• You need to sell your house but cannot because you have let it break down over the years and it needs a lot of tender loving care.
• You can’t fix it because you don’t have 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 sales strategy (or a home buying strategy for that matter) is through an example.
Here it goes:
The handyman special
• The situation: you are a seller with a dilapidated house. It is currently valued at $ 200,000. All the other homes in your area are valued at $ 300,000.
• Neighbors are turning their backs on Renovate Your House because it is reducing the value of their houses.
• You have had professional dealers for quotes on repairs. You can’t afford to pay the $ 30,000 for repairs and couldn’t find the time to DIY. You are too busy working to try to pay your 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 that if your house were in good condition it would be worth $ 300,000.
2. Suppose also (conservatively) that the bank would be happy to lend at a loan-to-value ratio of 80%. This means that they will loan a buyer $ 240,000 to buy a $ 300,000 home.
3. The next thing you need to do is list your home for, say, $ 270,000. Yes, it will get a lot of interest because it is well below the area value of $ 300,000. However, when a buyer comes to inspect, they should expect that (if they have their eyes in their heads) they will resist the price when they see the bad 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 was happy to do the job himself, you would be happy to discount $ 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. Instead, the buyer does a job of $ 30,000.
So what does the seller gain? The seller no longer needs to pay $ 30,000 for repairs and renovations. The seller will receive $ 40,000 more than expected ($ 240,000 instead of the present value of $ 200,000). Title to the property will remain in the seller’s name until renovations are completed to your satisfaction. The seller does not have to spend precious time on DIY renovations.
So what’s in it for the buyer? The value of the house will be $ 300,000 when it is fixed. 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 he paid only $ 240,000 (plus repair costs). He / she has $ 60,000 of “equity” in the home even before moving in (this is 20% of the home’s value).
Conclusion: How does this all end?
• The Bank sees a house worth $ 300,000 and a buyer who has a sales contract for $ 240,000. They are happy to loan 80% of the valuation to the buyer ($ 240,000). Happy bank!
• The seller receives $ 40,000 more than he ever thought possible and did not have to spend a penny or lift a hammer to get it. Happy seller!
• Buyer gets a beautiful home decorated and renovated to THEIR LIKES and the only money spent is approximately $ 8000. NO DEPOSIT IS NECESSARY. The bank gave them ALL the money they needed to buy the house at the seller’s price of $ 240,000. Wow, a beautiful $ 300,000 house for only $ 8,000 in cash. Happy buyer!
So the “Handyman Special” strategy for selling a home has in this case resulted in a happy seller, a happy buyer, and a happy banker. Now that is a WIN – WIN – WIN situation.