Does Choosing Who You Sell Properties To Matter?
Does it matter who you sell your properties to as an investor?
Is there an ethical and legal responsibility sellers have when signing contracts with real estate buyers? If so, what does that mean for your career in real estate, or as an investor and real estate business?
Institutional Sellers Have Been Increasingly Selective
Since the 2008 crisis institutional sellers of nonperforming mortgage notes and REOs have become increasingly selective in who they will sell to.
They have created stringent rules for who qualifies to buy their properties and note assets. In some cases also writing in provisions guiding what those buyers can do with the properties within a specific time window. Such as not foreclosing or evicting for a set period of time.
Aside from the regular issues of making sure they are contracting with buyers who can actually follow through and close on the deal, this is being done to limit their own liability from the actions of those they sell too.
They don’t want to be held liable for negative impacts from the new buyer acting aggressively or harming the market.
Why It Matters Who You Sell Your Property To
While it may not be written in black and white, or even a hard law, sellers may end up bearing some responsibility for the outcomes of who they sell to.
Such as how the new owner:
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Treats occupants of properties
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Does a quality job on rehab work and creating new affordable and healthy housing
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Impacts the immediate neighborhood
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Operates ethically, and impacts the financial and real estate ecosystem
One of the great parts of the financial freedom that comes with being your own boss in real estate, or simply as an investor is that you now have the choice not to work for people and companies that are taking advantage of people and are treating their customers poorly, or even committing fraud.
It’s important to hold onto that, and flex that freedom in real estate too. You don’t want to be involved with someone who is going to just skim equity from the properties and allow them all to be foreclosed on. Or who may just cover up mold or other toxic health issues with paint and resell them to unsuspecting families with kids.
What It Means For Buying & Selling Properties
For acquisitions today, this means you need to build up your own resume. Show the good work you’ve done, and how you are a strong buyer. If you don’t have the reputation and track record yet, you may need to partner up with someone else who does to gain access to the best discounts on bulk deals.
On the flip side, you may want to carefully curate partnerships for liquidating and flipping properties to those you trust will do a good job.
Or have some parameters that you are looking for when selling high volumes of properties to individual buyers and companies. How many deals have they flipped? How good was the work? How happy are their end buyers or renters? What is their online reputation? Just make sure these are written out and uniform to avoid anything which could be misinterpreted as discrimination.
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