Help! I have negative cash flow. - Posted by Ron M

Posted by Durand on October 21, 2002 at 02:27:49:

Good point. I don’t know about in America, but in Australia we can go down to the local council where they have printed listings of everything that’s sold in a particular year, street by street, and the price. If the agent waffles or you want to double check, perhaps you could go there?

Help! I have negative cash flow. - Posted by Ron M

Posted by Ron M on October 20, 2002 at 22:35:23:

Hi everyone. I thought I had a buyer for my 4 bdrm, 2 bath house a couple of days ago when her husband said there is no way he would live in “that part of town”. It appears, maybe I purchased in an area, I shouldn’t have. This was my very first deal, brought to me by an agent who said he was doing me a favor by not listing this property on the MLS and bringing it directly to me.

I have approximately $64,500 tied up in the property and am presently making interest only payments to the bank of about $360. The loan was a portfolio type loan where the bank gave me the money to buy the property and then rehab it. I have made 6 payments on the loan and it will term out in another 6 months. When the rehab was finished he sold me on signing a 12 month listing agreement for the sale of the property at $84,900. When the property sold in 1 day, I thought I was home free. However, according to the agent, the buyer lost his job just a few days before closing. In hindsight, I wonder if this truly is what happened or if the agent was misleading me.

I have since reduced the price to $79,900 with the agent and gotten no action from him or the MLS. In fact the only response I have gotten was when he agreed to let me market the property on a for sale by owner web site with a 33% discount in his commission if I find the buyer myself. A couple of nights ago, I thought I had found the buyer, but they decided not to buy.

Tonight I just made another interest only payment on the property and realize this is starting to hurt. I have done a little research and found the the local housing authority would rent the property from me for $750 per month, as they would any 4 bdrm, 2 bath property. However, the agent says if we put a renter in the property they are likely to take the “like-new” condition out of the place and this will result in an even lower sales price down the road.

I am trying not to be the “don’t wanter” in this situation.
My plan A was to sell the property, can someone tell me a good plan B?

TOP PRIORITY! - Posted by IB (NJ)

Posted by IB (NJ) on October 21, 2002 at 15:32:05:

Take care of that balloon payment by refinancing FIRST! You can’t afford to go under contract with another buyer who falls through a few days before the closing.

Re: Help! I have negative cash flow. - Posted by Todd B (Va)

Posted by Todd B (Va) on October 21, 2002 at 12:13:23:

Try changing the listing so that you cover closing costs for the buyer.

Potential listing:

$82,000 with seller contributing 5% of closing costs.

If you did this, people with no cash could still buy your house. This time of year (approaching Christmas) a lot of lower income people are broke and have nothing for a down payment, even if they have good credit. If they know you will cover this, they will come to you first, rather than going to a house that might or might not do this for them.

Also, you need to make your agent hold an open house ,preferably one that is well advertised. He needs signs all over the neighborhood, rather than just an mls listing.

Good Luck.

Todd B (Va)

Re: Help! I have negative cash flow. - Posted by wpage

Posted by wpage on October 21, 2002 at 11:29:17:

Ron If the agent is willing to cancel the listing that would be ideal. Just be certain that the agent cancels the listing and does not just place it off market. Placing it off market does not cancel the listing but leaves it in suspense until it expires and would make you liable for a commission if you end up selling it yourself. Does your contract with the agent allow you to do a lease option? If not, I would just go ahead and rent the home with as much deposit as is allowed in your state. If yes,I would seriously consider renting the house with a l/O, getting about 5 months option consideration monies up front.With a l/0 you should be able to get a higher selling price. Once you have a signed lease you should start working on the refinancing immediately. Hope this helps wpage

Re: Help! I have negative cash flow. - Posted by Jim FL

Posted by Jim FL on October 20, 2002 at 23:13:37:

Determining a “Plan B” is tough without knowing first what your needs are?
What are they?
Sure, you want to sell the house outright and take care of the loan with a balloon screaming due soon.
What about refinancing the house and pulling your cash out?
Then just make it a rental.

Is the agent doing their job?
Find out what they are doing to move your property.
If they are merely listing the house for sale in the MLS computer and you are not happy with the agents performance, perhaps a change is in order.
Generally houses do not sell for two reasons:

  1. The price is too high.
  2. the price is too high.

Run some comps now, determine what the house is really worth.
Also, keep in mind, no matter what a local agent or broker tells you, the market is slowing right now.
I had an agent tell me just the other day that all the houses I have for sale right now would go in DAYS if I allowed her to list them.
I told her, sure, I’ll sign a one week listing agreement then.
When she would not go for it, I asked her why, since houses are selling in days here according to her?
She did not have an answer, and could not show me ONE house that had sold in DAYS recently in our area.
Bottom line, people either don’t have money now, or they are not spending it.

So, with that in mind, determine what you NEED to accomplish, and then develop a plan to get it.
With the loan coming due in just 6 more months, I’d look at refinancing it, getting a longer term, perhaps some better rates, and sell the house with a contract sale or lease option.
After firing the agent if they are truly not doing their job.
The agent is an employee to you, and what does an employer do with an employee who is not doing their job?

Good luck,
Jim FL

Re: Help! I have negative cash flow. - Posted by Ron M

Posted by Ron M on October 21, 2002 at 24:22:22:


Thanks for the good thoughts. As far as my needs go, I am mostly interested in covering the negative cash flow in the short term, but was initially looking to create a capital gain to reinvest into some other deals, as I aspire to become a full-time investor in real estate within the next 3 years. I have thought about refinancing, but if I do that right now, then my cash flow goes even more negative because I will be paying the full PITI on the $65K, when right now I am only making interest payments.

On a side note. I am a seasonal employee with my job, and am looking at an upcoming layoff toward the end of November if things go as usual.

With the house originally selling for $84,900, I think it is fair to put a price on it of $79,900. However, as you say, if the market is slowing down perhaps I should just go ahead and sell it on a contract or lease option it. Do you know the best way to get out of a 12 month listing agreement, or if that is even possible? Perhaps, if I lease the property to a tenant/buyer and set up a separate purchase contract from the lease contract, this will keep the agent from finding out that I found a buyer without his help? Any ideas?

Thanks Again,

Ron M

Re: Help! I have negative cash flow. - Posted by Jim FL

Posted by Jim FL on October 21, 2002 at 01:08:16:

First, I would not try to go around the agent or hide anything. I just don’t beleive in pulling the wool over the eyes of anyone, not good business. (And I’m not implying you would do that.)

If the TRUE value of the property is less than the listed price, I’d guess the agent has dropped the ball.
So, instead of trying to sell the house yourself with a L/O or contract sale, figure out some things first.

  1. You have a balloon payment coming up, so if you L/O it, or sell on contract, you NEED to take care of the balloon payment.
    It is not realistic to expect a T/B’er or contract buyer to get financing within 6 months.
    So, get that the financing on the house to be longer term.

  2. Is there a market for rent to own, or seller financing in this area?
    If so, will you be able to structure terms for a buyer that will cover your expenses, create some cashflow, and produce some cash now?

  3. How to cancel the listing?
    This is something you will need to read the listing agreement and talk to the agent or their broker about.

Frankly, if I wanted to get out of a listing agreement, for the reasons you are needing to, then be honest.
Talk to the agent first, and if they will not play ball, talk to the agents broker.
Tell them you are not happy with the service you are getting, the house has not sold, and is hurting you to hold it vacant.
So, you want and need to get out of the listing.
You do not have a buyer waiting in the wings, so you are not trying to get out of paying commission.
You are thinking of what you can do to move the house, or to hold it without further financial pain, and perhaps might just rent it, and attempt to sell it later.

Heck, the agent or broker might present you with some other options.
You are in the house for less than your asking price, so you do have some room to work with, but not much.
Bottom line, you are not happy with the service, so you can always DEMAND the listing be cancelled.
Trust me, if you make it clear you are not happy, they will let you out.
You certainly have the ability, not that you would do this, to make the listing agents job of selling the house difficult, if you wanted to, and they know that.

When/if you get the listing cancelled, you should work on getting the place refied to some long term financing, and market the house for sale at the same time.
Get aggressive!
Create signs for the yard, windows of the house, flyers to place everywhere, fax the flyers to local mortgage brokers, directional signs, ads in the paper, and signs around town about the house.
Basically get the fact that the house is for sale with terms out there to as many people as you can, and calls will follow.
You could even consider seller financing it, and selling the note.
This would require you to get buyers with better credit and a decent downpayment, but you can get it done if you push hard.

Plenty of options available, but again, the financing issue needs to be taken care of first, in my opinion.

And remember, you have a TON of people here on this board and others who you can brainstorm with.

Good luck,
Jim FL

Re: Help! I have negative cash flow. - Posted by Nate(DC)

Posted by Nate(DC) on October 21, 2002 at 24:49:00:

The problem is, you don’t know if $84,900 was a good price and therefore you also don’t know if $79,900 is a good price. Maybe the real price should be $69,900.

Ask the agent to print out comps to show you what the recent sales of similar homes have been.