“Look away, Dixieland,” is how the song puts it, but a new service, StrollAway, aims to help people sell their distressed homes in disaster-affected areas in the South without paying a commission.
The service was developed for property owners in hurricane-ravaged areas with damaged or destroyed homes, or those who simply want to leave. They can find investors to buy their homes by listing them on the StrollAway site at no cost, bypassing the need for an agent.
With experts predicting rising foreclosures this year, there are already a number of sites that specialize in distressed properties. Like StrollAway, RealtyDebtRelief, launched in 2003, appeals to individual sellers. RealtyDebtRelief facilitates “short sales,” when distressed homeowners sell their houses for less than they owe in order to avoid foreclosure.
However, while RealtyDebtRelief facilitates communication between home buyers and their lenders, StrollAway connects investors and sellers without involving the lenders. Also, StrollAway is specifically focused on people in hurricane-affected areas.
Buyers can search the StrollAway site for information by city, parish, number of bedrooms and the ratio of insurance proceeds to mortgage balance.
Paul Koenig, partner and co-founder of StrollAway, said he and his co-founders – none of whom have real estate backgrounds – came up with the idea as a way to help hurricane victims.
“We started talking about if you no longer have a job, your house has been destroyed, if you need to move along, there must be a better way to go about it than hiring a broker and paying the broker tens of thousands of dollars to do it for you,” Koenig, a Denver attorney, said.
Sellers pay no fee to list their properties and pay no commission because they deal directly with buyers. They are asked to make a voluntary contribution to the Red Cross when their property sells, Koenig said.
Buyers can search the database for free, viewing photos of homes and information on their neighborhoods. If they are interested in a property, they can get the owner’s name and contact information and the property’s address for a $99 fee.
“Sellers will run the gamut from people in a strong financial position who, for instance, have decided to move to Atlanta because their children are in school there, to people in a financial pinch,” Koenig said. “Buyers could be folks living in northern climates who would like a second home in a warm client, people relocating within New Orleans, or speculative investors.”
One of the big challenges for StrollAway is getting sellers to list their properties. Koenig is confident that word will get out as people learn about the site and talk to neighbors about it. He’s also planning a marketing campaign that will likely center on online advertising, “since many sellers and buyers are now in different parts of the country,” Koenig said.
According to industry experts, an important consideration for the seller in such transactions is that if the seller still has an outstanding mortgage, the lender should be contacted for approval.
In response, Koenig said, “The desire to save a lot of money on real estate commissions is independent of whether the person still owes money to their bank on a mortgage. People want to get the highest price possible and to keep as much of their money as possible regardless of their debt position. It’s true that any sale would need to be in compliance with the terms of the bank’s loan documents or would otherwise require the bank’s consent, but that doesn’t diminish StrollAway’s value to property owners.”
A property owner who owes $100,000 on a mortgage and can sell for $200,000 would presumably still rather sell through StrollAway because they would keep the $100,000 profit, less any closing expenses, Koenig said.
“If they sell through a broker, they typically have to pay the broker 6 percent or 7 percent of the $200,000 sales price, or $12,000 to $14,000. That’s a big chunk of the $100,000 profit they were hoping to receive,” he said.
This is true even if the property owner is upside down on their mortgage, he said.
“If they owe $100,000 on the mortgage but can now only sell the property for $80,000 due to hurricane damage, they still would want to use StrollAway because it may be a solution to allow them to avoid bankruptcy,” Koenig said.
“If they can come up with the other $20,000, they can repay the debt to the bank and maintain their good credit. If they used a broker to sell the house, they’d owe the broker 6 percent or 7 percent of the $80,000, or $4,800 to $5,600, which is that much more that they’d have to come out of pocket to be able to settle up with the Bank,” Koenig said.
The entrepreneurs who started StrollAway consulted with Doug Elenowitz, a partner at investor firm Brownfield Partners in Denver, when they were putting the company together.
“From the investor’s perspective, the real estate market is highly competitive and efficiency is the key for success. StrollAway allows investors to quickly cull the market from a distance to identify properties immediately as they hit the market. For us to be front and center with ready, willing and able sellers is great, and that is what this tool does.”
Elenowitz said that his company, a real estate investment and development firm that purchases environmentally distressed commercial property, “would certainly look at this site because it does identify ready, willing and able sellers. It’s something that we would use. I think it tries to provide real value to people who have suffered a loss.”
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