Real estate and housing markets across the nation are changing. You can hardly turn on the national news without hearing a story on how home prices are peaking–or even declining. Homes are taking longer to sell. The spread between asking prices and selling prices is widening. Unsold inventories are up. Foreclosures are on the rise.
As real estate entrepreneurs, we make money buying and selling houses. So what does all this mean to us? With the right mental attitude and good investment strategies, you can now begin helping more people than ever before.
By helping buyers and sellers solve the problems they are facing now, you can not only survive, but in fact–generate huge profits now and in the future. It doesn’t matter what your market is doing.
Real estate markets always change. And you must change also in order to compete and succeed.
In Part One, I gave you some useful tips for: Finding deals you can buy right; collecting enough cash each month to survive and thrive; and negotiating with sellers who think the market has not turned yet
Now let’s cover some more changing market strategies: How to sell or occupy houses quickly in slower moving markets.
When houses start taking longer to sell, that’s what many people might call a “buyer’s market.” With more homes to choose from, buyers become pickier. Sellers become more flexible. This puts pressure on prices. It’s the law of supply and demand.
How can we change our investing strategies to compete for the buyers who still want to buy a home?
First, don’t forget the basics
My basic formula for selling a house includes:
1. Price it right
Any property will sell if it is priced right. You may be used to getting a premium price when offering flexible terms. But if your market has slowed, you may have to settle for retail price (comparable value) or less. Use price points. Don’t drop a price from $189,500 to $184,500. Bring it down to the next price point, in this case, $179,500.
2. Get the house ready
I’ve sold or occupied hundreds of houses that were not in excellent condition. But that was not in a slow moving market. Get your homes in great shape–fast. Consider staging your homes.
I don’t mean minimal staging like floor mats, fake plants and colorful soap dishes. Consider extensive, professional staging. It may cost $500 to $2,000 to have furniture moved and the interior decorated. But wouldn’t it be worth it if you could occupy your properties just thirty days faster? Check out www.StagedHomes.com and other similar Online resources.
3. Offer flexible terms
Offering flexible financing, rent-to-own, or a lease option when selling will make your houses more desirable.
If you need to sell a house only to a qualified buyer using a new loan, then consider offering to “help finance the down payment and closing costs.” That means you’d consider taking back a small second mortgage to help them get closed–sometimes with no money down!
4. Get the word out
Posting lots of signs, running classified ads, and working your buyer’s list can many times be all you need to do in order to sell a house. I highly suggest you use a selling website and a 24-hour recorded message lines to distribute house details and directions 24/7.
Flyers in a box at the house are a must, and flyers or postcards to all the neighbors are a plus. If you need more exposure, consider a flat fee listing in the Multiple Listing Service (MLS) for a few hundred bucks.
5. Manage your leads effectively
You (or someone you’ve hired) needs to take calls from buyers live or return calls very promptly. You can add some “prescreening verbiage” to your website or recorded message line to weed out some callers.
If they make it through your systems or they’re calling from in front of the house, be sure you’re more easily reachable. Use a lock box so anyone can easily view your vacant properties and then follow up on all leads. If they don’t like it, then send them to other properties or add them to your buyer’s list.
Now are you doing the basics? Good. That will help you on houses you already own or later buy.
What’s else can I do?
What else can help you sell fast in a slow market?
6. Buy the right houses
Recalibrate your buying criteria. What was once a deal in a normal or hot market may not be a deal in slower market. In other words, buy better. Get a better price or better terms from your seller.
You must have a “resell price” in mind before you ever make an offer. Use a resell price that you believe would ensure getting the house occupied (a “pretty house” deal) within 60 days.
Not sure? Keep lowering your planned resell price (before you make your offer) until you’re confident. Then back out your minimum profit requirement and projected expenses to come up with your pretty house MAO, or Maximum Allowable Offer. Then, never pay more than that–ever.
7. Avoid the wrong properties If you’re in a buyer’s market, be pickier. Buy houses that are easier to resell or occupy. Pick nicer areas, more desirable floor plans and homes with attractive features you can advertise. Choose neighborhoods with shorter “days on the market.” If you stay within the median price range (plus or minus 20%) you’ll have the largest pool of buyers.
Very small homes, mobile homes, and high end homes will be harder to sell. If you buy those, you need to really buy them right. Think steal. Be wary of condos, town homes, and newer subdivisions with a glut of unsold properties. Flip your rehabs deals for quick cash if you want to:
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Avoid competing for qualified retail buyers
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Avoid being subject to possible price declines
Consider buying farther out if that’s what is required to find the good deals.
8. Don’t buy What? Quit the house business? Never. However, there are times you don’t want to buy or own. Especially if you think prices in your market will go down. What if you have a potential deal, but it’s a little scary. You’re not sure what you can do, or when you can do it, so you don’t want to make any promises. Then don’t. Control it without ownership.
You can use a straight option. Or you might use a standard purchase agreement that’s contingent upon finding your occupant. You might even lease a house with the option to buy, so you can bail out if desired. A six-month lease with the right to extend nine times gives you five years of control, plus the opportunity to get out every six months.
A lease option might even get your monthly payment less than the current mortgage.