Very early on in my real estate investing career I partnered with two other people on the purchase of several local homes. Honestly, they knew less than I did about real estate investing but the saying 'safety in numbers' kept running through my thoughts so a partnership was formed. It was a disaster, but it actually taught me so much about how to sell my investments. Here is what happened.
Image by thinkpanama via flickr.com
We purchased a property in a very nice neighborhood in a gated community in south eastern Florida. The price was discounted because the owners needed to move quickly so while it was not going to be a huge deal, it was a good first project to get us started. One of my partners went and looked at the house and signed the contract. I trusted him to look for the basic things that could be wrong with the house and sent him off with a standard list of questions which came back with all the right answers. After signing the contract he came to my office excited that he had made the deal. We were paying all cash and were closing as soon as title came back. While we were waiting for this he took me to see the property.
I walked in the front door and to the left was the kitchen. It was a little dated but nice and roomy, the appliances were new, the counter top was in great condition and I was feeling good. Then I walked into the rest of the house.
The entire interior was painted a deep, dark purple. To the point of being almost black. But it gets better (or worse). The owners had moved out and the house was empty. Apparently they had built in furniture throughout the house. Well, when they painted this awful deep purple color, they just painted around the furniture. The spots on the walls behind the furniture were bright red. It looked like a crime scene where someone had marked the body with police tape. I looked at my partner and asked him what was up with the paint. His response was 'just needs a skim coat, no big deal'.
The estimates to have the entire house professionally repainted were between six and eight thousand dollars. This was money we did not have in our profit margin. I sat my partners down and told them we can't list this house with a real estate agent. First off, no agent in their right mind would take the listing. Secondly, we need to sell this house from the outside in. I explained to them that the best feature of the house was the backyard. It had a very large screened in swimming pool with a built in hot tub, covered patio, tropical ceiling fans and outdoor kitchen. Plus it overlooked the golf course and the canal.
We cleaned up the inside as best as possible and held an open house. We put a sign on the front door directing everyone to enter the property through the back. Once there, we kept them on that patio and painted the most incredible picture in their minds of what their life would be like living here in their own personal paradise. We kept them out there until they fell in love with the house, then we took them inside.
As soon as they walked in their eyes lit up. Before they could say a word I told them 'Obviously the previous owners taste in art leaned towards the abstract' and made them laugh. I then told them that the house of course had to be repainted. We were going to do it ourselves, but that would have meant every single wall would be painted that awful renters beige color. The whole reason behind buying your own house is to be able to express yourself and get away from that boring neutral color. I told them they could either except our offer of $3,000 in closing cost credits to repaint the house, or we would just paint the whole place beige to appeal to the widest group of potential buyers we could.
The open house went well; there were plenty of people there, all mulling around the pool, so anyone who fell in love with the house and went inside knew that if they balked over the paint there were plenty of other people out back who were interested.
We put the house under contract that day at our requested price, minus the $3,000 paint credit. And that was also the last house I ever partnered with my color blind friend. But it taught me to think outside the box and learn what motivates people to get them to buy.
Daniel Doran is a 20+ year veteran in the real estate industry. He is a previous owner of a law firm, mortgage and title company. Daniel has also written several books on mortgage modification, short sales and real estate investing. He currently specializes in Commercial Finance and Real Estate Development and is a graduate of Manhattanville College and Brooklyn Law School. You can contact Dan at Buildings By Owner.
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