Andrew Wetzel's Musings

October 4, 2019

Selling Real Estate Without Representation: Reward vs Risk

The Philadelphia Inquirer recently ran a Real Estate story that made many people angry.  REALTORS were not involved.  What has happened and will undoubtedly continue to happen is sad and, perhaps, entirely preventable.

The article talked about people buying Real Estate, such as vacant land, from people with a high level of urgency or people with limited information.  The article described many as being poor which adds to the emotion.  The buyers either searched for people they thought would want or need to sell property or responded to owners looking to sell quickly.  In many cases the buyers “flipped” the properties for huge profits, often without making any repairs or little added cost to themselves.  Now the sellers and others are blaming the buyers, saying the buyers took advantage of the sellers.  But did they?

Would I like to have this done to me or someone I know?  Absolutely NOT!  So, what is the answer? Assuming these transactions were not coerced, who is responsible for this?  Whether the sellers were misled about the “market value” or worth of the Real Estate is a separate issue.  What is the seller’s responsibility as far as learning the “market value” of what they want or need to sell?  What should the buyers have done differently?  What is society’s role:  do we want to require a third-party to review and evaluate sales to protect whomever we think “vulnerable”?  That would seem excessive.

Please do NOT misunderstand me:  the article did not accuse the buyers of fraud and I would certainly NOT condone that.  In fact, the buyers say they do a lot of work to put these deals together and provide a benefit to sellers.  Frankly, what we have are two parties with their own interests and motivation as well as two different ideas of property value.  The same thought applies to a sale where both parties are represented by professionals although they would have an added layer of “protection” if their agents performed as we are supposed to.

In Real Estate there have always been a number of “private sales”, meaning there are no agents involved.  About 8% of national transactions do not involve agents although many of these involve parties who know each other.  Sadly, many who buy or sell Real Estate without professional representation come to realize there was a problem AFTER the sale closed and those sales tend to result in lower proceeds even when you consider that the Real Estate fee was not charged.

While the article has several very sad stories, absent fraud, many of these sellers need to look at what they did and what they expected to happen.  They took a risk by not hiring a professional.  Could they really have gotten “top dollar” on their own or did they have the resources to maximize the “highest and best use” of the Real Estate?  Again I ask:  whose job was it to protect and promote their interests?  They had choices, even if somewhat limited, and now they have the consequences of what they did.

While anyone can make the decision to buy or sell Real Estate without an agent, what is the TRUE co$t of trying to save the fee?  If the issue was a matter of time, trying to sell fast usually comes at the expense of profits since the market was not allowed to function properly.  Absent hiring a professional, please, at least pay an attorney to review any documents involved and/ or hire an appraiser to determine the true “market value” of your property.  While doing either may not get you what you think you are due, at least you will know your options.  Certainly do NOT trust random online property valuations and, respectfully, do not rely on friends and family.  Business is business!

In the event there was any fraud or misrepresentation, pursue that through legal channels.

When Real Estate (or anything of value) is involved:  there is no time for inexperience, empty promises or false expectations! 

HIRE WISELY:  We are not all the same!

May 11, 2019

Flipping Real Estate: A Different Form of Investing

“Flipping” is a trendy way to “invest” in Real Estate.  TV shows and infomercials advertising FREE SEMINARS are everywhere!   I suspect that many people are making lot$ of money telling others how to flip houses and wonder how many of these “coaches” have done even one flip.

Flipping expands on the old mantra: buy low; sell high and adds a critical “make it or break it” step.  Unless you are lucky and can buy something below market value and then sell it without doing any work, you have to renovate flips to make money.  Therein lies the unknown.  You paid a specific amount and there is likely a ceiling on your eventual selling price:  you have to fill in the blanks!

The old-fashioned way of investing, buying rentals and becoming a landlord, has lost some of its appeal to many for a variety of reasons although there are still opportunities.  Flipping allows you to get in and then get out, hopefully with a return that justifies the investment and risk.  Some flips will be homeruns while others will be singles.  Serious flippers do volume and can handle the ups and downs.  Many stop after trying one.

Flipping is a multi-stage, interconnected AND interdependent process. You have to check all of the boxes to make it work.  Success requires hiring a competent agent to identify, negotiate and acquire opportunities, access to money, the ability to properly evaluate what a property needs to maximize interest, the ability to complete the work in a cost-effective manner, the ability to RATIONALLY assess an eventual selling price and patience if the rehab and/ or the marketing take longer than expected.  If you use your own funding, this may be easier than paying someone else although using an equity loan as some do has inherent risk.

While many have done quite well, others have failed, some miserably.  If you overpay, under-evaluate what is required, overspend on the rehab, over-estimate a selling price and/ or pay too much for your “seed money”, you will have issues.  The market itself introduces a degree of uncertainty so timing is important although not a science.  A number of incomplete renovations always end up on the active Real Estate market looking for someone to finish the job.

This is truly NOT the time for inexperience, empty promises OR false expectations!

HIRE WISELY: we are not all the same.

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