Owning a home teaches people a lot about homeownership, but it doesn't necessarily make people real estate experts -- although some people might (mistakenly) think they are. That's good news for real estate investors, who can often swoop in and make a lowball offer on homes sitting on the market unsold. Often, these are good homes that are just not being marketed correctly. If you can spot a house that appears to be overpriced compared with the competition, you might want to sit back and wait for seller frustration -- or desperation -- to take hold.
Here are six ingredients in the recipe for an unsellable house.
1. Too-high price
If comparable recently sold homes fetched a price significantly lower than a seller is listing their home for, that high-priced home probably won't sell for the inflated price. If it does, it might take awhile. Why would someone pay more when they can get a similar product for less elsewhere? Unless some buyer comes along who must have that particular home or it's suddenly a seller's market after being a buyer's market for some time, skewing the comps, this might be a property ripe for a solid, but low, offer from you.
2. Bad online presence
There's usually lots of competition online for homes for sale. Photos taken by the homeowner, unless they happen to be a real estate photographer, probably won't look appealing, particularly when viewed next to all the professionally photographed and videoed homes. If a home has bad photos or hardly any at all, buyers might not click on that listing.
The same goes if there is a poorly written or generic description. That reeks of neglect, which sends a message the home might be neglected as well.
Regarding specifications, here's a secret: Real estate agents sometimes enter the wrong specs on the listing. If a real estate investor is looking for a deal and notices the square footage looks way off in the listing or the homeowners association (HOA) dues are too high compared with similar area listings, there's a chance the specs have been entered incorrectly. That mistake could make a house sit unsold until someone notices the error and fixes it. By that time, prime viewing and selling time has likely passed.
3. A terrible odor
A bad smell could signal several things, none of which would be appealing to buyers: animal odors, mold and mildew that emits a musty smell throughout the home, or the unmistakable reek of cigarette smoke.
If you enter the home to inspect it and wrinkle your nose, wondering, "What's that smell?" chances are you aren't impressed. In fact, you're probably having serious doubts about staying in the house much longer, let alone buying it. And if you notice this, you can bet other potential buyers have as well.
4. Too much clutter
If you, as an investor, see a listing with photos that show clutter or you enter a home that's cluttered, get excited. Unless it's already priced below market value, the house will be harder to sell. Buyers often cannot look past clutter. Or if the clutter is bad enough, potential buyers can't even conduct a proper inspection.
If the sellers can't take the time to declutter, buyers wonder what else they haven't done. But if you can look past the clutter, wait and offer a low price.
5. Outdated appliances
Many buyers are looking at the high end of their price band, meaning they need a home that's move-in ready because they don't have the funds to do anything extra. If the appliances are ready for a museum, potential buyers might pass.
But as an investor, you probably know where to get the best investment property appliances. And if you're buying this house as a rental property, the appliances you put in might be tax-deductible.
6. A dark home
Today's buyers prefer lots of natural light. If the house has heavy draperies on windows, dark paint on the walls, and outdated, red-toned cherry cabinets, it might not sell quickly. But you as an investor can easily lighten and brighten such a home by opting for simple shutters or blinds and painting a nice clean Sherwin-Williams (NYSE: SHW) Shoji White, for example. If you choose white cabinets as well, consider wood or color elements in the kitchen for some character.
The bottom line
If any of the above ingredients have been used in this recipe, the owner might have cooked themselves an unsellable house. When you, as a real estate investor, see a property like this, you might want to make a lowball offer. After having the house sit for too long, frustrated owners just might be ready to accept your price.