You see, the trouble with this business of trying to buy properties for way below what they are really worth is that there aren't queues of people waiting to sell to you on those terms.
The majority of people who enquire, in response to your advertising, are usually put off by the fact that they either cannot afford your low offer - meaning their mortgage balance is greater than the price you offer them, or they simply aren't keen to accept a low offer - in other words they just don't want the benefit enough - that a fast sale will bring them.
That's fair enough and can only be expected. People who do accept the low offers are actually making a statement. They are effectively saying that the pain of accepting a low offer in order to leave their house and 'move on' (for whatever problem reason - there are hundreds) is less of a pain than what they are currently experiencing.
In other words - 'moving on' is more important to them at this point in their life - than is trying, in a slow market, to sell their house at a retail price on the open market for more money.
I was talking of this last week to a friend who explained a classic situation where he had just agreed a deal with someone who simply was set on moving on - AND could afford the low offer that was made to them.
Essentially the seller in question had a strong desire to go and live elsewhere in the country - quickly. He definitely had to be away fromhis home by Christmas Eve. there was no alternative for him
He said his property was worth 125k (becasue an identical house across the road had just been listed atthat price), but the research and logic applied by the potential buyer showed it clearly to be worth 110k (meaning it couldnt be expected to sell for more than 110k in current market conditions).
The investor who was hoping to buy the house was fortunate because the seller agreed with the logic when it was shared with him (many don't - and that can be a problem to overcome - its not impossible - just a bit awkward!).
He understood that had he been selling in 2007 it would have been worth more - and also that if he could wait another 2 years til 2011 - it would probably be worth more.
But he HAD to leave by Christmas Eve.
He knew he couldn't leave by 24 December if he took the far, far riskier Estate Agent route. He therefore had 2 options left open to him.
- Stay put and forget moving elsewhere
- Sell it quickly and cheaply to an investor
The other obstacle was if he had a mortgage greater than the investors offer or not.
The good news was - he didn't have a mortgage at all. He wasn't hindered by a loan.
So he accepted an offer of 79k.
So this is a price that is around 71% of what the property should sell for at a 'retail' price in today's market.
The investor was lucky in as much as he found (via his extensive local marketing) a motivated seller who could afford to take his offer - these are 2 vital ingredients that form any bmv deal.
My friend reckons for every oneof those he has to make around 20 offers. He looks at things this way
'If I increase my wealth by an average of 30k on each deal I eventually agree - this means that every time I see someone (regardless of if a deal is agreed or not) I make £1,500'
For me that sums up this business. Lots of mundane drudgery - punctuated by the occasional lucrative deal that makes it all worth while
The sale is 2 weeks down the line now and is set to conclude on Friday 18 December.
Incidentally the rental on the property is around £525 per month. Finance costs are around £380 per month - so a healthy gross margin there.
The property is only 15 years old - in good condition and needs maybe £500 spending to make it tip top.
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