Pre-Selling a Flip

[Andrew K.]

I'm sure some of you have run into this before. A property I purchased in an amazing neighborhood has garnered some interest already (before even starting on any work) from friends/colleagues of friends. One in particular is very interested and would like to know how it would all work. Letting them have some control of customizing would need to be accounted for in how the pricing works out as well. I'm a general contractor so I have a good idea as to how to structure the selections and budget, but when it comes to the commitment to buy, I could use some guidance. How do you all structure a pre-sale deal? Of course, there would need to be a contract and a significant down payment up front to guard me against them backing out, but specifically how is this done? Any insight from people that have done this before would be much appreciated!

[Andrew K.]

Great answers thanks @Anson Young  and @Bill Gulley 

Speaking to your point, Anson, about locking in your price and cutting out competition: There is theoretically some upside to being able to take away a lot of the carrying costs involved during the work and also not having to pay out any realtor commissions. When you're dealing in a higher end area, such as the Maryland suburb I am, with a target price right around 900K, that's no small chunk of change. In my eyes, customizing exactly how they want leaves room for an even larger return as some of the items they would want cost more to do. Locking in a contract also allows my bank financing to be freed up earlier as well. I'm sure it's going to take a bit of work/headache to structure it though.

Bill thanks for your perspective. Yes, it definitely seems that there are a number of ways to do this. I bought the house directly from an estate off market so I physically own it now, so some of the creative financing is off the table, although I suppose I could seller finance for a while ;) . I guess as long as its put together clearly and through lawyers there's no cut and dry way to get it done.

Anyone else with experience with this?