If you want to learn how to sell a property in a bad location, you've come to the right place. For 12 years, I owned a single family house in San Francisco on a busy street next to the busiest street in all the city (Highway 101). The busiest street consisted of three lanes going both directions plus space for cars to park. The property was in a good neighborhood, but in a bad location.
This is my story of how I sold a property in a bad location for $1 million more than I thought I could have. If you own a property in a bad location, you still have lots of hope!
Selling A Property In A Bad Location For Big Bucks
I was able to buy the property for $1.52M, a 20% discount in 2005, because of its suboptimal location. Yes, $1.52M is still a lot of money. However, comparable 4 bedroom, 3 bathroom homes in the Marina District were selling for $1.8 – $2M at the time. To be able to buy a single family home in San Francisco was a challenge.
When I tried to sell the house in 2012 after retiring, I failed to get ANY offers at my $1.7M list price that was publicly displayed on MLS. I thought the price was reasonable given it was just 12% more after 7 years. Unfortunately, every buyer balked at the location – too noisy, too busy, not great for kids etc.
After four weeks of being publicly listed on the MLS, the VULTURES started circling. I got a couple low ball offers for $1.6M before we decided to take the house off the market.
But given I bought the house, I knew there must be other buyers out there who would also appreciate what I appreciated. My taste wasn't that bad. The house had amazing Art Deco detail.
The layout was wonderful with three bedrooms on the top floor, and a nice garden and deck off the kitchen. My goal was to simply sell at a 20% discount or smaller with the new market price to win out in the end.
Related: What I Learned From Not Selling My House At The Bottom Of The Market
Tried Selling Again Five Years Later And Succeeding
By 2017, I decided I had enough of being a landlord for three years. I had bought a fixer in a wonderful neighborhood on a quiet street in Golden Gate Heights in 2014. I decided to rent out my old Marina house.
For three years, all I could find were a group of 4-5 tech bro guys to rent to. They threw parties, trashed the house, and often paid rent late. Being a landlord was a hellish experience at that time. As a new father in 2017, I decided to simplify life and try and sell again.
This time, instead of going the public MLS route, I went with a “top agent” in SF and listed the house privately. There is a Top Agent Network where you have to be in a certain top 1% – 10% in volume to join. Once the agent is in, they can privately shop your client’s home around for the asking price you want.
The great thing about going this route was that I could test an aspirational price without getting pounded by the market if I failed to get a buyer. Some call this method “doing a pocket listing.”
There is this real taint a property gets once 30 days passes with no offer. After 30 days, everybody starts wondering what's wrong with the property. If you have a stale listing with a bad location, you might never be able to sell.
Going For A Stretch Price
My aspirational price in 2017 was $2,600,000 after my agent and I both did a lot of market research. When we got an offer for exactly $2,600,000, we were thrilled.
But since I didn’t have to sell and I was dealing off the MLS, I countered at an even higher aspirational price of $2,788,000. I had nothing to lose because worst case, I would earn at least $7,500 a month in rent from the property and hire a property manager.
After a 45 day negotiation and closing period, we finally settled for $2,740,000, or $1,040,000 more than my asking price in 2012! You can read about my whole ordeal of selling my house in this post: Why I Sold My Rental Home: Had To Live For Today
The Private Listing / Pocket Listing Route Helped
If I didn’t got the private market route, I probably would have listed the house for $2,299,000 – $2,499,000 in hopes to attract buyers and then pray I wouldn’t have egg on my face 2–3 weeks later with no offers or low ball offers.
Every single time you list, it becomes public record online (Zillow, Redfin, etc all see it). My failure to sell in 2012 still shows up on Zillow, but I don't care anymore since I don't own the place.
By going the private listing route, I had supreme confidence to ask for the moon and not care about getting rejected because nobody else would know. Further, I had NO OTHER OFFERS. But of course, the private buyer didn't know this.
I highly recommend you go this private route as well. You have nothing to lose because you pay nothing if there is no sale. And if you fail, nobody will ever know. A pocket listing with a big real estate brokerage house is one of the keys to selling a property in a bad location.
Know that selling a property is at least 3X more stressful than buying a property. If you lose out on buying a property, you will be disappointed, but there are plenty of other properties to choose from. If your property sale fails, you could lose out on a lot of money or get stuck.
Tips For Selling A Property In A Bad Location
Now that you've read my story about how I sold a property in a bad location for big bucks, let's review some of the key tips.
- Find an experienced real estate agent with deep connections. The more connected the agent, the higher the chance you can find the right buyer.
- Improve the curb appeal by painting, gardening, and landscaping. First impressions matter.
- Disclose everything up front. The more you hide, the more people will suspect.
- Hold as many open houses and private showings as possible. Selling a property is a numbers game.
- Stage the house to generate imagination and connection with potential homebuyers. Buyers really don't have much imagination.
- Offer incentives to smooth the transaction process along. Time is one of the best free incentives to give.
- If the house is not moving, then you unfortunately need to drop the price to hit market demand.
Once you sell a property in a bad location, reinvest the proceeds in a better-located property or other assets.
Reinvesting The Proceeds Wisely
I used $550,000 of my $1,788,000 in home proceeds to buy much cheaper real estate in the heartland of America via Fundrise, a leading real estate crowdfunding platform. Fundrise is the pioneer of the eREIT product.
The net rental yields are 10% in places like Austin, Houston, Omaha, and Salt Lake City vs. 2.5% in SF. Further, I now feel a huge relief to no longer have to manage physical real estate anymore. Paying $23,000+ a year in property tax was a real burn.
Due to technology and work from home, there's no need to live in expensive places like San Francisco, New York, LA, and Seattle anymore. The coronavirus pandemic accelerated the work from home trend. Further, there are strong demographic trends towards lower-cost areas of the country.
Fundrise is my favorite real estate crowdfunding platform for most investors. However, if you are an accredited investor who wants to build your own select real estate portfolio through individual listings, check out CrowdStreet. CrowdStreet primarily focuses on 18-hour cities where valuations are lower and cap rates are higher. It is also free to sign up and explore.
There is tremendous opportunity to buy property again. Just make sure to buy in a good location not a bad location this time!
About the Author:
Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of it. He spent the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.
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