The Dream of Owning a Home

One of the challenges to finding a great fixer is, of course, competing with seasoned rehabbers who come in with cash to close within a matter of days. As the old adage goes, “cash is king,” and when you are talking about a seller who wants a quick guaranteed close, even strong buyers with a pre-approval letter will find themselves up against stiff competition and, potentially, a frustrating buying experience. Here are three things fix-up buyers can do to reduce frustration in a highly competitive real estate market (like Seattle, WA):

1. Approach the market as an investor.

To understand buying fixers, it is helpful to first understand the different investor types and where you fit in this world of real estate investing: rehabbers (typically buy at 50 – 60% market value) , wholesale investors (find and assign real estate contracts to buyers depending on the criteria of buyers on their list), fix-up buyers (typically buy at 70  – 80% market value), and retail buyers (buy at current market value). 

Rehabbers and the Major Fixer market

Rehabbers typically purchase homes that need a lot of work—over and above cosmetic repairs. In order to get the best deals, these investors often have the cash to close quickly at a deep discount (50 – 60% market value). When this type of buyer can close with cash, they gain much leverage over a strong buyer who is pre-approved for conventional financing. It’s the “bird in the hand”  theory.

Attempting to buy a fixer with conventional financing  is a red flag to sellers who are trying to unload problem properties. Sellers want to be certain that the transaction will close. In the climate of the current lending environment, I have heard stories from many listing agents who had transactions fall through at the last minute because of failed financing.

Key to Success

The key to a successful transaction with a fixer depends buyers addressing such concerns in a way that assures the sellers’ agent that you are capable and confident of closing. The way one presents their facts will greatly reduce frustration and increase the chance of a win/win arrangement for all involved.

2. Assemble a support team of experienced investment professionals.

Find and work with professionals who are experienced investors themselves. This adds strength to the strategic plan you create with your support team because such professionals understand the dynamics of the marketplace, as well as how to evaluate and adjust your buying strategy in order to fit current market conditions. In a highly competitive marketplace, this is an important element that could mean the difference between a positive outcome or a frustrating experience in the market. It does not have to be a frustrating experience, but it does requires mutual understanding, trust, consideration, and open communication.

3. Be open to strategic feedback offered by your support team.

There are some buyers who are just not open to feedback. Their nature may be to view feedback offered by anyone with skepticism and doubt. This is evidence of a low trust culture. A low trust culture  slows down progress for the team. In a tough market, trust and teamwork is important. With an open mind, one can be receptive to possibilities, and with possibilities, a clear path to achieving the desired goal and outcome will become more apparent. Remember, it is not about changing the goal, but rather, changing the approach to achieving the goal

Smart trust is what it all boils down to:

It all comes down to extending smart trust  to get the most out of your real estate support team. With a high-trust culture, you will empower yourself and your team to get results and achieve the best outcome in the least amount of time, but it takes assessing the current conditions of the market and then approaching the market in a planned way–taking all things into consideration.