This is a case study of a recent property I sold in Riverside, California. The purpose of this blog post is to familiarize you with the process of obtaining, listing, and selling an REO. This is a behind-the-scenes look into REO disposition.
The house I sold was a duplex in a Riverside neighborhood that was constructed in the 1970’s. Each of the two units in this duplex home are 2 bedroom 1 bathroom, 906 sq. feet, with a one car garage.
The borrower’s mortgage had been in default for more than 12 months, but the property was fully occupied and both tenants were still paying rent to the defaulting owner. We started legal eviction on both units, but since they were both occupied by tenants with written leases, we were limited to what we could do, and the eviction would take at least 90 days.
Evicting The Tenants
As the listing broker on this home, I went out to the house and met with both tenants. I offered Cash for Keys but both tenants were resistant to it, fearful that they wouldn’t be able to find a similar place in the same rent range quickly enough to move. Since neither tenant wanted to do cash for keys, I made sure we got the written notices sent out from legal quickly because that shows them that the eviction is happening.
As the listing broker, my job is to sell this home which was now owned by a bank. Since the eviction is happening with or without me, I go out of my way to make the transition as easy as possible for tenants who are willing to cooperate. I told them that we were the owners and we will not collect rent anymore during the eviction process.
I waited until after I knew those notices had been delivered and went out there again to meet with them. I explained to them how detrimental an eviction would be on their credit and got one of the units to agree to move out in approximately 20 days from when I met with them. The other tenant was still resistant to move out, but I left him my information. Eventually the other tenant called me when he got more legal notices and he agreed to move out as well. This was the best decision for both sets of tenants because NOT having an eviction on their record made qualifying to rent a new home much easier.
Preparing The Home For Sale
After both sides were emptied, I did my physical inspection of the property and found the duplex to be in poor to fair condition. The house needed flooring replacement throughout, paint inside and out, water damage remediation in the bathrooms, appliance replacement, smoke detector and carbon monoxide detector installation, window replacement, water heater replacement, and fence replacement. Of that, we replaced the window and installed the smoke and carbon monoxide detectors. I replaced the window because it was a security issue and we were legally required to replace the smoke and carbon monoxide detectors. After we made those minor repairs, the property was cleaned and we performed basic landscaping.
Determining The List Price
Next we needed to set the list price of the home. This bank requires that two Broker Price Opinions (BPOs) be performed. Then a reconciled value is set for the list price.
When I did my BPO, I pulled 3 active listings and 3 competitive sales that were all within a half mile radius of the subject property and had sold within the last 90 days. This is the best way to understand the market’s perception of value. Based on the condition and sales prices of the comps, I determined that the as-is value of this property should be about $165,000. I felt that due to the extremely distressed nature of this sub-market, repairing the property would not necessarily increase its value. I recommended the property be sold as-is for $165,000.
The second BPO came back and the broker agreed that in the duplex was worth $165,000 in its as-is state. This broker, however, thought that it was worth $170,000 repaired. As a result, the bank reconciled its value at requested the property be listed at $170,000.
Marketing The Home For Sale
We put up a For Sale sign in the front yard, installed lockboxes on the front door, created property fliers, listed the property in the MLS, and syndicated the listing to our network of websites including CAPropertyFinder.com, Trulia, Zillow, Realtor, and 40+ other real estate sites. We sent out feelers to our investor network and within the first 48 hours had received 9 offers.
We negotiated with everyone and ended up selling the property for almost $10,000 above list price. The escrow was opened 4 days after it was listed and the property closed exactly 30 days later. Pricing the property correctly and marketing the home properly allowed us to do that.
Home Sale Specs
This property was listed for 2 days until we accepted an offer. An average deal in our portfolio takes 39 days. We closed escrow in 30 days, whereas an average property in our portfolio takes 37 days. This property sold for 5% above list price, whereas an average property in our portfolio sells for 3% below list price.
In the last 150 days, 2 properties sold within a half mile. Those properties averaged 73 days on market and they sold for an average of 8% below list price.
List Your Home For Sale
Selling a home quickly and for above list price is a matter of experience, market knowledge, and connections in the industry. If you are seeking similar results and would like us to sell your home, call us at 1-800-287-1808.
You may also reach me directly, Scott Mehlman, at 310-430-6361. I am the managing broker of our office and I look forward to exceeding your real estate needs.
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