If you want to get serious about flipping houses for a living, you’re going to have to do some legwork, and that includes talking with sellers and determining whether or not a house is a good flip or not. As a real estate coach, I give a lot of advice on how to make this decision with as little wasted time as possible.
If you’ve already attended a Success Path preview workshop then you’ll already know some of our tips and techniques for finding houses that are under threat of foreclosure or short sale or that have been abandoned and could prove to be lucrative investments. But if you haven’t here’s a good primer on the essential questions you should ask any seller before purchasing a flip.
1. Is Your Property Currently on the Market?
If so, ask them how long the property has been on the market and at what price. If not, skip to question three.
2. (If Yes) Do You Have Any Offers in Writing On It?
If they already have an offer on the house, ask them how much the buyer wants to pay for the property. If this is below your budget (keeping in mind that you still have to pay for renovations and repairs), ask them if they would accept a counter offer.
If the current offer they have is more than your budget, then all is not lost. Ask them if you can stay in contact with them just in case the deal doesn’t close. Buyers back out all the time and sellers can get desperate – especially when they have a deadline to meet – like moving to another city to start a new job. We’re got some great deals on houses just because we’ve been willing to be patient!
3. Would You Like to Sell the Property Today?
If the property has been on the market for some time, or the seller is in danger of foreclosure, the answer is going to be a resounding, “Yes!” At this point, you can find out if they are willing to part with the property at a price that’s reasonable for you to come in and flip it.
4. Are There Any Outstanding Liens on the Property?
Before you make an offer, though, be sure to find out if there are any outstanding liens, a second mortgage, or any other debts associated with the property that would be passed on to you if you were to buy it. This is one of the biggest mistakes new investors make when they start flipping houses. They get excited about what seems like a good deal and then forget to ask a question with a potentially devastating answer. Don’t take sellers at their word on this. Do your homework. Get a title company or attorney to check title and you can look up the tax records to see if they’ve fallen behind or are up-to-date.
5. Does The House Need Any Repairs?
They may be reluctant to tell you about all of the repairs the property needs. In general, assume that it needs more than they detail for you in this conversation. You’ll have an inspector out to tell you everything it actually needs after you make the purchase.
6. What Price Do You Want for the Property “As Is”?
Finally, ask them what they’re looking to get from the property for an as-is cash sale. If this is above your price range for the property, ask them if they would be willing to come down due to the shape the house is in, how long it’s been on the market, and/or how pressing their need to sell it is.
After this conversation, you should have a better idea of whether or not flipping is a good idea. Sometimes, when flipping houses, you can find a real gem just by making a phone call or dropping your contact information off at a house you’re interested in purchasing. This will save you a lot of time and effort in the long run, as you find out which houses are worth your time and which aren’t.