San Antonio Market

Broker David Bowan reports on recent market conditions in San Antonio, Tx. While residential sales have increased “about 10% over last year,” it is still a buyer’s market. Home owners looking to sell are still not out of the woods as new homes sales are increasing relative to homes for resale. However, according to Realty Times, a variety of employment opportunities and a strong local economy should continue to attract new buyers making it a little easier for home sellers.

Housing Market

While according to Wall street the recession is officially over, CNN suggests that the housing market might not be so stable. New home sales are down 15% and unemployment and high foreclosure rates continue to delay potential home buyers. Experts predict the housing market won’t improve until inventory is down, a trend unlikely to occur while foreclosures are continuously added to the throng ofI homes for sale. Writer Paul R. La Monica also suggests that because the home buyer credit is over, there are even less credible buyers in the market for a home.

Rise of the Cash Buyer

Inman News discusses the rise of the cash buyer and the benefits they offer motivated home sellers in the form of quick and trustworthy closes. In 2010 27% of buyers were paying cash for homes, up from 15% in 2008.

Another advantage of selling to an investor is that they’ll deal with complexities that might surround the close. “Sometimes there’s complex title issues. Like someone died without a will, or there are multiple wills. Retail buyers won’t stick around for that. But because I’m not actually going to live in the house, I don’t care. I’ll wait for nine months, and the sellers will have the advantage of a sure close. I can then offer my services as a sophisticated buyer to kind of shepherd the closing process.”

“I’d say the three major benefits an investor offers is speed, convenience, and risk reduction. I can structure a deal that’s beneficial for them time wise. Sometimes they don’t want a two week close, so I can work with different time frames. I’m also available to do the dirty work- I’ve had times where I’ve had to hall the trash my self from a property- I’ve even worked with estate liquidators. I’d say pretty much any investor, given the right property, would do a lot for the seller. I almost always handle the clean up for the properties I buy.”

No one likes two house payments. Sometimes sellers need to move now, but want to make sure their house is sold before looking for another house. In these cases, investors like Dave would buy the house now and rent it to the family until they found another place to live, again offering the attraction of risk reduction.

The more he works, the more incentives he finds people have for working with him. Again he stresses financing flexibility, and his ability to work with different schedules and situations.

While admitting that some shady investors have given his job a bad reputation, he gives some pointers for detecting quality investors. There’s enough competition out there now among single family investors, that even the motivated seller now has options. Don’t be afraid to ask questions, the more knowledgeable you are the less likely you are to get taken advantage of. “I would ask any investor who wanted to buy my house how many homes they’ve actually done. I’ve had calls where people have worked with an investor, only to discover it was their first deal, and they weren’t very professional. Also, ask for references of people they’ve done transactions with. I would offer this information to anyone who asked- I’d say about 95% of people I’ve worked with have walked away happy from deals with me, and 100% have been satisfied. Another important thing is to ask if they’re actually going to be the person at closing. The last thing you want is to work with Joe Bird Dog, who in his first deal overestimates what investors will pay for your house, then strings you along while he looks for money and ultimately can’t follow through.” The investor also encourages people to ask for earnest money and if it’s an actual company to look them up at the Better Business Bureau, or even Google them.
“The most important thing is to not get caught up on price. The reason you are selling to an investor in the first place is that you want a fast close and to be paid in cash. To accept an offer for $1,000 more from an investor who is half as credible is a false trade off.”

“Price, quality, and time. Those are the three variables in any deliverable- and in almost any product or service you can only get two of the three,” Dave provides this principle as a simple reason most people come to him. “My service allows people to have very flexible offers and get cash very quickly, and as a result I buy properties at a discount.”

“A lot of people just want to close as quickly as possible, because they never want to go in there again. I’ve gotten people whose parents have passed away in the house, and they don’t want to deal with the clean up. I’m always very empathetic with these types of sellers. If they don’t want to go in the house, I’ll clean it up for them- they don’t have to go through the painful process of making the house show ready.”

Dave describes convenience sellers as people who are usually capable of doing the repairs themselves, but simply don’t have the time or energy. “These sellers are less common, but they’re easy to be direct with. They want nothing to do with the sale of their house. One time I had a multi-millionaire come to me- he could afford to leave this small house he inherited on the market, but it was worth more to him to get it sold fast so he didn’t have to think about it.”

So how do investors make such quick offers? While admitting that investors vary on their exact equation, Dave says most will look at the after repair value, multiply by 70%, and back off repairs. “Some people get offended when I offer them lower offers on their house, but they have to understand this is what I do. I’m not looking to make a killing off of unfairly low offers. They go to work every morning, my job is to buy houses.” He explains that most sellers see the value in the trade off- “I’m taking on all of the risk. They could wait on the market for it to sell, and then end up lowering their asking price anyway. I’m a guarantee. I promise to close, and to close fast. For people who don’t bring home a ton of money every paycheck, the cash option is a huge selling point. They may get the entire value of the property in cash at one time- that could be as much as their yearly salary.”

He says another great incentive he offers are non contingent closes. “If you buy a house retail and later you find out there’s a major foundational problem you have some claim against the seller- there are some disclosure issues there. Generally, with investors there are no disclosure issues. If I don’t notice that the air conditioner doesn’t work when I walk around the house, that’s my loss. I am truly buying the house as is and I always tell sellers that unless they really like me, we never have to talk again after we sign the contract.”

As we talk, I notice the phrase “trade off” come up a lot, usually in reference to a discounted price and all the reasons a seller may choose to accept it. “As a seller, here’s what you have to decide. Realize that if you’re selling a house retail for $100,000, you’re really not getting $100,000. Usually because you hire a realtor, and must allow for miscellaneous fees, you’ll probably only be getting about 90% of that. It’ll cost you about $9,000 to sell the house anyway.” Although selling to an investor might cost you a little more than that, you don’t have to worry about miscellaneous fees. You know what you’re getting and in a lot of cases investors will even pay closing costs. “They have to decide, is selling to me today and getting money in two weeks, worth the trade off of having to sell at a discount? Sometimes I think the home is worth even more than the seller did, in which case the perceived discount is significantly less.”

Last week I had the opportnuinty to interview Dave Anderson, a former Home Vestors franchise owner and full time real estate investor. A few years ago Dave walked away from his job as a software executive to pursue a career in real estate investing. He has now purchased over 100 single family residences and multiple apartment buildings in the Houston area. I wanted to find out what an experienced investor would say to a person who was considering selling their home to someone like him.

The first thing I asked was what drew him to the job in the first place. Surely an executive at a major software company could expect little initial financial gain from single family investing- his answer was flexibility. “I want to be available to pick my kids up from school. I like that I no longer have a corporation telling me what I’m going to earn. If stuffs going to get done, I know that I’m the one that’s going to do it. I’m in control of my income.” He also referenced his love for rehab saying, “I love taking something that’s beat up and turning it into quality housing. I believe everyone deserves a well run, quality place to live.”

Dave says he’s always upfront with people when he approaches them about purchasing their house. “They know I’m an investor and they know they’re going to be selling at a discount. What I offer is speed, convenience, and a cash offer. Sometimes I have to be completely honest with people who aren’t willing to accept a small discount in exchange for these variables, and tell them I’m not their buyer.”

Dave’s found that in his career he’s come into contact with two types of sellers- ones that are financially motivated, and ones that come to him for convenience. “A lot of people think investors are down at the court house buying foreclosures, but that’s really not a large source of my leads. One typical scenario I’ve encountered is someone who’s inherited a property. Usually it’s been vacant and has about 10 years of deferred maintenance. There’s really nothing worse than a vacant house. Empty houses attract rodents, vandals, and crime. They better hope they have insurance.” He goes on to say that most of the people that come to him simply don’t have the cash to make the house market ready, and must attempt to sell it as is. “A house like that is not in a condition to sell because your average retail buyer, or one searching on har, doesn’t want to work to repair it and doesn’t have imagination. Most people won’t buy a house with dirty carpet, much less one with foundation problems or one that’s been through a fire.”

The investor goes on to describe what he calls a lead funnel. “At the top of the lead funnel is a perfect house- there are lots of buyers. But as you get to the bottom of the funnel, say from mold to foundational problems to burn damages, there are less and less buyers, even within the investment community.”

Assuming a median income of $50,000 for a family of four, most people don’t have the cash reserves to make the kind of repairs needed to make their home ready for a retail buyer. Their only option is to sell to an investor. One of the things people don’t think about that makes rehab so much easier for an investor is their access to reliable contractors. Most investors always work with the same people or have a crew that works for them exclusively. The idea of having to do repairs, and finding a trustworthy contractor is more than most people are willing to take on.

Home sellers in today’s market are placed in a tough and often stressful situation- while competing with brand new houses, rentals, and each other, they must take great pains to choose the right realtor and give their house an edge over others in the area. If they’re not careful to correctly price their homes or make the right improvements, they may end up spending months on the market or worse, taking a loss.

Unfortunately, motivated sellers don’t have the luxury of spending months waiting for offers, and are liable to get taken advantage of if they do. If you’ve been through a divorce, experienced a death in the family, or are facing foreclosure, you may want to avoid this process entirely and sell to someone who can close quickly and pay in cash.

It’s for this reason that more and more sellers are turning to investors to take their property off their hands. Companies and individuals who will buy your property as is and are gauranteed to close can be found everywhere. They advertise on billboards, have programs on the internet, and in some cases are even approaching sellers directly. These businesses appeal to sellers who have enough on their plate without going through the frustration, and uncertainty of selling their house through an agent.

Because they intend to resell your home, these buyers are generally very accommodating. They’re often pretty flexible on the terms of their purchase and can get you an offer extremely quickly. So if your a motivated seller, don’t set yourself up for months of stress and unease in the housing market. Explore other options to sell your home quickly and for cash!