We’ve gone through 4 of the 6 Fs of Flipping—Find, Finance, Fix, and Fill. Now it’s time to Flip. In this section, we will cover the following:
The 9 steps to selling a house
You’ve found, financed, fixed, and potentially filled a property with tenants, now it’s time to sell it and make a tidy profit. Let’s look at each of the 9 steps that go into selling a house fast.
- Decide on a pricing strategy. First thing you want to ask is “how much can I sell my house for?” This will depend on the state of the market (sellers’ market vs. buyer’s market), comps, your home specifically, and the extent of the rehab project. We’ll dig more into list pricing later on in this piece, and you can read our guide on how to use comps in your neighborhood to determine your home’s value. Remember, fewer great offers are better than a lot of mediocre ones. The wrong price can potentially attract too many of the wrong borrowers, and not enough of the good ones.
- Stage the property. This is optional, but you may choose to stage the property. A study by the National Association of Realtors (NAR) found that 97% of buyers’ agents reported that staging had some effect on how buyers view prospective homes. Read our blog post on whether staging a house is worth it for you.
- Keep it clean, both inside and out. This is one of the top home selling tips we always recommend. You’d be surprised how much can happen to an empty property over the span of 1 or 2 months. Roaches may find their way in and die, dust will settle, open blinds could discolor a cabinet or flooring, and more. The same goes for the exterior. Curb appeal is huge when selling a home, so make sure that the landscaping is kept tidy while buyers are touring the property.
- Take pictures. You’ll need to take extensive pictures of the property, staged or otherwise, for the various listing sites and services. Make sure they are high-resolution and thoroughly depict what the interior and exterior of the home look like. With most home buyers window shopping online before they get a chance to see a property in real life, high quality photographs of the inside and the outside of the home can tilt someone to visit the property who is on the fence. For high-end properties, drone tours of the inside of the property can give prospective buyers a sense for the flow of the house and allow more showcasing than traditional still images would be able to.
- Post/syndicate the listing. One of the most important steps to selling a house is getting the word out! Post the listing in multiple places. It’s important that you list the home through services that access the MLS, the national listing service that the majority of homes in the US are bought and sold through. Remember, this isn’t the time to be shy on social media or with friend and family. Shout from the rooftops that you have a great rehabbed property for sale that someone would be lucky to live in. The goal is to get as much foot traffic into the home as possible, no matter how it happens.
- Don’t forget the yard sign! The iconic FOR SALE sign gets a lot more attention than you may think. Make sure to put the sign up to show people passing by that the home is for sale. Your buyer could easily be a neighbor that is moving out of his/her rental and wants to stay in the neighborhood. It’s also a great way to let neighbors know the house is available in case they are trying to find opportunities for someone that they know.
- Take calls, show the property, follow up with buyers. Once the post is out, hopefully people will be reaching out! You or your Realtor will need to answer the phone and respond to email, show the property, and follow up with potential buyers. It’s easy to get lazy and not make the extra trip to show a potential buyer, but the top priority needs to be creating opportunities for a sale. Future buyers typically have a couple of hours on a Sunday to visit all the homes on their wishlist, and making the home available after hours is a great way to get more visits. If you use an agent (we’ll get to that later) adding a lock box is a great way to allow people into the property without having to make the trip yourself.
- Receive offers, negotiate terms of sale. Price is a key term, but not the only term. While the objective is to make sure the house gets sold, not all offers are created equal. You should consider things such as how much money they are putting down, how quickly a potential buyer could close, and whether there are borrower contingencies attached to the offer. When it comes to money, the sooner it’s in the bank, the better. If your objective aligns with community building, you could also consider accepting someone based on a letter they have submitted alongside the offer.
- Coordinate closing. The last step is for the buyer to close on the home. You’ll need to coordinate the time and date with the buyer and closing agent, sign a lot of paperwork, and exchange keys. A few days later, proceeds from the sale should land in your accounts after debts against the home have been paid off. From there, it’s typical to do a happy dance, and then go find a new house flipping project to take on!
Do it yourself? Or get a Realtor?
Given what you’ve read above, there are a lot of steps involved in selling a house. Before you start with any of them, the first steps to selling a house fast is to determine if you are willing to undertake this project yourself, or do as many Americans do and hire a Realtor.
Selling a house without a Realtor can be a lot of work, but can present some advantages. Let’s look at some.
Save seller commission. The biggest reason to sell by yourself is to save money. Seller commission usually amounts to 2-3% of the sale price, which doesn’t sound like a lot at first. But on a $200,000 home, $4-6k of commission fees could reduce your gross profit by 10-15%, depending on the margins of your deal. Once flipping at scale, it’s possible to negotiate much cheaper rates with real estate agents since you’ll be an active source of business for them on both the buy side and the sale side of the flip.
Increase sale price. You may be able to sell a property that you rehabbed for more than an agent. There are a variety of reasons for this. Agents will be motivated to sell your house as quickly as possible, both to get their commission and to show you results. Thus, they will likely accept a slightly lower sale price than you would yourself.
Also if you renovated the house before selling it, agents probably won’t be able to show the property as well as you would because they weren’t involved with the project. You will probably know more about the minute details of the property (what kind of granite in the counters, what type of flooring, etc.) because it was probably you that decided to put them in.
That said, while buyers will appreciate this extra level of knowledge, it’s also important to not get too emotional about the home. Leave buyers room to feel comfortable being upfront about what they like and don’t like.
A lot less work in a hot market. If you’re in a seller’s market, getting offers will not be very difficult, which alone may make bringing an agent on board not worth the cost. You will likely find offers at or even above your selling price while doing minimal leg work. It will still take work, but in a hot market a lack of experience can be erased by buyer enthusiasm.
Using a Realtor
Selling your house yourself will save you money, but if you’re working full time, have a family, are operating in a slow market, hiring a Realtor is likely the better option. Realtors will take care of most of the steps to selling a house in exchange for a commission fee, and save you from having to do many hours of legwork. In exchange for their services, Realtor commission fees are usually around 2-3% on each side of the transaction.
If the Realtor is going to do the work of selling the home, the onus is on you to find the right Realtor. Let’s go over some things to look for to ensure that your Realtor is a fit.
Experience with a property like yours. Ensure the Realtor works with properties similar to yours, in terms of location, size, quality, etc. A Realtor who works with million-dollar homes probably won’t be great at marketing and showing your 3 bedroom, 2 bath, $300k home. Same applies vice-versa. Go on the Realtor’s site and check out his/her listings and make sure there’s a strong match.
Who is doing the work? Sometimes, Realtors will assign work to their subordinates or less experienced people at their firm, meaning you will likely be overpaying for the services you receive. Make sure the Realtor you research and speak with will be the one actually selling the property and not someone else (especially someone less experienced) at the company.
Secret shop them. A great way to determine how well your Realtor will do is to pretend like you are a prospective buyer. Call and inquire about one of his/her listings, and take note of the customer experience. Is the Realtor responsive, friendly, and helpful? Take careful note—how the Realtor sells that house will likely be how he/she sells yours. You should even secret shop your own listing once you settle on a Realtor, and provide feedback with things you don’t like.
Do your due diligence. How many properties have they sold? How many listings do they currently have? How big is their team? Do as much research as you can and always check references. Once you find a good Realtor, you can use them again and again, so invest the time up front.
A Closer Look: some best practices on how to sell a house
We wanted to dig deeper into a few other aspects of the home selling process: List price, negotiation, and off-boarding.
Closer Look #1: How to determine list Price
In addition to comparing your rehabbed home to similar ones in your neighborhood, there are other tips to deciding on a list price.
- Decide whether to list high or low. Listing on the high or low end of your range will yield different results and determine different strategies. List high to signify high home quality. This will bring in highly interested buyers, but will take longer. List low to generate multiple offers quickly. Having multiple offers will give you the leverage you need to negotiate (as it is illegal to represent phantom offers), so pricing low ensures that you can sincerely say you have other offers.
- Sell fast to save money. Keep in mind that you have a carrying cost that’s eating into your profit every day you don’t sell the home. (Insurance, taxes, mortgage payments etc). A good rule of thumb is that 1 month = 5-7% of your gross profit.
- Don’t use a round number. Psychologically we know “charm prices” really do give the impression of a discount, so don’t use big round numbers in your list price. ($299,999 feels like a lot less than $300,000. At least, it feels like more than just one dollar less.) Use 7s to be more distinct and imply more thought/precision. And practically, keep yourself in people’s search ranges! People will likely use round numbers in online filters, so stay under them to appear in search results.
- Curate your own comps. Package comparable sales to your property to send to your prospective buyers in order to justify your asking price. If a home like yours sold for around the price you’re asking, that helps make the case that the price is fair.
Closer Look #2: How to negotiate with prospective buyers
Negotiation is a critical part of the home-selling process. Here are some tips on how to negotiate effectively and get as much for your home as possible.
- Don’t negotiate unless you have an offer in hand. You can waste a lot of time by negotiating with people that are not serious about buying the home. Do not negotiate with anyone who hasn’t made an offer to avoid wasting time with the looky-loos.
- Don’t respond immediately. Make buyers a little nervous and don’t respond right away. Wait 1-3 days before responding to an offer to convey a sense of high demand. In your counter, it’s important to keep a buyer optimistic and hopeful, rather than put off and annoyed. While this is a business transaction for the flipper, it is a very personal and large life decision for the buyer!
- Set a deadline. Hopefully you’ll have multiple offers for your home. If so, request everyone’s “highest and best” offer by a certain date and time. Take all the offers and compare apples to apples, and make sure to pay attention to all the terms of the offer, not just the amount.
- Require an earnest money deposit. An earnest money deposit is cash a prospective buyer will put down in exchange for the seller to take the listing off the market while the home inspection and appraisal is being done. The more serious the buyer, the bigger deposit he/she will put down. Even better is if the deposit “goes hard” on day one, meaning there are no contingencies tied to the deposit, and the money is yours no matter what happens in the inspection or appraisal.
Closer Look #3: How to transfer ownership of the property
Here are a couple final things that sellers often forget when offboarding the property that can cost you money if you’re not careful.
- Shut the utilities off! Remember to cancel your utilities when transferring ownership of the property. Otherwise, you’ll keep getting charged and that money may be tough to get back from the new owners.
- Cancel the insurance. Same as with the utilities, unless you cancel the insurance on the home, you will keep being charged no matter who lives in the property. Make sure to cancel it upon sale of the home.
- Don’t forget the HOA. We’re beginning to sound like a broken record, but make sure you stop paying any homeowners’ association fees as well. These will have been prorated at closing, so you have already paid your share! HOA’s probably won’t tell you if people are paying them that shouldn’t be, so be proactive about this.
That concludes our guide on how to Flip your fix-and-flip property. Next up, the final F: Fun!