5 Reasons No One is Buying Your Fix and Flip
I love to shop for clothes at Ross.
Maybe it’s the bargain hunter in me, but finding a nice shirt or pair of jeans I like (and will actually wear) for $10 is fun.
However, the search is never easy.
It’s like a treasure hunt every time I visit the store. Rack after rack, I sift through all of the dreadful colors, styles and patterns. As I leave, often shaking my head, I’m intrigued by all the merchandise that no one seems to be buying.
Where does this stuff end up?
I mean is someone really going to buy that XXXL green t-shirt with the scarecrow embroidered on the back?
It makes me wonder what these clothing designers were thinking. Did they give any thought at all to what the customer wants?
The Fix and Flipper’s Customer
Make no mistake…
If you’re going to fix and flip houses, you have customers. And to be successful, you must give the customer what they want.
The fix and flip investor’s customer is the homebuyer.
And guess what?
Homebuyers are picky. Very picky.
You can thank all of the reality house flipping shows for that. You see, today’s homebuyer expects perfection. They see what’s possible on HGTV and want the same for their new home.
5 Reasons No One is Buying Your Fix and Flip
Whether you’ve fixed and flipped 100 houses, or have yet to purchase your first deal, it’s important to remember what turns your customers off.
I came up with a list of five reasons a homebuyer won’t purchase your house:
You chose the wrong finishes
You didn’t pay attention to detail
You cut corners
You’re priced too high
Location, location, location
You Chose the Wrong Finishes
When we started fixing and flipping houses in in 2009, every investor in Phoenix painted interior walls beige, installed tan granite counter tops, and used travertine tile for their kitchen backsplashes. Because, at the time, that’s what the homebuyer wanted.
Here’s what they all looked like:
Then, practically overnight, it all changed. All of the sudden, investors were painting interior walls gray, installing black granite counter tops and using subway tile backsplashes. Because, that’s what the homebuyer was seeing all the reality show house flippers using in their properties.
Here’s what most investors are doing now:
Unfortunately, we got caught right in the middle of this trend on a big rehab in Whitefish Bay, Wisconsin. We put the house on the market and no one liked it. Almost every buyer commented on how the house looked “dated”, even though everything was brand new.
Eventually, we sold the house, but it took three big price drops to do it.
You Didn’t Pay Attention to Detail
Have you ever been to Disneyland?
If so, have you noticed how well manicured the place is? Or how there’s never a piece of trash on the ground?
Well, that’s how your fix and flip should look when the homebuyer pulls up to the curb. The yard should be mowed and the shrubs trimmed. Everything should be spotless. Before we put a house on the market we make sure everything is in working order. That means no burnt out light bulbs, squeaky-clean windows, and all debris hauled away.
If you’re house doesn’t shine like Disneyland the homebuyer will think you’re lazy, or just don’t care.
You Cut Corners
Now, more than ever, the homebuyer can spot a bad rehab. Don’t think for a second you can fool anyone.
If your house needs anything, and I mean anything, replaced, you better replace it before you list it for sale. And if you’re not 100% sure something needs to be replaced, then it probably does.
I can’t tell you how many half-assed fix and flip deals I’ve stumbled across over the years. I’ve seen investors add some eye candy to the property (new cabinets, paint, carpet), but not replace 50-year old windows, or 20 year-old HVAC systems.
The best way to avoid this is to budget for the repair before you buy the property.
You’re Priced to High
Many investors (including me) have a very high opinion of their properties. They believe their house should sell for more than any other because it’s like brand new.
While your home may be the nicest on the street, it doesn’t mean it’s worth 10-30% more than the next nicest house in the neighborhood.
Remember, today’s homebuyer is smarter than ever. They have tools and resources available to them to determine a fair market price for your deal.
Location, Location, Location
My Dad has a saying…
You can’t polish a turd.
No matter how much bling you apply to a home, if the location sucks you’ll never sell it (for a profitable price).
I’ve seen houses on busy streets sell for 20-30% below what properties inside the subdivision go for. As a matter of fact, I wrote a post about this happening to us recently. The article was called House on a Busy Street: Profit Killer or Killer Profit?
Every now and then I forget what a big deal location is and outsmart myself.
We flipped a house in Phoenix a few months ago that was located on one of the busiest traffic arteries in town. Inventory was low at the time so I thought I could take advantage of all the demand in the market.
I was wrong. It took us two months to sell the property and we barely broke even on the deal because we had to drop the price so low.
Give Them What They Want
Don’t be the fix and flip investor with the XXXL green t-shirt for sale.
The good news is that these days there are lots of free resources available (like this website) to help you determine what the homebuyer wants. Having this knowledge will save you thousands, and could make you millions.