Durant, OK · Member since 2017 · 40 posts · 4 votes
I was just throwing ideas around in my head and was thinking... Has anybody ever heard of a strategy along the lines of:
1: Showing homes in need of repair to potential home buyers
2: Have the potential homebuyers tell you what kind of renovations they would want in the house
3: Get a contract between you and potential buyers for you to buy the house yourself, do the renovations and then sell the house to the buyers after all renovations are finished.
Essentially instead of the homebuyer buying it and then worrying about doing all the renovations themselves after it has already been bought, they can pay somebody else to renovate it before they put money into it then buy it after it is finished. This way they would be living in their previous home without all the construction until it is finished.
Yes. It's just speculation building/flipping with a buyer already selected. It's very common.
The risk is that the buyer backs out of the deal later when it's taking too long to finish or they don't like the customizations. Then you have to find a backup buyer.
The other option is you find the house and have them finance it while you get the rehab done. Then they just move in.
Jacob Barnhart It's not uncommon. And it's really, really, REALLY common in new developments. Model homes, a pick-your-finish scenario, etc. But those are a different animal in that if a buyer backs out (even surrenders their deposit) they still have the "marketing engine" running so it's easier to get another person to (in essence) pick up that contract. They also don't have exposure in quite the same way. If a buyer wants a new kitchen and you find mold when you tear a cabinet out, what happens? Do you eat the cost? Do you go back for more money to the buyer? There's no mold getting found when you're doing a new build. So I'm not saying it doesn't happen, can't be done, etc. but it's much easier for a developer (or very experienced flipper) than Joe Schmo (like me) as a one-of scenario.
My guess is that the type of hands off 'don't want to deal with it' buyer you are looking for is also unlikely to be able to see past the 'ugly' current state of the house.I could imagine it working if you show them something finished (model home) and not show them the current ugly state.
I heard a story from a high end ($50k tables) furniture designer who once made the mistake of showing the client the table in progress with clamps, glue and unfinished surfaces etc. He only did it once as the client could never undo the first impression.