Fixer Upper

The Fixer Upper

by Darrin DeRoches October 31 - November 6, 2013

Everyone watches the HGTV shows about fixing up a house and making a huge profit. People think it is so easy to flip a house and you hear about it all the time in real estate. Talk to any agent and they always have people who tell them to “call me when you see a house to flip”     The problem is – by the time you call these people the house is already sold. I recently listed a “flip house” on the market and it usually goes something like this. The first day it is listed you get calls from about a dozen agents and you set appointments all day. Day two another dozen agents call and they want to get in and you allow them through. By the end of day two you have had a couple of calls about buyers wanted to pay a low ball number. You explain to them it will not sell that low and yes you agree it will take “30, 40 or 50 thousand dollars to fix up and the selling price will be – whatever they think and yes there is no profit in it”. Day three it hits the MLS system and you start getting inquiries from buyers without agents who want to buy their first “flip” and “can they now set an appointment?” You also get a couple of your own buyers through who also agree the profit is too small for their time.     By this time you have had every “flipper” and so–called builder through the house and you may even get some quick “low ball” offer. If you did your homework you should know what the top dollar the property can get and where the number should reasonably fall. By the end of the first week you should have had a couple of low offers and one offer that may be close to what the seller is looking for. A good agent will make the sale with a good offer. A bad agent will take a lowball offer and explain to the seller that the house needs a ton of work and you should take the offer before the house sits on the market forever. A great agent will take the close offer and get it up to a number the seller deserves and close the deal to the highest bidder who will get the opportunity to the “flip” and make a nice profit once they do the renovations.     Some builders will not take on a project for less than a twenty thousand dollar clean profit but others realize they can do the work and make a quick profit, even if it is a little less. They can then move on to the next “flip” to continue to make more money.     There are a lot of unknowns when taking on a flip but a great agent should know the real costs of a flip to help the seller or the buyer make a proper business decision so everyone wins. The seller should get top dollar and the buyer should make a nice profit. Win, win! V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca.