Background: The Nastiest House We’ve Ever Seen
Earlier this year my business partner and I found ourselves with a VERY ugly house. Actually, ugly is an understatement.
Our normal clean-out crew wouldn’t touch this house. It was NASTY.
The smell of roaches, feces, and dog urine all mixed together with the piles of trash and rotting food. It was the most repulsive house condition we’d EVER scene in 10 years of real estate investing.
How were we so lucky to end up with the house?
Seven years earlier we bought the house and immediately seller-financed it to someone. It went well for over five years, but it ended badly after some personal problems made the house unaffordable for our buyers. Unlike similar difficult situations we’ve faced in the past, they didn’t exactly give it back to us nicely.
We weren’t very excited about renting the house again because we were going to have to sink a lot of cash into it for repairs.
If we were going to spend all that money on this house, we decided it was better to just sell it as quickly as possible, recoup our cash, and move on.
We did the mandatory things like cleaning up, fixing the plumbing, fixing structural issues, and repairing rotten wood. But we also put together a more detailed plan to sell this house quickly.
Here’s that plan in 5-parts:
Part 1: Jazz Up Curb Appeal
As you may know, people often make a decision to buy a house when they first pull up or first see a picture on the internet. This makes curb appeal very important for selling quickly.
But the curb appeal was rough on this house.
There were 3 different kinds of siding – brick, vinyl, and aluminum that made the house look choppy. The windows were odd sizes and in odd alignments. There were no landscaping beds. The front porch and entrance looked small and insignificant.
So we painted the exterior 3 tones – a darker on the brick (SW 7047 – Porpoise), a lighter color from the same card on the vinyl and aluminum (SW – 7045 – Intellectual Gray), and a bright white on the trim.
To strengthen the front porch, we started by replacing the front door and painting it a bold reddish/orange (SW 6867 – Fireworks). We also bought an expensive door handle and kick plate.
Then on the front steps and porch floor we installed a beautiful, dark slate tile that we found on clearance. We also put in a new porch light and painted the railings white.
The colors and front porch gave the house new life and created more interest from the road.
Then to put it over the top, we also spent money on extra nice landscaping beds. We made curved walls and we covered them with a manufactured stone, which is just a formed and stained concrete that looks very much like rock but is much easier to work with (we used Ledgestone – Kona from Carolina Stone in Seneca, SC).
The front beds were planted with some nice but simple plants you find at Lowes or Home Depot – Azaleas, Loropetalum, and Sky Pencil Holly.
All of this combined gave us the extra “wow” factor we wanted. Here is the after picture from the road. What do you think?
Part 2 – New, New, New
Our house was built in 1952 and it showed. Some old things, like refinished hardwoods are appreciated. But all of the other old surfaces had to go.
This process included:
– New carpet/pad in master bedroom
– New hardwoods in the kitchen
– New appliances in the kitchen
– New sheetrock instead of paneling in some rooms
– New vanities in bathrooms
– New bathtub and surround (although we like to refinish tubs sometimes)
– New plumbing fixtures in kitchen and baths
– New sink in kitchen
– New HVAC vents
– New electrical outlets and covers
– New light fixtures
– New door hardware (handles and hinges)
– New wall, ceiling, and trim paint (of course)
– New fans in living room and master room
– New plumbing supply and drain lines (not by choice, just a bunch of leaks)
Some people skimp on this step. For example, remodelling the whole house but leaving dirty, old electrical outlets. If you’re going all out for a sale, it’s often worth the extra expense to make everything new.
Part 3: Stage to Sell
A vacant house feels strange, cold, and unappealing. The right staging makes a HUGE difference in selling a house fast.
I’m a complete convert and wouldn’t consider listing a house to sell without staging.
Some people do staging themselves, and on rental properties, we do that some too.
But to do it right we use a professional to stage the house a lot better than we can. And it just so happens she also is our Realtor! (I HIGHLY recommend Mona Lisa Harrison if you’re in Upstate SC – staging and listing to sell).
Check out what our staged house looks like:
4. List on MLS (Multiple Listing Service)
I have sold a lot of houses FSBO using seller financing and lease option techniques. And I know that today there are plenty of great, free online listing services (Zillow, Trulia).
But if you want to find buyers with ready financing to cash you out, the Realtor Multiple Listing Service (MLS) is the still the best place. I don’t know the exact stats, but I know that most prequalified buyers use agents to buy their home. Agents use the MLS to find their properties. So if you want maximum exposure you should put your house on the MLS somehow, some way.
You can do flat fee listings or full service listings to get on the MLS. I’ve opted for the full service listing lately because my Realtor (Lisa Harrison) adds so much value with her staging, consulting, listing, and agent services.
5. Price Realistically (NOT With Wishful Thinking)
A decent house in a relatively healthy market WILL sell at some price. So this final key to our strategy means studying the current market and choosing a price that is in line with reality.
I study recently sold (12 months back), active, and under contract properties. I look for the best 2-3 comps in each category, which means the location, size, and desirability factors are the most similar to mine.
No house is exactly alike, so I then compare my house to my chosen comps and add or subtract based on the most important factors.
This is basically a rough appraisal process, but I don’t worry about being too exact. I just want a tight range – like $5 – $10,000 that I feel confident in. I then compare my opinion with my Realtor’s opinion, and we decide on a price that will be within striking distance of the likely value.
An overpriced house is usually a result of your pride, which causes you to evaluate this process with too much emotion. The more objective you can be, the better. Put yourself in the shoes of your potential buyer who is shopping around, and try to make your product competitive in relation to all other choices.
In the case of this house, when I first started rehabbing I had thought the very rough price range was $85 – $95,000. I hoped we could push to $100,000. But when I did updated comps after our rehab, the real range seemed to hover around $85,000.
So our list price was $90,000.
Results and Conclusion?
I’m happy to say that after doing these 5 steps we sold the house relatively quickly for $88,000. It was under contract within 3 days and it just closed, 33 days after listing.
I certainly don’t want to make the process sound too easy. There were a lot of hiccups and problems that we had to solve in order to get this result. But the main point I hope you take away is the benefit of a deliberate, step-by-step plan to sell your house.
Have you ever had to fix up and sell a nasty house? Let me know your comments and questions below.
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Jack Knochel says
Great article! The numbers on my current flip(on market by end of Dec) are not the greatest(worse time to try to get top price is Jan and Feb) so I was thinking of skimping on a few things. Looks like I will do more to spruce up the front of the house, new matching door knobs throughout, and the electrical outlets and covers. I am still on the fence about staging, we usually spot stage but your talking a whole different animal. My realtor and I were going over numbers yesterday and she mentioned staging, so after her and then your article, I guess we really need to think about that. After seeing the first pic, I was surprised at how great the inside and outside look. What was your rehab cost?
Later
Chad Carson says
Hey Jack,
Thanks for feedback. Best of luck with your house as it goes on the market.
I have heard different opinions on selling in the winter. The days are shorter and weather is colder, so that’s not good. But some people shop for everything around Christmas, including houses. So you never know.
If you can find a realtor who’ll stage and list, that’s the best of both worlds. But either way staging really gives the house a warm and attractive feeling. Check out this blog for more examples of staging houses to sell: http://www.123flip.com.
I don’t have final numbers, but I’m think we’re close to $28,000 total rehab. We had a LOT of surprises and problems on this one, so that’s a high number on this size house.
Deano says
Great post!
Very informative, it has given me some great ideas.
Providing links to your resources is going the extra mile…thanks.
If you could share your costs for the various projects, that would be extremely helpful.
Chad Carson says
Thanks Deano!
I’m glad the post was helpful. We just closed I don’t have final breakdowns on repair costs because they are still coming in, but I’m estimating about $28,000 for total rehab cost. I’ll try to share some more details in future posts.
AL says
I also found a house. I found it on the MLS priced at $30,000 in a neighborhood with comps of $90,000. The picture from the curb looked great; it looked really good brick house. When I got over to see it, I noticed that the house was vacant and had been for some time. It had no floor and nothing to support a floor. After I entered through the back entrance, because there was no back door, I notice extensive termite damage to the floor or rather what was left of it. I suspect that the people who tried to fix it may have done more damage than the termites. Question is, is might this be a good deal?
AL
Chad Carson says
Al,
Whether it’s a good deal or not depends upon the cost to repair all of that termite damage and to do all the other work needed to make it worth $90,000. If it’ll take $50,000 in repairs, I personally wouldn’t be interested if it’s only worth $90,000. There’s not enough room to make it work unless they give it to you. If the cost is only $30,000, you might be close.
So I think your next step is to get a better repair estimate.
AL says
Thanks Chad for your reply, I also decided that the profit if any would be too thin. I am glad that I was on the right track.
Robert says
Hey Chad, great info as always.
I noticed you said you installed an expensive door handle and kick plate and then said you found some dark slate tile on clearance that you installed on the front porch. How much time and effort do you put into the purchase of the materials you use? On a basic flip do you have standard flooring, paint, appliances, etc. that you use?
On my personal flips, I try and stay with the same vendors, materials, etc., but lately I’ve been helping an investor purchaser properties to flip and he seems to be all over the board and how, what & where when it comes to rehab. In your experience, is it really worth it to chase price on basic things like carpet, hardwoods, lights/fans & appliances if you can find a vendor you are comfortable with?
Thanks.
Chad Carson says
Thanks for the great questions Robert!
I like a mix of customized and standardized. I get that it doesn’t really pay to spend mental energy or time on custom choices for every single item for every flip. So we have some standard paint combinations, standard carpet colors, and standard fixtures (electrical and plumbing). I’m constantly reading and watching other flippers to tweak my standards when needed.
But I like to also add some special touches, if possible, to each house. This can come in the form of one accent color (like a front door) or some special stone finishes (like the landscaping wall or a fire pit that I’m doing on another house). I also think it’s important for a design-conscious person to pick the cosmetic finishes. Few contractors that I know should be picking out light fixtures, tile patterns, or colors. So I think either you, your realtor (if he/she have good design sense), or an interior designer should still pick those out if you want a really impressive product. They can still be picked out at Lowes/Home Depot and let your contractor pick them up.
Like you, I like to use the same vendors, if possible. It makes all the difference in the world when we’re on the same page. On this flip that I shared we had to try out a lot of new people because we had mainly been focusing on rentals for a couple of years and hadn’t used a lot of our old flip vendors recently. So it was MUCH more time intensive checking behind all the new people.