|Buying and Selling Distressed Houses for Maximum
If you want to become a real estate investor, find a "fixer-upper" owned by an
anxious seller. Finding distressed houses at bargain prices, fixing them up, and then selling them
on a consistent basis can make you a millionaire.
Why Sellers Sell At a Discount
Homeowners' problems often prevent them from staying on top of their home's upkeep, and
factors such as job loss, divorce, serious illness, various addictions, or other personal problems
quickly overwhelm them. These sellers can't make the needed repairs because of financial or physical
limitations, and when that happens, their home becomes a low priority and sometimes will go into
Look for the "Triple D"
Home sellers with three problems give beginning investors a great opportunity. A
"Triple D" is a Doghouse, involved in a Divorce, and in Default. The label
"doghouse" comes from Southern California Realtors who used this term to describe the
worst fixers. These houses maybe "tired" and need only cosmetic work in order to favorably
compare with other homes in the area.
What to Look for in a Doghouse
The hardest house for a homeowner to sell is a "doghouse," "dump," or
"fixer-upper." These run-down houses scare off most buyers, who don't have the money to
cover the down payment, closing costs, new furniture, carpeting, appliances, roof repairs, and other
deferred maintenance required to bring the home back into top condition.
As you look through the classified ads or at realtor listings, keep an eye out for terms
like "handyman special," "as is," "fixer," or other tell-tale words.
Also have your agent use similar terms when scanning the Multiple Listing Service for your target area.
Once you've found a property that you can turn from doghouse to dollhouse, find out the
seller's problem and then offer a solution. Distressed sellers frequently experience financial
problems and need cash as soon as possible. Therefore, if you're ready to close quickly, you'll be
set to negotiate a lower sales price.
How to Close Quickly
Find an experienced lender and get yourself not only "pre-qualified," but also
"pre-approved." Taking that second step assures worried sellers that you already have your
loan in place for their property, and this puts you well ahead of other potential buyers.
How to Know When "Bad" Is Good
When you first start out in the real estate "fixer" business, you'll want to look
for "ugly" houses needing only cosmetic work. Look for entry level fixers that just need
some cleaning up, painting, and carpeting.
When you're new to the fixer game, always remember your limitations and use caution when
considering houses needing structural repairs. My husband replaces structural beams, sub-flooring,
walls, plumbing, and electrical systems, but he acquired those skills after years of experience.
If you find a house with structural problems, get estimates from reliable contractors to do
the work. Experience teaches you how to do more over time. Until then, rely on experienced
professionals to do the repairs. Take professional estimates into account before deciding whether or
not to purchase an investment property.
The Easiest Houses to Sell
A dollhouse, located in a popular neighborhood, sells the quickest. For instance, we once
sold a home we named "Orange Tree Cottage" in just three hours! To qualify as a dollhouse,
a home must be in a location that buyers want and must offer the number of bedrooms, bathrooms, and
amenities they're seeking. Beyond the price, however, buyers purchase the house that meets
both their basic requirements and their emotional needs.
Filling Buyers' Emotional Needs
After many years of investment experience, we've found that using Design Psychology and
Marketing Psychology techniques greatly increases our profits. Both concepts go far beyond "curb
For instance, we use colors that target our prospective buyer's income level and match the
selling season. Generally, buyers of higher-priced homes prefer complex colors, and using cool colors
during hot weather and warm colors in cold seasons makes buyers feel more comfortable. We also paint
the front door a happy color and entice buyers into the house by placing potted plants
on the porch.
Over the years, we've bought and sold dozens of distressed properties. By using caution and
common sense, as well as following a few simple rules and using Design Psychology strategies, you,
too, can become a wealthy real estate investor!
© Copyright 2004, Jeanette J. Fisher. All rights reserved.
About the author:
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Jeanette Fisher, Design Psychology Professor, is the author of Doghouse to Dollhouse for Dollars,
Credit Help!, Joy to the Home, and other books. Jeanette teaches Real Estate Investing and Interior
Design Psychology. For more articles, tips, reports, and newsletters, see