If you own a piece of real property that is in a distressed condition, the chances are very good that you have already been approached by several different people who want to “unburden” you. These might include traditional real estate sales agents, developers, and/or investors, and the approach is usually through phone calls or mailers. My advice in this situation is to take in multiple offers, see what’s on the table, and compare values that several different agents or investors come up with. Also, make sure you know who you’re dealing with.

Are you talking with a principal, someone who is going to both pay all cash and renovate the property himself? Or are you talking to a middle man, a wholesaler, who makes a living by finding distressed properties, locking them up with a contract, and then selling those contracts to fix-n-flip developers? If you are not talking directly with a principal, you might think you’re getting a fair deal, but you probably aren’t. Middlemen and brokers have to make a living, and the way they do that is by trying to get properties under contract at below market prices and selling those contracts to developers at a mark-up. The bottom line: you’re leaving money on the table.

On the other hand, wholesalers can sometimes overvalue a property, which sounds like it might be a good thing for you but turns out not to be. If the contract price turns out to be too high, developers will pass on the project, and the property will not get sold. You’ll be left hanging on to a property that won’t be sold until the contract expires. In the meantime, you won’t be able to market the property to anyone else.

Always do your homework and investigate the people you’re dealing with. Do they have a good track record? Can they do what they say they’re going to do? Can they pay all cash? Are they going to do the work themselves, or are they going to re-sell your contract to someone else? Until you have answers to these questions, you should hold off making any decisions.

If you want more information, please feel free to call me, Dalton Hepworth, directly at (530) 313-3852.

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