Why would anybody sell their home at a discount?
It’s a reasonable question. Can you think of any reasons?
The best way I have heard this concept explained was in relation to car sales. Have you ever traded in a car? It’s the same concept. Could you get more for the car if you sold it independently? Likely, yes, considerably more. Then, why don’t more people do that?! One main reason is convenience. It’s a lot easier to trade it in at a dealership than have to go through the hassle of trying to sell it on your own. I mean, who wants to advertise it and then meet up with strangers — much less, get in a car with them for a test drive? Yeah, you will get a lot less money, but you might feel that is worth it with the savings of time, cleaning, and … awkward interactions with strangers about selling your car — your BABY! — that you have shared so many hours of your life with over the years. That, and who wants to negotiate price? Talking about money is super uncomfortable. Plus, well, the tires are worn and that noise the engine started making six months ago is a little disconcerting and, frankly, you don’t want to spend money on repairing it just to turn around and sell it for a little more money.
Selling a house has many parallels.
The key to successful real estate investing is finding distressed properties (properties that need work/upgrades) and purchasing them at a deep discount. The money is made at the time of purchase — regardless of what shape the property is in. Then, the investor fixes up the property (“adds value”) and cashes out on those improvements when the newly-renovated property is sold. Seems like a pretty basic formula, right? It is! But, the success of any deal is in the finding of those properties that homeowners are willing to sell at a discount. It’s not so easy. Lots of marketing is involved to bring those sellers (and deals!) to you. And, negotiating with a seller on the value of their home is a delicate balance between setting realistic expectations from the potential sale at market value and not scaring them off with an insultingly low offer. (For more on how this process works, you can learn more here). Transparency is really important to us and we want sellers to know what they can expect from us: a fast closing on the date of their choosing (typically, within 10-30 days), no repairs or cleaning — they can even leave stuff in the house that they don’t want to pack and move, and no hidden costs or fees. It truly is a hassle-free way to sell.
But, can’t they make more money listing it on the MLS?
Absolutely! And we tell them this in the very first phone call. Again, we are not out to lowball and scam Ms. Betty up the street into selling her home for pennies on the dollar. Unfortunately, though, there are investors out there that do take advantage of people’s situations and do exactly this, which gives the rest of us a bad name. But, there are a lot of reasons why people don’t want to list their house on the Multiple Listing Service (MLS) through a real estate agent. I don’t want to get into all of those details in this post. If you have ever sold a home, you can relate to the hassles involved with going this route.
Why “Catherine” wants to sell.
First, let me say that “Catherine” is not her real name. And, now that you know that, I will refer to her simply as Catherine. Catherine’s daughter was the one that visited our website and completed our form. Two forms, actually, which gives an indication of the seller’s level of motivation. The fact that it was also on a Saturday night AND she followed up with a phone call on Sunday is very telling.
Something was going on … and she wants to sell. Now.
To be clear, it is Catherine’s son and daughter that own the house. They inherited it from their paternal grandfather a few years ago and have been renting it by the room with some success. Catherine, their mother, lives in the downstairs portion of this split-level home that has been made into somewhat of a 1/1 apartment (it doesn’t have a full kitchen). The upstairs has three bedrooms with a shared bathroom, living room, and kitchen.
When I talked to Catherine’s daughter on Sunday, we discussed my usual questions: What’s the condition of the house? Why are they looking to sell? What price are they looking to get for the property? She also said that they had consulted with real estate agent wanted to list the house at $139,900. This is a fair retail price for the area. So, why is she calling us? Well, as hard as it is to understand sometimes, people will trade money for convenience, just like with the used car situation. I explained that she would get more by listing it with an agent but she said that managing the property, even with her mom living in it to help, was too burdensome for her young family. Her brother, 50% owner, also lived out-of-state and just wanted to sell it quickly.
After our call, she sent me some photos of the inside of the house and some other information related to the rent and utilities. The photos showed a house that, while outdated in some areas (it was built in 1962), was in far better shape than any of the homes we have seen since we started. This is what she sent:
We set up an appointment for me to see the house the following day (yesterday) at 2pm. Catherine would be home and could show me around.
A very telling house visit
I met Catherine and we began the tour of the house. She is a petite woman with glasses and her thick grey hair pulled up into a cute messy bun and dressed in comfortable around-the-house clothes. As we walked through the upstairs where the renters live, she told me all about how this was the house her now-deceased ex-husband grew up in when his family moved to Pensacola when he was in 7th grade. So, the house had been in the family since the 1970s. We went downstairs to her living space: a large bedroom, living room, bathroom, utility/laundry area, and a makeshift kitchen minus a range and sink. She also introduced me to her sweet dog, her trusty companion.
Although she and her husband divorced, they lived as brother and sister and shared the living space for quite some time after. It was while we were in the downstairs living room that she quite unexpectedly broke down for a brief moment. She explained that since moving back into the house eight months ago, she had become quite depressed. She looked down at her clothes and felt embarrassed that she hadn’t even gotten dressed appropriately for my visit. She said she spends a lot of her time bed bound. I honestly hadn’t even noticed her tattered shirt until she pointed it out. She was also having a lot of anxiety about a water leak on the floor coming from the bathroom and started apologizing for the state of the house. I tried to put her mind at ease since the house truly was very clean! She had experienced a lot of loss and she said that being back in the home has been hard. She said it also became noticeable to her daughter, who is a social worker. We went outside on the back patio where she had a cigarette while pointing out the areas of the yard along the fence that had become overgrown with weeds and told me about what it was like in better times.
My heart really went out to her.
As we continued into the garage, she talked about the fact that although the marriage ended, she truly loved her in-laws and missed them. She continued to care for his elderly parents as they aged when no other family members could be bothered. In addition, and as so many during these COVID-19 times, she also was struggling financially and all of this was taking a toll on her. It was then that things started to make more sense to me about why they were looking to sell their house fast for cash with an investor rather than list it on the market: their mother’s well-being. At least, this is my impression. Catherine was such a sweet and caring lady. She deserved to be in an environment that better suited her needs.
People sell their houses at a discounted rate for all sorts of reasons. As I left my visit with Catherine yesterday, I had a better understanding of why homeowners might want to sell their house quickly and without the stress of a typical sale. There are definitely things that are simply worth more than money. <3