor condition, some agents may be tempted to have low-ball sales to flippers knowing that they will get a second chance to sell the property after it is renovated. The seller should pay particular attention to the comparable sales the real estate agent identifies and know clearly why they are comparable.
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Re: for those of you who sold a home...

Post by rocket354 » Wed Jun 19, 2019 6:46 pm

Just a few comments from someone who has bought a few houses, but has yet to sell one (so grain of salt and all that):

1) There is no reason for any potential buyer to know how much your friend still owes. You are right that many will use that as a gauge for how little they can offer. Offers should be based on the perceived value of the home.

2) Your math is a little suspect. If your friend accepts 50% of the "fully fixed up" market value and the agent's commission is 6% then he will get 47% not 44% of that number since 6% of 50 is 3.

3) Do not worry about what the house is worth fully fixed up. It has a value in its present condition which sounds like is the condition it has to be sold in. He needs to identify the market value of this home in its current condition, and go from there.

4) People who target distressed properties are in it to make money so they will try to get it for as little as possible. If the house is in so poor condition that most retail buyers would not actually buy it then the only way to get a fair price would be to have multiple investors/renovators look at it and essentially auction it off. They're business people so even if they'd pay, say, $60,000 for the property, they're not going to offer a dollar more than they think he'd accept. So if he doesn't have a competing offer the first one will be a low-ball, much less than the $60,000.

Best of luck for him in his situation. It does sound like talking with realtors might be his best bet, as they might be able to help him navigate his predicament. The problem of course is finding a good one, which is its own can of worms.

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Re: for those of you who sold a home...

Post by renue74 » Wed Jun 19, 2019 6:57 pm

Your friend should make his/her agent work for their money. For example, the friend should know exactly how much they owe. (They don't need to disclose that to the realtor, but eventually it will come out in the HUD closing statement anyways.)

I would ask my realtor to price the property....and then ask them how much closing fees will be. From that point, your friend will know how much they walk away with.

Distressed property buyers will buy in cash and as said earlier, they are are going to low ball. Depending on the market in your area, there might be multiple cash offers.....some will be super low ball because they think that the seller may be needing money quickly....or they may simply be novice buyers who think they can walk away with a steal because they read it on the internet.

Offers are just that....your friend doesn't have to take any offer. Of course, everybody thinks what they own is worth more than the buyer.

BTW, savvy buyers will know exactly how much your friend owes. I can pull up the mortgage information on RealtyTrac.com and see the loan amount and approximate pay off amount.

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Re: for those of you who sold a home...

Post by arcticpineapplecorp. » Wed Jun 19, 2019 7:09 pm

thank you everyone who took the time to respond. You've given me some things to think about for sure. much appreciated.

any other ideas anyone can think of, keep 'em coming! thanks
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: for those of you who sold a home...

Post by JoeRetire » Wed Jun 19, 2019 7:31 pm

arcticpineapplecorp. wrote:
Wed Jun 19, 2019 6:16 pm
1. Since it's going to be a cash offer, does the realtor need to know upfront (before he gets an offer) how much is left on the mortgage?
No. The seller should indicate the minimum he'd be willing to accept. There's no need to mention a mortgage or any other debt.
The reason I'm asking is I don't want my friend to say he owes $33,000 and then the buyer comes back with an offer that's either for $33,000 or slightly above (like $40,000).
Your friend should find a realtor he can trust, rather than expecting to be stiffed.
2. If this is a we buy homes situation (albeit now with a 6% commission to a realtor) and they offer 50% of the homes value (worst case scenario I've heard) does that mean the bottom line, worst case offer to be accepted by my friend would be $60,000 since the house is assessed at $120,000?
It seems unlikely they would just blindly offer 50% of the assessed value. If it's assessed at $120,000 for a home in "good condition" and it's not actually in good condition, he should expect less than $60,000.
3. I know this next question is not charitable (to realtors) but if the worst case scenario is half the appraised value, does it make sense to use a realtor to pay a 6% commission which I assume wouldn't be paid if dealing directly with a we buy homes type outfit?
If he is willing to accept a "we buy ugly homes" deal, he wouldn't need a realtor at all.
And finally, if he does use a realtor for this transaction, should he try to get more than 50% since he'd be left with only 44% of the home's value after the commission?
He should try to get as much as possible, without regard to using or not using a realtor. But remember, a buyer doesn't care what percent the seller ends up receiving. That's not their problem.

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Re: for those of you who sold a home...

Post by randomguy » Wed Jun 19, 2019 8:33 pm

123 wrote:
Wed Jun 19, 2019 6:34 pm
The real estate agent is motivated to get the most for the property because that's what his commission is based on.

Some caution may be needed when dealing with a property in very poor condition, some agents may be tempted to have low-ball sales to flippers knowing that they will get a second chance to sell the property after it is renovated. The seller should pay particular attention to the comparable sales the real estate agent identifies and know clearly why they are comparable.
A real estate is motivated to sell a house as quickly as possible first and to maximize sale price second.

If the house is actually worth 120k (and that just isn't some tax assessment number), put it on the market for 90k and it will sell quickly. Some one will think it is a good value and put in the 30k of work need to make it into a 150k home (i.e. they get 20k "profit" for doing the work).

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Re: for those of you who sold a home...

Post by adamthesmythe » Wed Jun 19, 2019 10:20 pm

It is at least possible that there are potential buyers who are not flippers. So I think the seller should have the property exposed to as broad a range of buyers as possible (that is, in MLS).

He COULD allow the agent to bring an offer ahead of listing. However, like others, I suspect that will be a lowball offer. And at this point the seller has no good idea what the house is worth.

And no, details of the existing mortgage should not be offered to the agent at this point.

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Re: for those of you who sold a home...

Post by rocket354 » Wed Jun 19, 2019 10:24 pm

adamthesmythe wrote:
Wed Jun 19, 2019 10:20 pm
It is at least possible that there are potential buyers who are not flippers. So I think the seller should have the property exposed to as broad a range of buyers as possible (that is, in MLS).

He COULD allow the agent to bring an offer ahead of listing. However, like others, I suspect that will be a lowball offer. And at this point the seller has no good idea what the house is worth.
Agreed. The only way to maximize value is to bring it to market and get the broadest exposure. Depending on condition, retail buyers may be turned off meaning he's got to get as many potential investors interested as possible and not cave to low-ball offers. The right agent can help with this. The wrong one (and there are many) will practically be working against him to close the sale ASAP.

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Re: for those of you who sold a home...

Post by arcticpineapplecorp. » Thu Jun 20, 2019 8:35 pm

thanks again to everyone who posted. i passed along info you provided especially about checking out different realtors and not mentioning how much is left to pay off at this point. he has three realtors to choose from and is meeting within one tomorrow. thanks again everyone. will let you know if i have other questions. thanks!
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: for those of you who sold a home...

Post by arcticpineapplecorp. » Mon Jun 24, 2019 7:50 pm

one more question. my friend's met with two realtors so far, one more to go tomorrow. It turns out it's not technically "distressed", just in need of a lot of work. All three realtors have wanted to know how much is left on the mortgage. He hasn't told them. One agent did say she can find out anyway (paid service, but free from a friend of hers). One said they want to know to get an idea of the bottom price. However, it seems that what the realtors are thinking the house could sell for is still much more than the seller ever expected, so that's good. They're saying the market is "hot" and it appears homes are being bid up to prices much higher than imaginable. So, perhaps my friend is going to be lucky (market timing).

The second realtor handed him a form (not an contract, just a consumer notice). It explains the difference between buyers-, sellers-, dual- and designated-agents.

My question is it sounds like the agents know buyers who want to buy the property. so I'm assuming these potential buyers aren't using their own realtor, or might be using the same realtor the seller has met with. Does that make this a "dual agent" situation because there aren't two realtors involved, one representing each but rather one realtor who's negotiating between the two parties? If so, should this be a concern? If so, should something be done and if so, what? Or does it basically not matter because my friend is going to take whatever the highest offer is from one of the three agents/buyers and just be done with it?

Also, I don't understand what the designated agent is, or if it's applicable here. It makes it seem like it's a dual agent situation even though one realtor acts for the buyer and another acts for the seller, but they're both with the same broker and not separate brokers. Is it just a technical term that applies to two agents from the same broker rather than one realtor acting on both seller and buyer's behalf. How is that even possible? Is this all explained when my friend chooses one of these three realtors (which type of agent he will have)?

Thanks again.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: for those of you who sold a home...

Post by rocket354 » Mon Jun 24, 2019 8:33 pm

Great to hear your friend's situation might turn out better than expected.

Here's a link about dual agency: https://www.thebalance.com/dual-agency-1798539

Generally there should be a different agent for each side of the transaction. If both are in the same firm, it's a dual agent since the actual brokerage firm is the legal entity. However, laws vary and so dual agent might be a single agent, whereas the designated agent is now the single broker with two separate agents. For all practical purposes, I would assume that two agents working from the same office is essentially one agent. Agents suggesting this are likely trying to maximize their take on the deal--the firm gets both sides meaning more profits, meaning likely more in the agents' pockets.

A few other alarm bells have gone off: one agent saying she can just look up how much he owes, and others bringing in ready buyers, and wanting to know how much he owes for a "bottom price."

Quite frankly, these sound like the exact sort of people your friend should be wary of. They are likely working for investors by finding them properties. They say everything they already know your friend wants to hear while they gauge the situation and try to bring a profitable deal to an investor.

If he wants to sell he should get potential agents to evaluate the likely market value of the home, and estimated time to sell. They should be able to do this without knowing how much he owes, or trying to push onto him buyers before the house has gone to market. If he sells without going to market than pretty much by design he'll be getting a lower price than he would otherwise. Investors "make money when they buy", and your friend's place sounds like the exact sort of target for those people.

Now, if he just wants out quickly and easily then maybe that's not so bad--but he's paying for that convenience. It still sounds like his property might only be attractive to these investors. If nothing else he should at least try to pit these prospective buyers against one another.

Having people already lined up is a good sign, though. It sounds like if he can navigate all the sharks he should be able to sell his place and get a price he's happy with.

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Re: for those of you who sold a home...

Post by J295 » Mon Jun 24, 2019 9:03 pm

As you help your friend navigate this situation be mindful that

1. For a home this price it becomes more difficult to find a quality real estate agent. It’s certainly possible, but it’s not always easy.

2. A quality agent wants to know the remaining mortgage amount to assure themselves that they are not getting into a short sale situation. Rightfully, they don’t want to try and sell a home that’s worth $100,000 if there’s $150,000 loan against it. All this hush-hush about the mortgage amount is a red herring

3. Dual agency happens around here, and results in a commission savings in many cases for the seller

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Re: for those of you who sold a home...

Post by Watty » Mon Jun 24, 2019 9:16 pm

J295 wrote:
Mon Jun 24, 2019 9:03 pm
2. A quality agent wants to know the remaining mortgage amount to assure themselves that they are not getting into a short sale situation. Rightfully, they don’t want to try and sell a home that’s worth $100,000 if there’s $150,000 loan against it. All this hush-hush about the mortgage amount is a red herring
+1

It is not a big deal.

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Re: for those of you who sold a home...

Post by arcticpineapplecorp. » Mon Jun 24, 2019 9:21 pm

thank you everyone for responding. very helpful. thanks rocket354 for the article link. I wasn't aware of the different types of agents and that dual agents are not legal in all 50 states. more info to chew on. I really appreciate all the useful knowledge I've received. thanks very much. will keep in touch if we have other questions.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: for those of you who sold a home...

Post by mchampse » Mon Jun 24, 2019 10:51 pm

A few points:

-The remaining balance on your mortgage is a matter of public record. It’s not a secret to anyone. Your relationship with the agent is a two way street. Don’t enter it suspicious. Trust, but verify.

-Many realtors act quite ethically except when it comes to getting dual commission when many will sell out their own mothers. It’s fine for a realtor to bring an offer where they are representing the buyer, just be vigilant that their client has the best offer.

-For reference, your friend should get a quote from a contractor for what it would take to fix the place up. Take the market value if fixed up less the quote and you get approximately what he should expect to get. In a hot market, there likely won’t be a big discount for the buyer having to go through the hassle of fixing it up.

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Re: for those of you who sold a home...

Post by michaeljc70 » Tue Jun 25, 2019 6:18 am

The realtor doesn't need to know the mortgage balance. All they want to know is if it will be a short sale.

They should hire a realtor who will list it "as is". They often include language in the description like "fixer upper". Where I live, you can often negotiate the commission down to 5%. A realtor will hopefully establish a market price to find the true value of the property. I don't see how you will get that with one of those we buy run down home companies that pay pennies on the dollar. The commission should be worth it. Of course, I don't know where this home is and what the market is like. Given how cheap the property is, 5 or 6 percent is actually not that much commission for the realtor (they will be splitting 6% four ways).

They could get a professional appraisal, but they would have to pay for that. It still might be worth it before accepting some low ball offer.

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Re: for those of you who sold a home...

Post by jharkin » Tue Jun 25, 2019 7:16 am

mchampse wrote:
Mon Jun 24, 2019 10:51 pm
-The remaining balance on your mortgage is a matter of public record.
Are you sue about that? At least where I live, only the original mortgage note is recorded at the county registry of deeds. THe only financial details on this document are the original principle amount and the maturity date. It doesnt have any other details of the payment schedule, etc... not even the interest rate as far as I can tell (that was on other documents that dont get recorded).

Using the MIN from that document I can find the current servicer info in MERS, but I dont see anyway that a lay person could see the actual current balance without making a request to the servicer?? They might estimate it based on what the prevailing rates where when you closed, but they have no way to know if you prepaid it, or what your exact terms where.

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Re: for those of you who sold a home...

Post by mchampse » Tue Jun 25, 2019 11:01 am

michaeljc70 wrote:
Tue Jun 25, 2019 6:18 am
They could get a professional appraisal, but they would have to pay for that. It still might be worth it before accepting some low ball offer.
Professional appraisals largely aren’t worth the paper they are written on.

Appraisals on new purchases almost always land at the purchase price. Rather huge coincidence. Similar for refinances, etc. where the appraisals usually hit the number you need. If the appraiser can’t justify the value you need, you’ll get a lower number, but that’s about it.

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Re: for those of you who sold a home...

Post by mchampse » Tue Jun 25, 2019 11:04 am

jharkin wrote:
Tue Jun 25, 2019 7:16 am
mchampse wrote:
Mon Jun 24, 2019 10:51 pm
-The remaining balance on your mortgage is a matter of public record.
Are you sue about that? At least where I live, only the original mortgage note is recorded at the county registry of deeds. THe only financial details on this document are the original principle amount and the maturity date. It doesnt have any other details of the payment schedule, etc... not even the interest rate as far as I can tell (that was on other documents that dont get recorded).

Using the MIN from that document I can find the current servicer info in MERS, but I dont see anyway that a lay person could see the actual current balance without making a request to the servicer?? They might estimate it based on what the prevailing rates where when you closed, but they have no way to know if you prepaid it, or what your exact terms where.
May not be the case everywhere, though my understanding is that it is tracked so that people with a lien on the property will know where they stand.

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Re: for those of you who sold a home...

Post by michaeljc70 » Tue Jun 25, 2019 11:07 am

mchampse wrote:
Tue Jun 25, 2019 11:01 am
michaeljc70 wrote:
Tue Jun 25, 2019 6:18 am
They could get a professional appraisal, but they would have to pay for that. It still might be worth it before accepting some low ball offer.
Professional appraisals largely aren’t worth the paper they are written on.

Appraisals on new purchases almost always land at the purchase price. Rather huge coincidence. Similar for refinances, etc. where the appraisals usually hit the number you need. If the appraiser can’t justify the value you need, you’ll get a lower number, but that’s about it.
This isn't for a purchase so there is no price for the appraiser to land at.

Also, things have changed since the crash and are much stricter with regards to mortgages and appraisals.

How else do you suggest they get an estimated market price? I wouldn't rely on the realtor who has a vested interest to sell it quickly.

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Re: for those of you who sold a home...

Post by mchampse » Tue Jun 25, 2019 11:34 am

michaeljc70 wrote:
Tue Jun 25, 2019 11:07 am
mchampse wrote:
Tue Jun 25, 2019 11:01 am
michaeljc70 wrote:
Tue Jun 25, 2019 6:18 am
They could get a professional appraisal, but they would have to pay for that. It still might be worth it before accepting some low ball offer.
Professional appraisals largely aren’t worth the paper they are written on.

Appraisals on new purchases almost always land at the purchase price. Rather huge coincidence. Similar for refinances, etc. where the appraisals usually hit the number you need. If the appraiser can’t justify the value you need, you’ll get a lower number, but that’s about it.
This isn't for a purchase so there is no price for the appraiser to land at.

Also, things have changed since the crash and are much stricter with regards to mortgages and appraisals.

How else do you suggest they get an estimated market price? I wouldn't rely on the realtor who has a vested interest to sell it quickly.
My point is that appraisers are literally paid to tell you what you want to hear. It used to be that the buyer would select the appraiser so any appraiser that wanted to stay in business had to justify ever higher valuations. Now the banks have more say in choosing them so they are more looking out for the interests of the bank, but you still get the phenomenon that appraisals land where they need to land at irrespective of the purpose for seeking the appraisal.

The value of a property is what someone is willing to pay you for it when you put it on the market, no more no less. Get 2-3 realtors to give you an estimate of what they think they can get for it. They know the market. There’s little incentive to high ball or low ball the amount. Selling for less, leaves commission on the table.

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Re: for those of you who sold a home...

Post by adamthesmythe » Tue Jun 25, 2019 11:38 am

> They should hire a realtor who will list it "as is"

NO. List as "fixer-upper", list as "needing love," anything else. "As is" gives the immediate impression of washed hands and hidden defects.

And YES expect that problems may emerge during inspection and negotiate price reductions rather than fixes.

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Re: for those of you who sold a home...

Post by arcticpineapplecorp. » Mon Aug 12, 2019 8:23 pm

just wanted to follow up to those who took the time to respond. my friend got an offer on his home and accepted. settlement is in a few weeks (cross your fingers). Followed the advice given and it was spot on, specifically to interview different realtors (2 of which wanted to basically low ball/flip but the third wanted to list and get maximum amount from it). Obviously went with 3rd realtor. He listed higher than he expected, but got two offers (one for list price and one for higher). Realtor was stunned and asked second offer if they wanted to bid higher (than the first highest offer) and they did, so my friend grabbed the highest offer which was 21% higher than the realtor expected to get and 6.5% higher than list price.

They listed "as is" had a number of walk ins over a couple days but all the bids came in soon after.

the realtor said it is a hot market so luck definitely played a factor in the sale.

thanks again everyone. would have been lost without you.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

rascott
Posts: 491
Joined: Wed Apr 15, 2015 10:53 am

Re: for those of you who sold a home...

Post by rascott » Mon Aug 12, 2019 8:39 pm

arcticpineapplecorp. wrote:
Wed Jun 19, 2019 6:16 pm
I have a friend who is selling his rowhome to move into an apt instead. it's a distressed property (more than a fixer upper). He called a realtor today and has an appt on Friday (sorry for the short notice). There is a mortgage with around $33,000 left on the property. It is assessed for $120,000 (if it were in good condition which obviously it's not). The realtor said he knows people who are interested in buying distressed properties. I don't know if this is a we buy homes type deal or not. I understand the "we buy homes" people at times only offer half of the actual value of the property (worse case scenario, besides not finding a buyer at all).

It would be nice for my friend to get the most out of this property (sell it for the most, rather than least) to not only pay off the mortgage, but also a couple of other smaller (really high interest loans. you don't want to know) around $3000 total. And if possible give a little cushion (I know, very little) in cash to make up any shortfall of income in the future when his financial picture changes (he works now, but is in his early 70s so not sure how long this will continue). Because as you can imagine, he has no retirement assets and very minimal emergency savings ($3000 or so).

My questions are:

1. Since it's going to be a cash offer, does the realtor need to know upfront (before he gets an offer) how much is left on the mortgage? The reason I'm asking is I don't want my friend to say he owes $33,000 and then the buyer comes back with an offer that's either for $33,000 or slightly above (like $40,000). Is it ok or not to keep this info close to the vest until an amount is offered? I'm kinda thinking it should be like a car purchase and you don't tell the dealer how much you have to spend or what you want your monthly payment to be, right? Am I off base with my thinking here?

2. If this is a we buy homes situation (albeit now with a 6% commission to a realtor) and they offer 50% of the homes value (worst case scenario I've heard) does that mean the bottom line, worst case offer to be accepted by my friend would be $60,000 since the house is assessed at $120,000?

3. I know this next question is not charitable (to realtors) but if the worst case scenario is half the appraised value, does it make sense to use a realtor to pay a 6% commission which I assume wouldn't be paid if dealing directly with a we buy homes type outfit? And finally, if he does use a realtor for this transaction, should he try to get more than 50% since he'd be left with only 44% of the home's value after the commission? I know he's not exactly in the driver's seat here but I'm just trying to help him walk away with something rather than nothing.

thanks. any help is much appreciated.
1) The Realtor doesn't need to know the mortgage balance.

2) we have no idea who the Realtor is going to market the property towards....but I wouldn't worry about it. You want it listed on the MLS so all potential buyers will come across it. Investors scour the MLS daily looking for fixers that have room for profit. They prefer to buy off market as they don't have competition. That's the opposite to what you want.

That's what all those we buy houses signs are about....those are actually just wholesalers that try to get a property under contract and then they flip the contract to their buyers list of investors for a few grand.

3) Again...don't go this route.... you will get less money....even after the 6% commission. You are limiting yourself to one (or a few) buyers rather than the whole sea of buyers.

Bottom line....find a competent, reputable Realtor that can give you a fair assessment on the market value....put it on the MLS and don't be rushed into taking an offer in the first few days.


Edit: sorry just realized this was an old post. Sounds like you did well!

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arcticpineapplecorp.
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Re: for those of you who sold a home...

Post by arcticpineapplecorp. » Tue Aug 13, 2019 4:29 pm

rascott wrote:
Mon Aug 12, 2019 8:39 pm
arcticpineapplecorp. wrote:
Wed Jun 19, 2019 6:16 pm
I have a friend who is selling his rowhome to move into an apt instead. it's a distressed property (more than a fixer upper). He called a realtor today and has an appt on Friday (sorry for the short notice). There is a mortgage with around $33,000 left on the property. It is assessed for $120,000 (if it were in good condition which obviously it's not). The realtor said he knows people who are interested in buying distressed properties. I don't know if this is a we buy homes type deal or not. I understand the "we buy homes" people at times only offer half of the actual value of the property (worse case scenario, besides not finding a buyer at all).

It would be nice for my friend to get the most out of this property (sell it for the most, rather than least) to not only pay off the mortgage, but also a couple of other smaller (really high interest loans. you don't want to know) around $3000 total. And if possible give a little cushion (I know, very little) in cash to make up any shortfall of income in the future when his financial picture changes (he works now, but is in his early 70s so not sure how long this will continue). Because as you can imagine, he has no retirement assets and very minimal emergency savings ($3000 or so).

My questions are:

1. Since it's going to be a cash offer, does the realtor need to know upfront (before he gets an offer) how much is left on the mortgage? The reason I'm asking is I don't want my friend to say he owes $33,000 and then the buyer comes back with an offer that's either for $33,000 or slightly above (like $40,000). Is it ok or not to keep this info close to the vest until an amount is offered? I'm kinda thinking it should be like a car purchase and you don't tell the dealer how much you have to spend or what you want your monthly payment to be, right? Am I off base with my thinking here?

2. If this is a we buy homes situation (albeit now with a 6% commission to a realtor) and they offer 50% of the homes value (worst case scenario I've heard) does that mean the bottom line, worst case offer to be accepted by my friend would be $60,000 since the house is assessed at $120,000?

3. I know this next question is not charitable (to realtors) but if the worst case scenario is half the appraised value, does it make sense to use a realtor to pay a 6% commission which I assume wouldn't be paid if dealing directly with a we buy homes type outfit? And finally, if he does use a realtor for this transaction, should he try to get more than 50% since he'd be left with only 44% of the home's value after the commission? I know he's not exactly in the driver's seat here but I'm just trying to help him walk away with something rather than nothing.

thanks. any help is much appreciated.
1) The Realtor doesn't need to know the mortgage balance.

2) we have no idea who the Realtor is going to market the property towards....but I wouldn't worry about it. You want it listed on the MLS so all potential buyers will come across it. Investors scour the MLS daily looking for fixers that have room for profit. They prefer to buy off market as they don't have competition. That's the opposite to what you want.

That's what all those we buy houses signs are about....those are actually just wholesalers that try to get a property under contract and then they flip the contract to their buyers list of investors for a few grand.

3) Again...don't go this route.... you will get less money....even after the 6% commission. You are limiting yourself to one (or a few) buyers rather than the whole sea of buyers.

Bottom line....find a competent, reputable Realtor that can give you a fair assessment on the market value....put it on the MLS and don't be rushed into taking an offer in the first few days.


Edit: sorry just realized this was an old post. Sounds like you did well!
yes, we did exactly as you said and he did get more money because it was a reputable realtor and was listed on mls. it worked out well. thanks for your help and advice!
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

JGoneRiding
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Joined: Tue Jul 15, 2014 3:26 pm

Re: for those of you who sold a home...

Post by JGoneRiding » Tue Aug 13, 2019 4:38 pm

Ad you have noted there are people that look for and buy these kinds of properties. I have been one of those people. The hardest thing is it sounds like a loan isnt even possible though it might be. You will actually get higher offers from people that need and or can get a loan because it's less of their cash on the table.

Clean! Even if he fixes nothing if the place is empty and clean he will most likely get more.

Be patient. If he doesn't have to move tomorrow and can consider several offers that will help him get the most.

Dont bother trying to get the realtor to take less commission they are going to earn every penny on this one.

edit. Oh sorry didn't realize old thread. We should really have a way that flags that better for us. One board I have seen has banner at the top warning people and reminding them not to reseract zombie threads. Glad for the update

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