It is a fix-and-flip investor’s worst nightmare.
You discover a great distressed property, compare it to local neighborhood comps, calculate that there is plenty of profit between project costs and ARV, buy the property, renovate it, upgrade the landscaping and list your fix-and-flip masterpiece on the MLS.
But, you’re not getting any offers.
Weeks go by and still no offers.
You drop the price 5% and still, no one is biting.
With each passing week, the ROI you’ve been counting on is being eaten away by holding costs. You are trying not to panic, but you don’t know why your amazing house flip is not selling. What do you do now? What does your plan B look like in a situation like this?
4 likely reasons your property is not attracting buyers
First things first, you have to consider the possible reasons your property is not attracting buyers–and address those issues right away. Of course, every market and every scenario is unique, but in general, here are the 4 most likely reasons your fix-and-flip property is not selling:
1) There isn’t a buyer willing to pay your asking price
The number one reason buyers will choose another property over yours is asking price. If all things are equal, and they can find a home like yours in their desired location with their same must-have amenities, the ultimate decision to buy will come down to asking price.
It’s important to remember that the amount you spent on renovations is irrelevant to buyers. You may think your inflated asking price makes sense because of the money you’ve invested in materials, appliances and other upgrades, but if other homes in the area offer the same room counts, square footage, materials, curb appeal and amenities, your flipped house will have to be priced to compete in the market.
Go back to the drawing board and compare your renovated project to homes in the vicinity that sold in the last three months. Make sure you are not comparing your renovated flip to dissimilar homes. Square footage, counter tops and cabinets, flooring, laundry, garage parking, pool, landscaping, etc. will all impact how well your fix-and-flip property compares with comps. For more information on how to accurately estimate the ARV for your flip project read How to Analyze Comps to Estimate Your Fix-and-Flip property’s ARV.
2) Buyers don’t know about your property
Another possible reason your property is not attracting buyers is that they don’t know about your listing. All too often, sellers find out after weeks (even months) of sitting on the market, that their MLS listing was incorrect or incomplete. If your property is listed in the wrong zip code, for example, buyers in your local market may never see what your home has to offer.
With the advent of Internet real estate search engines, many home buyers are searching websites like Zillow and Realtor.com before they even contact an agent. Be sure your home is listed on these sites accurately and is showing up in those search engines–and be sure the filters (bedroom count, square footage, garage, and other amenities buyers are seeking) are returning a search result that includes your property.
If your fix-and-flip property is located in a market where there are plenty of comparably-priced properties like yours available, rather than dropping the asking price of your property multiple times, consider offering local agents a monetary bonus if they can get your house sold quickly.
3) Buyers are not impressed with some aspect of your listing:
Another possible reason your home is sitting on the market may have less to do with the property’s actual price or value, and more to do with buyers perceptions about what your property is worth. You have to help buyers know what your property has to offer by presenting it in its best possible light. Below are some possible problems that may be causing buyers to overlook your fix-and-flip property:
Your property’s landscaping and curb appeal aren’t attractive
After you have invested so much time and money making the inside of your fix-and-flip property look amazing, it would be tragic if buyers are turned off before they ever step foot inside.
A negative first impression will prevent buyers from imagining themselves coming home every day to your flipped house, so it is critical that your property has great curb appeal, helping potential buyers look forward to seeing what’s inside.
Depending on the market and how your fix-and-flip property compares to comps, you may (or may not) need to install new sod and invest in new shrubs and plants. If you don’t have the budget for a more drastic yard makeover, making simple cosmetic fixes to the exterior of your property can make a huge impact. Below are a few suggestions for improvements that will give you more bang for your buck:
– If new paint or power washing will not help beautify your fix-and-flip property’s aged or damaged exterior, invest in new siding, especially if local comps have been beautified in this way.
– A front door is a focal point for buyers, and it either welcomes them in to see more, or turns them off immediately. If you have it in your budget, a brand new front door can definitely be worth the expense. If you’re on a tight budget, spruce up your fix-and-flip property’s entry door with new paint in a contrasting color, and install fresh hardware.
– Like a new front entry door, a new garage door can be really impressive to potential buyers. For relatively little money, a garage door upgrade can give your fix-and-flip property the curb appeal it deserves, and historically, the amount you spend on a garage door upgrade improves your property value to an equal degree.
– Lawn and landscaping will make or break your fix-and-flip property’s curb appeal. Remove or trim overgrown hedges and power wash, paint or replace cement surfaces like patios and walkways. If its not in the budget to lay down all new sod, landscapers charge about $200 per 500 square feet of lawn to apply a special green paint that makes dead or dormant lawns look much fresher.
Your interior upgrades and renovations don’t compete with comps
Pay close attention to how your property compares when it comes to upgrades and amenities. Your property may have the same bedroom count and square footage as comps, but you cannot have an outdated kitchen or bathroom and expect to get top dollar for your fix-and-flip property.
If comp properties have upgraded counter tops, cabinets and appliances in the kitchen, for example, and higher end upgrades in the bathrooms, yours should too. If yours doesn’t, you should be prepared to settle for a lower asking price.
Your interior upgrades are too “unique”
Successful fix-and-flip investors know very well that nothing turns buyers off more than quirky design choices and colors and materials that won’t stand the test of time. “Good taste” is in the eye of the beholder, but your profits are at stake, so be very careful about forcing your artistic expression on potential buyers.
Neutral colors and conservative style choices almost always pay off in the end. If you have incorporated bright colors or quirkier design elements into your home, consider toning things down a bit. If you just have to express yourself with bright colors or quirkier design elements, do it during the staging of your fix-and-flip property, not in the renovations. That way, buyers who are attracted to bright colors and quirky designs will still see themselves living in your home, but buyers looking for something neutral won’t be turned off by permanent elements they don’t want to live with.
Your property is not staged, or is poorly staged
In a recent Real Estate Staging Association (RESA) study of 1,081 sold homes, unstaged homes spent an average of 184 days on the market (with no sale) before they were subsequently staged and sold. After staging the unsold homes, they sold on average in 41 days. Homes that were staged prior to being listed sold on average in 23 days:
Days on Market
|NOT STAGED at LISTING||
Average 184 days on market
|STAGED AFTER NOT SELLING||
Average 41 days to sale
|STAGED BEFORE LISTING||
Average 23 days to sale
This study does not tell us how much was spent on staging, and whether staging included complete furnishing of the home, or if it was limited to plants, artwork, mirrors and other smaller decorative items. However, what we can glean from RESA’s research is that your investment of time and money into improving the experience potential buyers will have when they walk through your property (or view photos of it online) will help you sell your property much more quickly.
Another benefit of home staging is that it increases the home’s perceived value in the eye of the buyer, which can return a higher sale price.
“Staged homes, on average, sell for more than 6% above asking price.”
“Making a 1-3% investment in home staging yields a return of 8-10% .”
-National Association of Realtors (NAR)
“The cost of staging is always less than your first price reduction, which is typically 1 to 5% of the asking price.”
All of the above data imply that if you would like to sell your fix-and-flip property more quickly, and for more money, staging your house flip should be a top priority. For more details on house staging, read How Much Should I Spend Staging My House Flip?
Your listing verbiage and photos need improvement
When real estate agents and buyers land on your listing, what is their first impression? Did you supply plenty of professional quality photos that show off your property’s best assets?
There are a lot of properties on the market vying for the attention of buyers, and that means to attract buyers to your property and get it sold for the best possible price, you’ll need to create a unique listing. Your post should be well-written, short, and informative. Give it an eye-catching headline and do your best to inject a bit of humor or personality to make your listing stand out.
For more details on creating the best listing, read these 5 Tips for Writing an Eye-Catching Property Listing.
4) The market has slowed down and you might have to wait it out
There are instances where a local market has slowed down to a crawl, and your only option to avoid sacrificing your investment is to hold on to the property and wait out the market slow down.
If you are able to hold the property for rental until the market picks up again, consider advertising it for rent or lease, or if you are in a good market for short-term rental tenants, furnish the home and list it on sites like VRBO and AirBnB. Short-term rental income can be quite lucrative, and if your property is returning dependable rental or short-term rental income, some mortgage lenders will consider it an asset for refinance consideration.
If you have a hard money loan on your fix-and-flip property, this is not a time for you to go silent. Communicate with your lender and be up front about your situation. If you have established a good relationship with your hard money lender and you are communicating in good faith, they may work with you to extend your loan term, giving you time to refinance. If you are worried about paying late and what your options are, read What Happens if my Fix-and-Flip Loan Payment to my Hard Money Lender is Late?
Most importantly, know that every successful fix-and-flip investor has hit bumps in the road and learned from mistakes made along the way. Not finding a buyer for a project you’ve put so much effort into is discouraging, but you’re not alone. Consider finding a local real estate investor group where you can network with other fix-and-flip entrepreneurs like yourself, and share experiences and solutions with others who have overcome similar hurdles.
Anchor Loans CEO