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Exit Strategies: Weighing Your Options

Investing in real estate can be a great source of long-term wealth. In fact, some of the wealthiest people in the country have made their money through buy-and-hold real estate deals. There is a large segment of property owners who have no intention of ever selling, but there are also many investors that will want to sell at some point or another. When this time comes, you have a few options on how to maximize your profits or get what you want out of the transaction. Accordingly, there are several real estate exit strategies that warrant your consideration. If you don’t have an exit strategy planned, you run the risk of wasting your time or leaving money on the table.

The most popular method of selling a property is by listing it with a local real estate agent. You may have an established relationship with a buying realtor, but that may not make them the best option when it is time to sell. A listing agent needs to have more tricks up their sleeve then just relying on the MLS and bank contacts to find deals. A good listing agent will have access to the MLS, but they will also know the local market and price the property correctly. They know what type of marketing is best and how to find buyers. Some markets may have less demand than others. If you are not working with a quality realtor, your house could spend months on the market with little to no activity.

If you think you can do just as good a job as a realtor, you can opt to try to sell the home yourself. The biggest reason sellers do this is to save money on the commission in an attempt to maximize their net profits. While this can be an effective strategy in some areas and for some properties, it is much more difficult than it may appear. Selling your home is not as easy as making a post on Craigslist or putting a bandit sign in your neighborhood and waiting for your phone to ring. These options may work, but to create demand and generate top dollar you need to market the property. This will come at a cost to you can may not give you the results you desire. Nothing can sell a home like the power of the MLS. Every property listed goes to every member realtor and their buyers. Without it you are at a severe disadvantage in trying to find someone to buy your home.

Another issue with selling the house yourself is the time commitment you need to make. Every time someone wants to see the house you need to be present for the showing. Additionally, if you want to have an open house you need to spend money promoting it. You also need to have an idea of how to negotiate and deal with offers that come in. The money that is saved by not using a realtor can be quickly eaten up with advertising expenses and in not getting as high a price as an experienced realtor could.

Another sales option would be to carry seller financing. Under this scenario you, as the seller, hold the mortgage for the buyer as opposed to a traditional lender. The main reason you would do this is if you have an interested buyer that is unable to obtain financing. You would receive monthly payments without having to do anything else associated with the property. Instead of having to come up with taxes, insurance, maintenance and worry about dealing with tenants you can simply wait for your mortgage payment every month. The obvious risk with this option is that the seller stops paying. If this happens you have the same rights as any other mortgage holder would. The best way to prevent this is by requiring a substantial down payment to give the buyer some skin in the game. If they put down a few thousand dollars they would be much more likely to walk away from the property than if they put down $20,000.

An alternative to seller financing would be a lease option. With this, the buyer acts as a tenant but also has future rights to purchase the property. The buyer has the option to buy at a set price in an agreed upon period of time. The prospective buyers would supply a nonrefundable option fee and can buy at any point in the negotiated time period. The biggest risk with this as a seller is that you are locked into a sales price if the market suddenly takes off. On the flip-side you also have a buyer committed to buy at your price if values decline. This is a good option for someone looking to get as cash flow as long as possible but also willing to sell in the foreseeable future.

When, and if, you decide to sell, you often have more options than you think. The better you know all the options available, the better decisions you will make. Between trying to sell for the highest amount through a realtor or trying to keep cash coming in, there are options for either scenario. You also have options if you want to defer your taxes until a later date and reinvest your profits. Selling can be a viable option, but it may not be the best thing to do for your immediate goals. There are often more options on the table than you realize.

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