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Flipping Properties – House #6 Update
Lessons in How to Flip Houses - Flipping Houses Blues
You can see the whole story of Flipping Home #6 here and here.
When flipping properties you run into your share of frustrations and disappointments. You also run into the occasional idiot too! In this case that idiot turns out to be the buyers lender.
In my last update for House #6 we were just waiting for the final approval from the lender now that flood insurance had been approved and we had agreed to give the buyer a $500 discount to help pay first years premium.
Apparently I spoke too soon on the house being almost sold because a few days afterward the lender declined the buyers mortgage. Of course, it only took them two months to figure out the buyer was not qualified when it usually takes any other competent lender out there less than 15 days to determine if buyer will be approved or not.
This means two things: first, I get to keep the buyers earnest money. This is a small consolation since we have lost some precious marketing time and a lot of interest on this house. But at least it helps to pay for the utility bills. Second, it means the house goes back on the market.
So now I have to re-stage the house and start advertising again. This of course opens up a new bag of worms because it’s anybody’s guess whether I will be able to get an offer as good as the one we had negotiated with the previous buyer. This is in part due to the fact that there are a couple of new foreclosed homes in the neighborhood bringing prices down for everyone. Also the last sale in the neighborhood was, you guessed it, a foreclosure at about $20k less than my house.
I also have to run my marketing plan again which includes some useful tips I have picked up along the way as I learn how to flip houses. You might want to consider these when flipping properties:
- Flyers – Nothing fancy, just a piece of paper with 2-3 pictures of the house, biggest features and phone number. I also include in the back information about my preferred lender with sample monthly payments. This is basically something the potential buyer can take with them to refresh their mind. I only place them inside the house. Outside the house they are a waste of money. I might tape one to a window depending on the neighborhood I am in.
- Staging – since this house did not have full staging furniture, basically it was mostly props it should be fairly easy to re-stage again.
- Staging Cards – these are little cards, a bit bigger than an index card that I put on the walls throughout the house to highlight some of the features like new kitchen cabinets, new HVAC, new floors, the view from the deck, etc.
- Personal Letter – I type up a letter as if it was coming from a homeowner to a potential buyer where once again I highlight the features of the house, talk a bit about the neighborhood and the area, talk about the HOA, and trivial stuff like that which gives it a personal touch. I attach this letter to the flyers.
- Marketing Binder – I will have a binder in the kitchen that will have information on recently sold homes, a recap of all upgrades and repairs done to the house with approximate total cost, tax records, map of area, property disclosure, and any other stuff I can think off. It helps the buyer realize how much money they will save by buying my house were all the work has been done and will get them thinking when they visit the next house. It will make my house stand out in their minds.
I know that flipping properties is not easy but it totally blows to think of the time we wasted with this buyer. To prevent that from reoccurring I intend to do all I can to get the buyer to use my lender the next time.
To do this I have asked for recommendations for lenders from fellow investors and have interviewed several lenders already. Since I really cannot dictate what lender they use I plan to offer incentives to at least consider using my lender. Incentives would be a lower earnest money, a longer financing contingency, even throwing in there a washer and dryer.
There are many incentives you can offer a potential buyer to get them to use your lender and many times a buyer does not have a strong loyalty to using a particular lender. So part of my flipping properties network has to be several lenders that are good at getting potential buyers qualified, specially using FHA loans.
More to come I assure you…
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