For the past 5 years, I have had the privilege of working with a bankruptcy trustee. What does that mean? A bankruptcy trustee is assigned to someone who is going through bankruptcy. The trustee decides what happens to all of the person’s assets. This could include selling their house. It all depends on how much equity they have in their house, the house market value, and if the trustee can pay off the mortgage, and other circumstances.
The trustee gives me an address and I do research on the property. This usually includes getting preliminary title work. This shows all the liens on the property. I have not seen the interior of the house so I base my findings on the house being in marketable condition. In some cases, it is far from it. I tell the trustee what I think the house is worth on the market today. The trustee decides if he can sell the house and at least break even.
Recently, he gave me an address that I did research on. A 3 bedroom, 2 bath ranch in a very popular neighborhood. Houses were selling in a day or two after being listed and at premium prices. After doing my research, I came to the conclusion that it was likely to be worth between $175,000 and $190,000. If that were the case, there was a lot of equity in the house. The trustee told me to list it.
I do not list a house without seeing the insides. The last time I listed a house without seeing the insides, it turned out to be a meth house. I ended up having to lower the price by 50 percent.
I ended up talking to the owner’s attorney. The attorney gave me the phone number of the owner. He also informed me that the owner’s brother had the power of attorney over the owner and that the owner could be considered to be a hoarder but he had never seen the house.
I find that the definition of “hoarder” is very broad, based on who you ask. The definition I am familiar with is based on the TV show Hoarders which I have seen in several episodes. I have also been told houses were owned by hoarders but come to find out that they were just very cluttered.
I called and talked to the owner about getting in to see the house. The owner seemed very cooperative and we arranged a time when I could see the house. Shortly after that call, I get a call from the brother’s wife. She gave me a lot of information about the house. She said that she and the brother had started to empty the house. They filled two 30 yard dumpsters of stuff and then gave up.
Here is a picture of a 30-yard dumpster;
At this point I did not know what to expect. Was this the next production set for the TV show Hoarders or was this just a cluttered house?
I met the brother and his wife at the house the day I was to tour. After introductions and some stories of their experience, we went inside the house and they introduced me to the owner.
I toured the house, took room measurements and pictures. It was very cluttered but I did not consider it a hoarder’s house. Of course, I never saw it before they pulled out 2 dumpsters worth of stuff.
I was told that the owner was only taking her clothes and personal effects out of the house and everything else would stay and convey to the buyers. That meant that the buyers would have to clear the house of any unwanted items. A huge job that might take weeks.
Other than the clutter, the 20-year-old house was in pretty good shape. A popular floor plan that would look much bigger when all the “stuff” was removed. The carpet could be cleaned or replaced and some paint touch-up was needed. My only other concern was that the back deck needed work. Other than that, from what I could see, little needed to be done. I knew that pricing it between $175,000 and $190,000 was out. I told the trustee that we needed to price it at $149,500. He agreed.
The owner said that she only wanted showings between the hours of 11:00 AM and 6:00 PM. Because of the limitations, I set it up for only 30-minute showings and no overlapping because of COVID. That meant that at max, only 14 showings a day. I thought that would work.
Two days later, after getting all the legal documents signed, I got it listed. I went to the house to put up a For Sale sign. As soon as I put up the sign, a neighbor came running out and took a picture of it. I guess he wanted the phone numbers. He never approached me.
Once I got back to the office and entered the listing, showing requests started pouring in. After a couple of hours, we had booked showings for the next 2 days and could not book any others until the third day. I started getting calls, emails, and texts from Realtors asking me why they could not get a showing immediately. After spending the rest of the day responding to all the communications, purchase agreements started pouring in.
On the first day, I got 29 offers. Some were from out of state. 78% were cash offers. (There must be a lot of cash out there) 80% of the offers were above list price. Some of the offers were sight unseen. (They had never seen the interior of the house first hand)
I had Realtors calling me after sending me an offer asking if they were the highest offer. If I said no, they would send me a higher offer. Turns out that the two highest bidders were battling it out.
Fortunately, the trustee picked an offer at the end of the first day. The first day pushed me to the max. After making the listing pending, I still got 2 more offers the next day for a total of 31.
Turns out that he picked a cash offer 12% above the list price. Nice!
I have always had two theories in this market about cash sales and pricing.
• It used to be that cash sales were king. You could close must faster. You did not have to wait for a lender to decide, generally no appraisals, and a lot of times no inspections. Sellers would always prefer cash sales even if they were a little lower than the list price. Now, cash sales don’t mean a thing unless they are higher than the list price.
The National Association of Realtors says that the average amount of offers per listing is 5. In this fast-paced market, you are bound to get lender offers above the list price. The housing inventory is so low that mortgage buyers are struggling to get a house. They will naturally bid above the list price to get the house and hope that it will appraise which leads me to my other theory.
• Pricing…Normally Realtors try their best to price a home at current market value. The seller will get mortgage offers above the list price and accept one. Now comes the appraisal. If it does not appraise for the offered price, then the buyer has to come up with the difference. This is called the appraisal gape. If the buyer does not have the difference in cash to meet the offered price, then they may lose the house unless the seller reduces the price of the house to match the appraisal. My theory is that if you price the house under market value, you will get offers over the list price and still have it appraise. You will also get more offers.
Real estate is a tricky business. Every sale is different with its own set of circumstances.
Summary of the sale:
• 24 out of 31 offers were cash offers
• 25 out of 31 offers were above list price, 2 at the list, and 4 below list
• 21 out of 31 offers were sight-unseen offers
• 6 buyers made multiple offers each higher than the last
• One Realtor made an offer
• Two buyers made 4 offers each. They were bidding against each other
• One offer from Texas, one from Delaware, one from California, and one from South Carolina
• 45 scheduled showings over 3 days
• Sold in one day – future scheduled showings were canceled
It is a crazy market out there!