Wealthy people have a great saying that they live by—buy low sell high. Most real estate experts will tell you that serious profits can be had if you can do business with motivated sellers. The trick is to find out where they congregate. Where does a person, who is desperate to sell their house, find help? If you knew that answer you could be on the fast track to huge profits very swiftly.
The answer to the question posed above is summed up in one word—Google! That is correct. Google and search engines like it are now the primary source for information discovery in the world today. This is particularly true when you consider people who are searching for solutions to their problems. With over two billion searches completed each and every day there has never been a faster means of information gathering.
Put yourself in the shoes of someone who is 90 days in arrears on their house payment. They need to find information, investors or even buyers who will help them out or buy their house. They go to Google and use a series of words (called keywords) to find immediate help. The combinations of words they use can be nearly infinite. Whatever words they use Google will provide search results. The number of people searching daily for solutions to their mortgage payment woes numbers in the tens of thousands. This is where the people you are looking for are!
How can you take advantage of this? You can use Google pay per click advertising to gain access to all of these desperate prospects. Use the search term “how to handle late mortgage payments” in a Google search. You will see two columns of search results. The column on the “right hand side” is made up of pay per click ads. This is a very unique form of advertising in that one only pays when someone clicks on the ad. You can use this type of advertising to connect with hundreds of motivated sellers.
Now there is an art to finding out which keywords you should use. You also have to have a solid web site page for these prospects to review after they have click on your Google ad. My company, In Touch Media Group (www.intouchmarketing.us), has developed a series of tremendous solutions to help anyone succeed using Google pay per click advertising. The bottom line is that Google is the place where motivated sellers are going to find solutions. Your job is to get in front of them when they execute their search.
Written by my good friend, Bob Cefail - Chairman, In Touch Media Group, Inc. CD
PS - If you register for the free teleseminar series at www.reimostwanted.com, check out our schedule page and see the BONUS call with Bob to get more informationon what Google Ad Words and In Touch Media Group can do to help you grow your real estate investing business and get a huge group discount on their services.
Monday, July 30, 2007
Thursday, July 26, 2007
How To Sell Your House In 5 Weeks Or Less And Make An Extra $19,000 In Today's Market - Part 2 of 2
Begin With The End In Mind
One thing with real estate investing is that you should never just go for a deal because you found a deal. If, after analyzing 100 deals, you come up with a half-dozen or so that look really good – you have to know how you are going to get paid for each one. Basically, you need to know your exit strategy for each deal, and you should really plan for at least 3 exit strategy options you can use to move a property (i.e. – wholesale to another investor, rehab and retail, or rent). As a rule of thumb, you should always plan for contingencies, as they almost always occur. I will give you my number one concept (and it really is pretty simple) to sell you house for above the FMV, in the “numbers” section of my report.
A Brief Word About Partners
One other thing that may seriously help you catapult your investing career forward is the use of partners. I love to work with partners, whether brand new friends to the real estate investing world, or seasoned investors who are willing to let me in on a deal for some sweat equity and a portion of the profits. The great thing with seasoned partners is that you also can learn as you earn. The great thing with newbie partners is that you can teach others, and it makes you more accountable to find great deals instead of mediocre ones, and you can develop an investment partner for the long haul. Shared risk and multiply potential reward using partners. All you need to do is start asking friends, family and acquaintances, and even people you just met (another good reason to belong to a local REIA).
Marketing
How can I move this property and move it quickly? This must be a part of everyone’s exit strategy and project budget – your marketing costs (which don’t forget are tax deductible). Here are a few strategies that, when used together, will combine to produce more calls than you probably can handle.
1) Get a customer yard sign made with a local sign company – black, white and red, or black and yellow are best – that says “For Sale or Lease Purchase – Call ###”. Make sure it’s your phone number in there – with the area code. This should run about $40-50 depending on the sign, but I recommend metal as they will last longer and look better.
2) Get a few hundred copies made of an 8.5” x 11” full page flyer that says “WANTED: GOOD NEIGHBOR, REWARD: $500” then list property address, brief description and your phone #. Distribute these flyers around the neighborhood your home is in, or pay someone to do so. 80% of home purchases are made by people who know someone, or are related to someone, or are a friend of a friend of someone who is already living in that neighborhood.
3) Classified Ads. Should state in the headline “A BEAUTIFUL 4BR/2.5BA HOME, (describe key amenities), Only $189,950, seller financing or lease purchase avail. Call ###”. You want to include the area code in your phone number. Also, you MUST put this ad online with your local newspaper AND for free with craigslist.com (so that you can also set-up Google Ad Words for each online ad).
4) Partner with a local Mortgage Broker (not a bank) who specializes in mortgages in the secondary market and ask them to also put up a yard sign beside yours that states “0 Down Programs Available” and that has a place for flyers in it with your homes address and sales price on it, and a few examples of financing #’s for that price range. Consider doing a couple open houses with your mortgage broker to bring folks in and get them pre-qualified while visiting. Ask a friend to even help you out if you expect more than 20 per day (you should not do open houses for longer than 3 hours per day – squeeze those prospects in together).
Now the real key to the entire process is your marketing and exit strategy. In today’s market, you must have as part of your exit strategy to be able to provide some level of seller financing or a lease purchase. You will make money doing this, so don’t worry. You also need a solid integrated marketing plan as outlined above – this total should be around $350 - $500 per property (after a few of your initial start-up costs) – unless it is higher than $200,000. Let’s first talk advertising words. There are words to use, and words not to use. Stay away from “motivated seller”, “cute”, “must sell”, “price reduced”, or “ranch house”. Do use “beautiful”, “landscaped”, “move-in ready”, “must see”, “home” and mention the availability of creative financing options. The words on the don’t list will drop your price by at least $10,000 easy and slow down the sales process, while the words on the use list should add $10,000 or more to the perceived value of your property. One word of caution in classified ads – do not exceed 7 or 8 lines of text. Briefly discuss key features (hardwood floors, fireplaces, newly remodeled, etc.).
One last marketing technique that helps tremendously is your business cards. You can even use blank card stock from your local office supply store and simply put the home address and basic info on one side and then $500 reward – call to find out more – your ###. Just hand these out to people you come across, friends and family. Who knows, they may even help you find your next good deal.
The Logic and The Numbers
Okay, well this has turned out to be a little more informative than I expected up front. So I hope I’ve at least wetted your whistle to find out more. One last thing I am going to do is explain my exact scenario, which was a combination of most of these strategies, and briefly why they worked.
So here’s the scenario. I was asked by a seasoned investor in my local area if I could help him sell an investment property and he’d cut me in as part owner of the deal. At this point I have no money in the deal and am getting paid to learn from a seasoned investor. He had purchased a 4BR/2.5BA home for around $137 and had invested close to $15K in repairs. When I looked through it, I felt as though it needed to “pop” a little more, so we worked out an ownership deal and I offered to put the finishing touches on it, stage it, advertise and sell it for a flat amount up to the fair market value and that we would split any profit above the FMV. We had some real estate agents say the house was worth $159,950 and others say $169,950. We found recent comps to show it was worth around $175, so we priced it at $179,950 to give some wiggle room as needed. This particular market was about average, and had appreciated a little over 8% the previous year.
As we were completing the initial finishing touches, I immediately switched to sales mode and put up our sign in the yard, as well as my mortgage broker’s sign, and ran an ad in the newspaper for open house. We initially priced it at $179,950 and had over 40 visitors come through the first weekend. After the second weekend, with tons of calls but no offers, I removed the ad and we went back through the house. I spent about $3,000 more in personal funds (which you can use from credit cards, tax returns, personal lines of credit) to put the window dressing and curb appeal on, and advertise as I stated in the entire article above. My partner also finished a few other minor rehab items I felt strongly about (new landscaping mulch, painting the downstairs wood siding white, and new carpet in the family room). Another good cleaning and with a new brass mailbox and flag pole out front – 2 weeks later we went for it again.
This time we put the ad for $189,950 and offered seller financing. I called the previous prospects back to see if they were interested in looking a second time. Some were. We also asked our realtors to come back and a few said we might get $170 to $175K, and one said they thought the house was over-priced. We had checked the local market and knew how much other similar homes were being list at and they were all over the board, from $149K to $189K. We decided because we were OFFERING creative financing we could ask more – plus the house look great (it wasn’t the best house in the area, but maybe the 2nd or 3rd best).
Now listen, we OFFERED the creative financing, which made the perceived value higher, especially for those who cannot get traditional financing. There’s a market share of about 40% potential home buyers who have decent down payments and decent monthly income, but marginal credit who you can help. These folks want to own homes and will pay a little extra to get the opportunity to have a home. The other thing is you do not want to be a landlord, so by doing seller financing or a lease-purchase, you can have tenant-buyers who are responsible for all maintenance, but will pay a monthly premium above rent and a nice up front, non-refundable, purchase option fee to get that chance. Now they are committed to keeping the home up and paying their payments on time, or they loose the option fee (which should generally be 3-7% of the agreed upon purchase price).
So the next weekend, we had a couple look at the house while I was showing it to another couple. This particular couple called me back the next day and asked about the lease-purchase program. I set the up with my mortgage broker to ‘pre-qualify’ them, which we do for all potential customers, and found out they needed about 3-4 months to have their credit ready to buy the house. They had $8,000 for the up front option fee, and could afford the monthly $1,400 per month. We sold the house at $189,950 on a 12-month lease-purchase at an annual appreciation of 5%. Our monthly costs are around $900 and when this couple closes with us, it will be for an agreed price of $199,450 – or approximately $19,000 above the FMV. Now there’s more profit in this deal than meets the eye, but I think you can quickly see the value here of the exit strategy. When you are working with motivated buyers and have a good property that is properly marketed, then there are no quibbles about the sales price or financing programs, as long as they can pay the up front money and the monthly payments. By the way, we gifted them with about $500 worth of extra work they wanted before they moved in and offered to help them with the closing costs at the time of sale by adding them to the loan value when we finance it, so they don’t have to pay another down payment in 12-months. Is this a good deal for all involved? I think it is. And we can all learn from this deal, as I am ready to do the next one – aren’t you.
So until the next article, I hope you were able to glean some good out of this, and if anything, it may have refreshed your memory on combining some powerful tactics. Just like a good carpenter has many tools for different jobs, some hand tools and some power tools. We as sophisticated real estate investors can use multiple strategies for acquisition, marketing and selling to make win-win-win situation for ourselves and all of our customers in the future, and make a buck or two for our hip national bank. If you are interested in more information regarding sales for investors and lease-purchase strategies, sign up for the 12-week teleseminar series with www.reimostwanted.com and get the latest, cutting edge real estate investing training available. Happy selling and the best of success in all your endeavors. CD
This is part 2 of a 2 part article by Charles T. Dudley, Sr. - Real Estate Agent, Investor and Coach - Executive Director of the Roanoke, VA Regional REIA and Founder of the real estate inveting training company, REI Most Wanted (www.reimostwanted.com). For FREE teleseminar training, go to www.reimostwanted.com or email reimw@cox.net for more information or to schedule a free consultation.
One thing with real estate investing is that you should never just go for a deal because you found a deal. If, after analyzing 100 deals, you come up with a half-dozen or so that look really good – you have to know how you are going to get paid for each one. Basically, you need to know your exit strategy for each deal, and you should really plan for at least 3 exit strategy options you can use to move a property (i.e. – wholesale to another investor, rehab and retail, or rent). As a rule of thumb, you should always plan for contingencies, as they almost always occur. I will give you my number one concept (and it really is pretty simple) to sell you house for above the FMV, in the “numbers” section of my report.
A Brief Word About Partners
One other thing that may seriously help you catapult your investing career forward is the use of partners. I love to work with partners, whether brand new friends to the real estate investing world, or seasoned investors who are willing to let me in on a deal for some sweat equity and a portion of the profits. The great thing with seasoned partners is that you also can learn as you earn. The great thing with newbie partners is that you can teach others, and it makes you more accountable to find great deals instead of mediocre ones, and you can develop an investment partner for the long haul. Shared risk and multiply potential reward using partners. All you need to do is start asking friends, family and acquaintances, and even people you just met (another good reason to belong to a local REIA).
Marketing
How can I move this property and move it quickly? This must be a part of everyone’s exit strategy and project budget – your marketing costs (which don’t forget are tax deductible). Here are a few strategies that, when used together, will combine to produce more calls than you probably can handle.
1) Get a customer yard sign made with a local sign company – black, white and red, or black and yellow are best – that says “For Sale or Lease Purchase – Call ###”. Make sure it’s your phone number in there – with the area code. This should run about $40-50 depending on the sign, but I recommend metal as they will last longer and look better.
2) Get a few hundred copies made of an 8.5” x 11” full page flyer that says “WANTED: GOOD NEIGHBOR, REWARD: $500” then list property address, brief description and your phone #. Distribute these flyers around the neighborhood your home is in, or pay someone to do so. 80% of home purchases are made by people who know someone, or are related to someone, or are a friend of a friend of someone who is already living in that neighborhood.
3) Classified Ads. Should state in the headline “A BEAUTIFUL 4BR/2.5BA HOME, (describe key amenities), Only $189,950, seller financing or lease purchase avail. Call ###”. You want to include the area code in your phone number. Also, you MUST put this ad online with your local newspaper AND for free with craigslist.com (so that you can also set-up Google Ad Words for each online ad).
4) Partner with a local Mortgage Broker (not a bank) who specializes in mortgages in the secondary market and ask them to also put up a yard sign beside yours that states “0 Down Programs Available” and that has a place for flyers in it with your homes address and sales price on it, and a few examples of financing #’s for that price range. Consider doing a couple open houses with your mortgage broker to bring folks in and get them pre-qualified while visiting. Ask a friend to even help you out if you expect more than 20 per day (you should not do open houses for longer than 3 hours per day – squeeze those prospects in together).
Now the real key to the entire process is your marketing and exit strategy. In today’s market, you must have as part of your exit strategy to be able to provide some level of seller financing or a lease purchase. You will make money doing this, so don’t worry. You also need a solid integrated marketing plan as outlined above – this total should be around $350 - $500 per property (after a few of your initial start-up costs) – unless it is higher than $200,000. Let’s first talk advertising words. There are words to use, and words not to use. Stay away from “motivated seller”, “cute”, “must sell”, “price reduced”, or “ranch house”. Do use “beautiful”, “landscaped”, “move-in ready”, “must see”, “home” and mention the availability of creative financing options. The words on the don’t list will drop your price by at least $10,000 easy and slow down the sales process, while the words on the use list should add $10,000 or more to the perceived value of your property. One word of caution in classified ads – do not exceed 7 or 8 lines of text. Briefly discuss key features (hardwood floors, fireplaces, newly remodeled, etc.).
One last marketing technique that helps tremendously is your business cards. You can even use blank card stock from your local office supply store and simply put the home address and basic info on one side and then $500 reward – call to find out more – your ###. Just hand these out to people you come across, friends and family. Who knows, they may even help you find your next good deal.
The Logic and The Numbers
Okay, well this has turned out to be a little more informative than I expected up front. So I hope I’ve at least wetted your whistle to find out more. One last thing I am going to do is explain my exact scenario, which was a combination of most of these strategies, and briefly why they worked.
So here’s the scenario. I was asked by a seasoned investor in my local area if I could help him sell an investment property and he’d cut me in as part owner of the deal. At this point I have no money in the deal and am getting paid to learn from a seasoned investor. He had purchased a 4BR/2.5BA home for around $137 and had invested close to $15K in repairs. When I looked through it, I felt as though it needed to “pop” a little more, so we worked out an ownership deal and I offered to put the finishing touches on it, stage it, advertise and sell it for a flat amount up to the fair market value and that we would split any profit above the FMV. We had some real estate agents say the house was worth $159,950 and others say $169,950. We found recent comps to show it was worth around $175, so we priced it at $179,950 to give some wiggle room as needed. This particular market was about average, and had appreciated a little over 8% the previous year.
As we were completing the initial finishing touches, I immediately switched to sales mode and put up our sign in the yard, as well as my mortgage broker’s sign, and ran an ad in the newspaper for open house. We initially priced it at $179,950 and had over 40 visitors come through the first weekend. After the second weekend, with tons of calls but no offers, I removed the ad and we went back through the house. I spent about $3,000 more in personal funds (which you can use from credit cards, tax returns, personal lines of credit) to put the window dressing and curb appeal on, and advertise as I stated in the entire article above. My partner also finished a few other minor rehab items I felt strongly about (new landscaping mulch, painting the downstairs wood siding white, and new carpet in the family room). Another good cleaning and with a new brass mailbox and flag pole out front – 2 weeks later we went for it again.
This time we put the ad for $189,950 and offered seller financing. I called the previous prospects back to see if they were interested in looking a second time. Some were. We also asked our realtors to come back and a few said we might get $170 to $175K, and one said they thought the house was over-priced. We had checked the local market and knew how much other similar homes were being list at and they were all over the board, from $149K to $189K. We decided because we were OFFERING creative financing we could ask more – plus the house look great (it wasn’t the best house in the area, but maybe the 2nd or 3rd best).
Now listen, we OFFERED the creative financing, which made the perceived value higher, especially for those who cannot get traditional financing. There’s a market share of about 40% potential home buyers who have decent down payments and decent monthly income, but marginal credit who you can help. These folks want to own homes and will pay a little extra to get the opportunity to have a home. The other thing is you do not want to be a landlord, so by doing seller financing or a lease-purchase, you can have tenant-buyers who are responsible for all maintenance, but will pay a monthly premium above rent and a nice up front, non-refundable, purchase option fee to get that chance. Now they are committed to keeping the home up and paying their payments on time, or they loose the option fee (which should generally be 3-7% of the agreed upon purchase price).
So the next weekend, we had a couple look at the house while I was showing it to another couple. This particular couple called me back the next day and asked about the lease-purchase program. I set the up with my mortgage broker to ‘pre-qualify’ them, which we do for all potential customers, and found out they needed about 3-4 months to have their credit ready to buy the house. They had $8,000 for the up front option fee, and could afford the monthly $1,400 per month. We sold the house at $189,950 on a 12-month lease-purchase at an annual appreciation of 5%. Our monthly costs are around $900 and when this couple closes with us, it will be for an agreed price of $199,450 – or approximately $19,000 above the FMV. Now there’s more profit in this deal than meets the eye, but I think you can quickly see the value here of the exit strategy. When you are working with motivated buyers and have a good property that is properly marketed, then there are no quibbles about the sales price or financing programs, as long as they can pay the up front money and the monthly payments. By the way, we gifted them with about $500 worth of extra work they wanted before they moved in and offered to help them with the closing costs at the time of sale by adding them to the loan value when we finance it, so they don’t have to pay another down payment in 12-months. Is this a good deal for all involved? I think it is. And we can all learn from this deal, as I am ready to do the next one – aren’t you.
So until the next article, I hope you were able to glean some good out of this, and if anything, it may have refreshed your memory on combining some powerful tactics. Just like a good carpenter has many tools for different jobs, some hand tools and some power tools. We as sophisticated real estate investors can use multiple strategies for acquisition, marketing and selling to make win-win-win situation for ourselves and all of our customers in the future, and make a buck or two for our hip national bank. If you are interested in more information regarding sales for investors and lease-purchase strategies, sign up for the 12-week teleseminar series with www.reimostwanted.com and get the latest, cutting edge real estate investing training available. Happy selling and the best of success in all your endeavors. CD
This is part 2 of a 2 part article by Charles T. Dudley, Sr. - Real Estate Agent, Investor and Coach - Executive Director of the Roanoke, VA Regional REIA and Founder of the real estate inveting training company, REI Most Wanted (www.reimostwanted.com). For FREE teleseminar training, go to www.reimostwanted.com or email reimw@cox.net for more information or to schedule a free consultation.
Wednesday, July 25, 2007
How To Sell Your House In 5 Weeks Or Less And Make An Extra $19,000 In Today's Market - Part I of 2
“My house will never sell.”
“It will take at least 6-months to sell your house in this market.”
“You’ll have to lower your price in order to sell your house fast.”
Are these some of the thoughts or conventional wisdom that you’re being bombarded with in a recent attempt to sell your home? Or perhaps you’re considering a big move, but are very uneasy to jump at your next home because of the screaming headlines of negativity in the media regarding the looming real estate “bubble”. Isn’t it expected that you would always make money from the sale of one of life’s biggest and most important purchases – your home? Well, this article will be both educational and biographical as you’ll see how I recently sold an investment property in 5 weeks once I put it on the market and made an extra $19,000. And although I don’t think I can necessarily guarantee you a sale or even profit on your home, I believe that with the secret hints and creative suggestions found within this article, you should be able to sell your home twice as fast as the market average and typically for more money.
The Basics of the Sell
So let’s first look at how the traditional methods for selling houses are approached. Most people in recent decades, and currently still, have used Realtors to assist them in the sale of their personal residences. The majority of Realtors are trained to do 2 primary tasks: list and sell. Now there’s a lot of activity and specialties that can go into these main jobs, but the end goal is always the same: to get out there and get listings and sell, sell, sell. Although most Realtors provide good service to their clients and customers, and provide some level of marketing for their clients properties; because of the way they are paid from a gross commission structure, they are less motivated to sell your individual home, than they are in moving inventories through transactions. In fact, the homes with the most activity can easily funnel all their energies away from your home if it has sat on the market too long (which in many areas is currently getting longer and longer).
The other basic method of selling a home on the open market is For Sale By owner, or FSBO. This is generally for those fearless do-it-yourselfers or folks who are trying to save (or worse, can’t afford) a typical 6% real estate agents’ commission. Depending on how someone goes about their FSBO, there is still a lot of work and education required to pull this off smoothly. There are some organized groups that assist homeowners with FSBO strategies, but they’ll usually charge a fee that is either staggered based on the home price, or a flat price. The downside to these are that it is definitely a lot more work to get your home prepared for showing, take the calls, make the appointments, handle extra paperwork, pay for the advertising costs and most importantly, not have access the MLS. And yes, there are a few places you can purchase MLS services a la carte, but in the long run – unless you have a strong back bone and don’t mind paying for a lot of things yourself, that a real estate agent may typically take care of, then FSBO may not be the quickest way to get your house sold on the market (at least not by itself). And yes, you can save 3-6% commission on the sale of your house, but you may pay that difference shouldering the other burdens of the process of selling a home and with possibly even slower results.
Now remember, the goal is to not only make money on your properties as you sell them, but I believe you can make up to $19,000 MORE than the fair market value on a fairly consistent basis. Just keep reading to learn how.
Getting Ready to Sell My Home
Here are some things to consider when selling a house. First thing to do in preparation is to de-junk and de-clutter your home. Yes, that’s right – get your house super clean! That may sound like common sense, but some people don’t define clean the same as others. As a general rule of thumb, once you believe your home to be clean, get it cleaner. Furniture, windows, doors, appliances, floors, carpets, basements, closets, garage, draperies and walls to get you started. If you need to, especially on mid to higher end homes, you may need to bring in a good cleaning crew – but only after you get rid of any unnecessary junk. Some folks may actually need to rent a storage unit to box stuff up and move into it, so that stowed items may be gone through at later date. I never said that you wouldn’t have to put in some sweat equity. Bottom line, you can never have a home too clean.
Always keep the goal of getting your house sold in front of you. You’ll have to think like a buyer. Also figure out how much your holding costs would be for each month you keep a property. You’ll have to pay the mortgage, taxes, utilities, lawn care, cleaning and maintenance to list just a few expenses. However much that totals to, multiply that by at least 4 to 6 months, or more for the current market trends. That dollar amount divided by 2 is how much you should be using as your fix up and staging budget, with a plan to sell your home in less than half that time.
Once your house is super clean, you’re ready to stage it. Now, there are some professional staging services available that you can use to help you with that – if you are stylistically challenged. They are well worth the investment (just do a Google search on home staging or home stagers to locate someone near you – a lot of times, real estate agents provide a fee based service for staging to supplement their income). Otherwise, get some good old fashioned home decorating magazines and try to mimic some of the designs you like that are within your budget. If your property is vacant, you should be able to even loan some of your own less used furnishings to help give the home a more appealing appearance. You can get inexpensive items such as basic linens, candles, dried flower arrangements, small pictures or mirrors, lights, floor mats, air fresheners, etc. will help to set the expected mood. Don’t forget, think like a buyer.
A buyer will want to see a very clean, bright, neat home that has a fresh, crisp, inviting atmosphere. No strange odors or dark and damp places. The first thing they’ll want to see when they drive up is a clean cut lawn with trimmed shrubs or trees if there are any, and it’s always a plus to have fresh mulching and colorful flowers if your lawn permits. Where I live, I can get mulch for $25 per truck load, which is a great deal for that fresh smell and appearance to your house from the outside. Also, if the front or side door the potential buyer is walking into is dated from the sixties or seventies, regardless of how clean it is, it will probably need to go. Look at other better homes in your neighborhood, and try to match them. A decent glass screen door is around $200 installed. Watch out for door stoops and thresholds too. You may want to paint or replace those. If you can, match the shutters to the home – if that’s common in your neighborhood. There are so many inexpensive things you can do to enhance the curb appeal of your property, that will pay you back many times over for that unforgettable first impression.
Now this article is not intended to be a long dissertation on every possible intricacy of buying, selling or rehabbing – but something you can use to jog your own memory or get your own mind thinking about how can I make my house ‘pop’! Whatever you establish as a first impression, you’ll want to keep that expectation up throughout the entire tour of the house (make sure it is good – and be sure to get outside opinions from someone who doesn’t care if they’ll hurt your feelings). I firmly believe that there is no such thing as a perfect house, but our job in selling homes are to maximize the good qualities and minimize the less desirable, without over-investing or losing money. Do your best not to give people an excuse not to buy your property. Be better than the next guy down the street, but don’t try to be the best house in the entire market – unless you know you can get that top dollar back.
The things I am getting ready to share with you next will show you how to maximize your return on your investment, without having to have the perfect home. You’ll be able to sell quality homes you can be proud of in less time than the market average and without spending too much money on them. Most of the times people spend too much money on their investments is because they get emotionally involved or because of pride. Don’t get caught in that trap. That’s too expensive of a lesson (one of those real live seminars I talk about).
Establishing Realistic Market Value
There are 3 main ways to determine the fair market value (FMV) or after repair value (ARV) of a property. The first I’ll mention is the replacement value, used primarily by insurance companies, and determined by the actual cost in today’s dollars that it would take to replace your home if lost completely to fire, flood, natural disaster, etc. This value typically does not include the value of the land your house is setting on. The next value you may hear mentioned in investing circles is known as the economic value. This value is primarily used on income producing properties, and is a rough value determined by the monthly income of a property divided by .01. (Example, a home that brings in $1,200 per month in rent is roughly worth $120,000 in economic value.) This number can fluctuated greatly depending on things like the market conditions, capitalization rates, etc. But for the purposes of this discussion, we will not go any further with that.
The last and most common way to determine FMV is based on true recent sales of comparable properties within a .5 to 1 mile radius of the subject property (sometimes further out if in more rural areas). Often call “comps”, this method will tell you within a few percent of the realistic sales price. Many people ask me how to get good comps for their potential investment properties. Other than being a real estate agent in your locality to have access to the Multiple Listing Service (MLS) to get those most recent sales, there are some other good tools that can give you a pretty close FMV for your property. I highly recommend using as many of these techniques in order to get the most accurate expectation of value.
First, you can always attempt to establish a cordial relationship with a local real estate who would be willing to perform occasional ‘ministerial acts’ for you in the form of pulling comps from time to time. This may be okay starting out, but unless you are also willing to provide this friend with listings as well, you may quickly wear out your welcome. As I prefer to be able to pull several comps a day and at my own leisure, I use more accessible online resources. The best place to start is to locate and use the local Geographical Information Service (GIS) or tax assessors office. Most of these are available online now, you may occasionally have to go to the local courthouse (or pay someone to do it for you). Depending on your specific market’s conditions, properties will conservatively appraise 10-15 percent more than their assessment. Next, I like to use other free online services such as zillow.com or housevalues.com, and paid services such as realtytrac.com and foreclosure.com. If you are only researching a couple of properties a month, don’t pay for these service, unless you have nothing better to do with your investment money.
Finally, the other 2 things I like to do for analysis is to get a look at the property location on Google maps and get a feel for the monthly principal and interest payments using bankrate.com’s mortgage calculator. For me, coming from a value investing standpoint, I want to buy property at a discount – either at or below the tax assessment value, minus any expected reparations and buy-hold-sell costs.
This is part 1 of a 2 part article by Charles T. Dudley, Sr. - Real Estate Agent, Investor and Coach - Executive Director of the Roanoke, VA Regional REIA and Founder of the real estate inveting training company, REI Most Wanted (www.reimostwanted.com). For FREE teleseminar training, go to www.reimostwanted.com or email reimw@cox.net for more information or to schedule a free consultation.
“It will take at least 6-months to sell your house in this market.”
“You’ll have to lower your price in order to sell your house fast.”
Are these some of the thoughts or conventional wisdom that you’re being bombarded with in a recent attempt to sell your home? Or perhaps you’re considering a big move, but are very uneasy to jump at your next home because of the screaming headlines of negativity in the media regarding the looming real estate “bubble”. Isn’t it expected that you would always make money from the sale of one of life’s biggest and most important purchases – your home? Well, this article will be both educational and biographical as you’ll see how I recently sold an investment property in 5 weeks once I put it on the market and made an extra $19,000. And although I don’t think I can necessarily guarantee you a sale or even profit on your home, I believe that with the secret hints and creative suggestions found within this article, you should be able to sell your home twice as fast as the market average and typically for more money.
The Basics of the Sell
So let’s first look at how the traditional methods for selling houses are approached. Most people in recent decades, and currently still, have used Realtors to assist them in the sale of their personal residences. The majority of Realtors are trained to do 2 primary tasks: list and sell. Now there’s a lot of activity and specialties that can go into these main jobs, but the end goal is always the same: to get out there and get listings and sell, sell, sell. Although most Realtors provide good service to their clients and customers, and provide some level of marketing for their clients properties; because of the way they are paid from a gross commission structure, they are less motivated to sell your individual home, than they are in moving inventories through transactions. In fact, the homes with the most activity can easily funnel all their energies away from your home if it has sat on the market too long (which in many areas is currently getting longer and longer).
The other basic method of selling a home on the open market is For Sale By owner, or FSBO. This is generally for those fearless do-it-yourselfers or folks who are trying to save (or worse, can’t afford) a typical 6% real estate agents’ commission. Depending on how someone goes about their FSBO, there is still a lot of work and education required to pull this off smoothly. There are some organized groups that assist homeowners with FSBO strategies, but they’ll usually charge a fee that is either staggered based on the home price, or a flat price. The downside to these are that it is definitely a lot more work to get your home prepared for showing, take the calls, make the appointments, handle extra paperwork, pay for the advertising costs and most importantly, not have access the MLS. And yes, there are a few places you can purchase MLS services a la carte, but in the long run – unless you have a strong back bone and don’t mind paying for a lot of things yourself, that a real estate agent may typically take care of, then FSBO may not be the quickest way to get your house sold on the market (at least not by itself). And yes, you can save 3-6% commission on the sale of your house, but you may pay that difference shouldering the other burdens of the process of selling a home and with possibly even slower results.
Now remember, the goal is to not only make money on your properties as you sell them, but I believe you can make up to $19,000 MORE than the fair market value on a fairly consistent basis. Just keep reading to learn how.
Getting Ready to Sell My Home
Here are some things to consider when selling a house. First thing to do in preparation is to de-junk and de-clutter your home. Yes, that’s right – get your house super clean! That may sound like common sense, but some people don’t define clean the same as others. As a general rule of thumb, once you believe your home to be clean, get it cleaner. Furniture, windows, doors, appliances, floors, carpets, basements, closets, garage, draperies and walls to get you started. If you need to, especially on mid to higher end homes, you may need to bring in a good cleaning crew – but only after you get rid of any unnecessary junk. Some folks may actually need to rent a storage unit to box stuff up and move into it, so that stowed items may be gone through at later date. I never said that you wouldn’t have to put in some sweat equity. Bottom line, you can never have a home too clean.
Always keep the goal of getting your house sold in front of you. You’ll have to think like a buyer. Also figure out how much your holding costs would be for each month you keep a property. You’ll have to pay the mortgage, taxes, utilities, lawn care, cleaning and maintenance to list just a few expenses. However much that totals to, multiply that by at least 4 to 6 months, or more for the current market trends. That dollar amount divided by 2 is how much you should be using as your fix up and staging budget, with a plan to sell your home in less than half that time.
Once your house is super clean, you’re ready to stage it. Now, there are some professional staging services available that you can use to help you with that – if you are stylistically challenged. They are well worth the investment (just do a Google search on home staging or home stagers to locate someone near you – a lot of times, real estate agents provide a fee based service for staging to supplement their income). Otherwise, get some good old fashioned home decorating magazines and try to mimic some of the designs you like that are within your budget. If your property is vacant, you should be able to even loan some of your own less used furnishings to help give the home a more appealing appearance. You can get inexpensive items such as basic linens, candles, dried flower arrangements, small pictures or mirrors, lights, floor mats, air fresheners, etc. will help to set the expected mood. Don’t forget, think like a buyer.
A buyer will want to see a very clean, bright, neat home that has a fresh, crisp, inviting atmosphere. No strange odors or dark and damp places. The first thing they’ll want to see when they drive up is a clean cut lawn with trimmed shrubs or trees if there are any, and it’s always a plus to have fresh mulching and colorful flowers if your lawn permits. Where I live, I can get mulch for $25 per truck load, which is a great deal for that fresh smell and appearance to your house from the outside. Also, if the front or side door the potential buyer is walking into is dated from the sixties or seventies, regardless of how clean it is, it will probably need to go. Look at other better homes in your neighborhood, and try to match them. A decent glass screen door is around $200 installed. Watch out for door stoops and thresholds too. You may want to paint or replace those. If you can, match the shutters to the home – if that’s common in your neighborhood. There are so many inexpensive things you can do to enhance the curb appeal of your property, that will pay you back many times over for that unforgettable first impression.
Now this article is not intended to be a long dissertation on every possible intricacy of buying, selling or rehabbing – but something you can use to jog your own memory or get your own mind thinking about how can I make my house ‘pop’! Whatever you establish as a first impression, you’ll want to keep that expectation up throughout the entire tour of the house (make sure it is good – and be sure to get outside opinions from someone who doesn’t care if they’ll hurt your feelings). I firmly believe that there is no such thing as a perfect house, but our job in selling homes are to maximize the good qualities and minimize the less desirable, without over-investing or losing money. Do your best not to give people an excuse not to buy your property. Be better than the next guy down the street, but don’t try to be the best house in the entire market – unless you know you can get that top dollar back.
The things I am getting ready to share with you next will show you how to maximize your return on your investment, without having to have the perfect home. You’ll be able to sell quality homes you can be proud of in less time than the market average and without spending too much money on them. Most of the times people spend too much money on their investments is because they get emotionally involved or because of pride. Don’t get caught in that trap. That’s too expensive of a lesson (one of those real live seminars I talk about).
Establishing Realistic Market Value
There are 3 main ways to determine the fair market value (FMV) or after repair value (ARV) of a property. The first I’ll mention is the replacement value, used primarily by insurance companies, and determined by the actual cost in today’s dollars that it would take to replace your home if lost completely to fire, flood, natural disaster, etc. This value typically does not include the value of the land your house is setting on. The next value you may hear mentioned in investing circles is known as the economic value. This value is primarily used on income producing properties, and is a rough value determined by the monthly income of a property divided by .01. (Example, a home that brings in $1,200 per month in rent is roughly worth $120,000 in economic value.) This number can fluctuated greatly depending on things like the market conditions, capitalization rates, etc. But for the purposes of this discussion, we will not go any further with that.
The last and most common way to determine FMV is based on true recent sales of comparable properties within a .5 to 1 mile radius of the subject property (sometimes further out if in more rural areas). Often call “comps”, this method will tell you within a few percent of the realistic sales price. Many people ask me how to get good comps for their potential investment properties. Other than being a real estate agent in your locality to have access to the Multiple Listing Service (MLS) to get those most recent sales, there are some other good tools that can give you a pretty close FMV for your property. I highly recommend using as many of these techniques in order to get the most accurate expectation of value.
First, you can always attempt to establish a cordial relationship with a local real estate who would be willing to perform occasional ‘ministerial acts’ for you in the form of pulling comps from time to time. This may be okay starting out, but unless you are also willing to provide this friend with listings as well, you may quickly wear out your welcome. As I prefer to be able to pull several comps a day and at my own leisure, I use more accessible online resources. The best place to start is to locate and use the local Geographical Information Service (GIS) or tax assessors office. Most of these are available online now, you may occasionally have to go to the local courthouse (or pay someone to do it for you). Depending on your specific market’s conditions, properties will conservatively appraise 10-15 percent more than their assessment. Next, I like to use other free online services such as zillow.com or housevalues.com, and paid services such as realtytrac.com and foreclosure.com. If you are only researching a couple of properties a month, don’t pay for these service, unless you have nothing better to do with your investment money.
Finally, the other 2 things I like to do for analysis is to get a look at the property location on Google maps and get a feel for the monthly principal and interest payments using bankrate.com’s mortgage calculator. For me, coming from a value investing standpoint, I want to buy property at a discount – either at or below the tax assessment value, minus any expected reparations and buy-hold-sell costs.
This is part 1 of a 2 part article by Charles T. Dudley, Sr. - Real Estate Agent, Investor and Coach - Executive Director of the Roanoke, VA Regional REIA and Founder of the real estate inveting training company, REI Most Wanted (www.reimostwanted.com). For FREE teleseminar training, go to www.reimostwanted.com or email reimw@cox.net for more information or to schedule a free consultation.
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