It’s hard enough to preserve the value of a vacant house, and one reason is that there is always the possibility that unwelcome tenants may want to rent your property for free without you knowing about it. Squatters can greatly increase the time to closing, the amount of repairs that will need to be done, and the hassle factor.
Plus, many people don’t know that insurance policies typically will not cover claims when a property is vacant. Usually you have to add on and pay for extra coverage.
The sale of this Dayton house did not go quickly for a couple reasons… one was not the seller’s fault as there were probate issues to deal with, but the other reason was indeed the seller’s fault: she listed the house too high.
When you list too high right out of the starting gate, you eventually get much less overall, plus you’ve had to pay taxes, insurance and utilities for all that extra time, too. The seller was probably thinking, “OK, the house needs $50,000 in rehab and the current value of the property after repair is $495,000, so I’ll list for $445,000.”
But if someone can buy a house for $495,000 without lifting a finger, why would they buy a house that needs extensive work?
If this house had been listed for $385,000 back in June, then they probably would have gotten it, and avoided the squatter situation, which just makes things that much worse… more time, more money for legal fees, etc. But at this point, they will probably get closer to $300,000 selling to a cash buyer investor who is set up to do all the work and spend all the money to make it ready for a nice family to move into.
And an investor needs to factor in that by the time the house is fixed up and ready to sell to an owner occupant, the market might have softened, meaning, houses might be selling for less.
So if I were to buy this house, I wouldn’t be betting on getting $495,000. I would plan on being able to sell for $445,000 and feel lucky if it sold for more. Builders have lowered their prices by 10% to keep people from walking away from their contracts. It’s only a matter of time before retail sellers will have to do the same thing.
There are many changes in recent months that have not really hit the market yet. More inventory will be coming. There are already $12,000,000 (yes twelve million) vacant homes in the US, did you know that? By this time next year there may be more sellers than buyers, especially if mortgage rates don’t come down.
So if you’re a property owner in Dayton or Carson City, Nevada, and you plan to sell some time in the near future, I would suggest that you don’t hesitate to get that home on the market ASAP. In a few months’ time you may find that you will have to reduce your price to get into escrow.
And for heaven’s sake, keep a close eye on any properties you have that are sitting vacant!