The other day I heard the story of a young couple who were trying to build net worth using real estate. The plan has hit a snag. The plan was to sell the family home, then build income property with the proceeds. The plan was to purchase the lot with the proceeds of the sale and that lot was to be used as a down payment.
These are smart professional young people, who do their homework, and ask for advice from family, and friends. They had a good plan, and through hard work and discipline were in a position to move forward this summer.
A few things did not go as planned:
• The sale of the home did not net the amount that was expected.
• The lot was purchased with proceeds of initial sale, but some pertinent information was not disclosed or unknown.
• The prep work (cost savings), to be done by the family and friends could not be done for several reasons.
• The builder who was to complete the project did not start on time.
Either a Land Disclosure Form was not provided (disclosure on vacant land is not required under Alaska Law), or the information about the property being a fill site that was unsuitable for a building foundation was not included. And now they are stuck. It is fall, and the lot they invested in, is unsuitable without much mitigation and huge costs.
All of this was done without the use of real estate sales professionals. Would it have made a difference? I believe it would, and here is why:
• The average homeowner sells a home once every 6 years. Things change in real estate very quickly. Major changes in real estate disclosures have happened in the past few months.
• Homes sold with the assistance of real estate professionals usually sell for more than those sold as “FSBO”. Buyers choose FSBO’s so they can beat them up on price, knowing there is no commission to be paid. The discount in price is usually more than the cost for a real estate professional.
• Real Estate Professionals have standard procedures to protect clients, including disclosures for land and residential properties.
• Knowledge of the market area helps us look for “red flags” on something that sounds too good to be true.
• We often know the history of previous sales.
• We work with builders and builder contracts, we know them well, and know the consequences of each agreement.
• We know what questions to ask. My checklist for land questions is currently at 2 pages long.
If you have questions about real estate , and how I might be able to help you, Please give me a call.