Finding The Best Candidate To Buy Your House

Looking to sell a home? Know your audience!

http://community.nasdaq.com/News/2011-04/allcash-home-sales-set-record.aspx?storyid=71985

This article from NASDAQ sums up the current real estate market as well as any other I have seen over the past 2 years. Yet, I’m not showing the link because I think this is a well done article. It is shown to make an important point.

The number of first-time home buyers has declined significantly, even compared with just one year ago when the market was already in decline. As this story relates, the trend for “investors” to pay cash for lower priced properties is still on the rise. While the tighter mortgage restrictions continue to make it a challenge for more and more people to get a mortgage, the number of first-time home buyers likely won’t be rising for some time.

Those who are currently home owners and would like to upgrade or downsize to a different home are often stuck with a mortgage they can’t get out of. If they take a loss to sell, they may not be able to afford what they want instead. And on it goes.

There is an important message in the NASDAQ story. Know your audience. If you are trying to sell your home, chances are you are doing everything you can to make it “family friendly” upon showings, and probably within your agent’s outside advertising. The above referenced article should make it clear that “family friendly” is not your audience.

Now, this doesn’t mean that you don’t need the new curtains or to keep the place looking good as new. But it does mean that you need to focus on the value of your home to an investor. That is who is buying, and, as statistics show, without the agony of waiting on getting a mortgage.

The priority should be on showing your potential buyer the ways your property for sale could make he/she/them money within the next 5 years. Although I have seen only a few examples of this of late, they are too few and far between.

One 3-bedroom home that I know of for sale has a lower level “family room”. It is not a basement, has window decorations and is a separate wing on that level. It so happens that the other homes in the development are all either 2 or 3 bedrooms. A few of the other units (both 2 and 3 beds) are also for sale, and now at well below the original new construction prices. Yet, only the advertising for this home points out that it is ready as a 4-bedroom home. At most, the current or new owner could put up a partition “door” and add more privacy, giving them a 4-bedroom home for under $100 (for the partition).

An investor with cash is more likely to see the value of getting a 4-bedroom house at 3-bedroom home pricing, knowing that he/she/they will eventually have a higher profit capability.

Again, based on current trends, being ready to show a cash investor how to get a 4^th bedroom in this home is a more likely “sale” than a first-time buyer with a big family knocking on your door to see it and then trying to get a mortgage.

Before I hear from realty agents out there, I am well aware there is a way this needs to be done. This property needs to be listed as a 3-bedroom home. Understood. But within the description and the “sales pitch” it should be clear that the easy opportunity exists to create a 4^th bedroom which would be larger than one of the upstairs bedrooms, without any room additions needed. That is targeting cash investors, and that is, at the moment, targeting who is buying.

Many homes for sale have at least one capability to increase in value with certain additions or improvements that cash investors would be interested in. A cash investor may not care about new curtains and new carpeting, which they could get for a few hundred dollars down the road when they are ready to sell. That same investor may instead notice if the property is zoned for an additional level, a pool, more parking, or whatever it may be.

Sellers should also monitor local business news. Watch for stories such as major retailers looking to open in specific cities or communities, new train or bus stations or routes, and new schools to be planned. A family, married couple, or individual probably doesn’t care about what will be built by 2016 nearby, but a savvy cash investor does. They can buy a property, hold on to it (without a mortgage to bog them down), maintain it, and be ready to put it on the market in time to be convenient to the new train station or whatever is being constructed.

Advertise the home without the “move in condition”, “near schools”, “breakfast nook”, and other sales points which target home buyers looking at 30 days from now. They either aren’t buying right now, can’t get a mortgage, or both. Advertise with any and every sales point that would cause a cash investor to see something that will be of value in 3 to 7 years. Know your audience.

Live In A Billboard?

The 'turn your house into a billboard' concept actually has some merit from a marketing standpoint.

If you haven't heard, an advertising company is looking at painting selected houses as advertising billboards for their clients, and paying each participating homeowner's mortgage for the length of the contract.

http://money.cnn.com/2011/04/05/technology/adzookie/index.htm">http://money.cnn.com/2011/04/05/technology/adzookie/index.htm>

Participants must own and live in the home, and there are some other qualifying points. But in this time of urgency in the real estate community, the thing to do is look at how this could help home sales.

I'm sure some of you are thinking "no way!" and how a home that is a billboard could make a neighborhood less attractive to potential buyers. That could be, but there are a number of positives to consider.

A homeowner having their mortgage paid for several months benefits with the opportunity to sock away a few thousand dollars. That money could be used for a home improvement, toward a down payment of a larger or smaller home in the near future, or to help pay off other debts.

Selfishly, the homeowner doesn't have to deal with an advertisement on the outside. Using my own warped logic over the years, I reason that I spend far more time looking at the inside of my home than the outside. Other people see the outside way more than I do.

Suppose you are a potential home buyer in a community where a home's exterior has been painted to become an advertisement. You would know that the "ad" home will be painted back to its original color(s) within a few months, and in fact will look BETTER at that time because of the fresh paint job. Chances are the seller(s) you approach will be more willing to reduce even further when you act like the "ad" home is a distraction to the neighborhood. Acting that way could get you an even better deal, saving you thousands of dollars, and getting a home sold within that community.

Even if people are annoyed at the "ad" home, they will be talking about it, and probably watching to see when it will be painted back. In today's real estate market, this would be a classic example of the "Any publicity is good publicity" theory of marketing.

With advertising being so omnipresent and scattered these days, having a house being an advertisement might not be any more annoying than large billboards that practically touch an expressway, advertisements in public bathrooms, on trains, buses, and everywhere else we look every day.

Let me add that I know nothing about the company planning this, am not compensated, and have no involvement in this project.

There could be positive benefits for people if this works. The real estate community needs every positive it can get. I can't paint that any clearer!

Re/Max provides valuable research for home owners

Admittedly I haven't been very kind to realty firms lately, based on the Listing of the Day marketing reviews and the rash of negative market publicity often fueled by realty associations.

But I must give a ton of credit to Re/Max of Northern Illinois for revealing some very interesting research within the past few days.

They quietly produced research about home sales and home prices in Chicago area suburbs in proximity to the region's commuter train line. And the results allow for a positive spin.

Again this year, their study measured home sales and home prices in selected suburbs and communities served by Metra trains. This year, the results showed that 19.2% fewer homes changed hands within the "Metra towns", along with price declines at levels 2% less than declines shown for all suburbs. The study included both attached and detached homes.

I agree with the speculation that this is due to the high cost of gas everywhere and for parking in Chicago. Even monthly parking "specials" are running upwards of $250 - $300 or more per month. Even parking meters have risen to $3.00 or more per hour. Factor in big city traffic, and a lot of the workforce sees the advantage of having proximity to a train that saves them time sitting in traffic, gas costs, and exhorbitant parking fees.

What this means for home owners in these areas (and near commuter train lines) is that they have gained a significant selling point to attract potential buyers if and when they are ready. And a reason to ask for a better price compared with an area which might be just a few miles further away.

Sellers in a "Metra town" can certainly gain from this. A potential buyer has a good reason to consider the location if they could ride the train to and from work or school every business day.

This is the type of story that realty agents should be all over. If I were a licensed agent but not with a Re/Max office, I would still alert my client "owners" in these areas to this study, and let them know that I can help them just the same as the company that released this information. And I would get a mailer or some sort of alert out to homes and condos within my farm area pronto. If I were a licensed agent with a Re/Max office, I would probably out knocking on doors personally to hand deliver this study within a couple miles of every Metra station I could get to.

And if I were a licensed realty agent in an area other than Chicago, I'd have dropped whatever I was doing to research commuter train usage within my farm area. Today.

This information certainly beats the usual "sales are down compared with last year, whoa is me" stories the realty associations churn out.

Let's see if the agents and home owners can take this news to the bank. By train, of course.

Would you buy an "award winning" home?

My continuing search for positives and much needed creativity continued as I read the story in the Milwaukee Journal about Mayor Tom Barrett presenting the “Mayor’s Design Awards” for design excellence with categories based on design, environmental concerns, and architecture.

The story went on to name various buildings, some city owned, others historical sites, and others which are commercial that are being named and information about what was done to earn the honor. I came away thinking this is a good idea, and then wondering why I hadn’t heard about this before.

Next, I thought about how local real estate offices are supposed to know their community of service inside and out, and even if for selfish reasons want to see local property values as high as possible. The Design Awards in Milwaukee are for some city and some commercially owned properties. What about residential?

I’m sure there are some new condos and developments somewhere which are making a big deal about how environmentally friendly they are, or have an environmental improvement completed or about to be. There are others which take special pride in a garden or gardening arrangement. And the list of possibilities goes on.

Selling a condo in an “award winning environmentally sound building” would seem to be a plus for the listing agent and for the seller when this unit is put up against hundreds of other condos also available in this buyers’ market.

Various city and community leaders should be aggressively looking for anything which could accelerate local property sales. As we have detailed in past columns, each property sale generates thousands of dollars to people and companies (commissions, taxes, transaction fees, moving expenses, etc.) and brings money directly and indirectly into city coffers.

Before you wonder what difference an “award winning condo” or “award winning single family home” might make, start naming movies you have gone to see AFTER you learned that a film had been nominated or won one of the major awards. Yet, you didn’t go see it when it was playing down the street for weeks.

Let’s see if we can work together and develop a residential property awards program.

Home buyers and sellers are customers, too......

Whether real estate related or not I regularly follow various marketing related sources and columns as much as possible. I found the recent story about the Yelp consumer review web site finally beginning to allow business owners to respond to bad reviews most interesting.

In this age of road rage, high unemployment, and consumers who carry a grudge no matter what the circumstances that a business which receives a complaint or critical review had not been able to present its side of the story until now. Speaking as a consumer, this move could “save” Yelp. From time to time I see consumer reviews of products and services, and reviews of matters such as hotel room stays and the like. As a consumer, I find it helpful if I see a possible negative from a customer of a product or service I am considering. But I can’t help but wonder about the other side to the story. The consumer that wrote a negative commentary about a business could have stiffed that same business previously, but we don’t know that without the business having equal time.

What does this have to do with real estate? Little to nothing at this time. The column I read about Yelp got me to thinking. I don’t know of any “review” source specific to real estate transactions. Yet, for the vast majority of us, real estate is the biggest transaction(s) we make in our lifetime.

As a consumer, I have a choice of hundreds of realty firms I could list or buy a property through. I also have the choice of using a “discount” brokerage, an “assisted sale” service, or selling it myself. This is a very important decision. Yet, I don’t have a web site or source to go to for reviews about real estate transactions. Does this make sense? I can read what others in my community think about the local hardware store or about last weekend’s new movies, but I don’t know if they had a good or bad experience with a local realty company when they bought their home?

Personally, I have heard stories from all sides. Over the past 20 years, I have worked with realty companies on radio, TV, newspaper, phone, and internet advertising and marketing. I have presented to entire offices, realty agent expos, and at seminars. But I have also represented FSBO companies and publications, including interaction with the public (buyers and sellers), even though I am not a licensed agent and had no direct involvement in the transaction. So I know there are 2 sides to every story, just as I know there a ton of stories out there that it would benefit all sides to be aware of.

These days, consumers don’t know who to trust when it comes to a real estate transaction. I see where there has been another set of state court rulings about realty companies tacking on an additional “administrative fee” at closing that mysteriously was in addition to the promised commission to that realty office. Not every realty office has been doing this, but I have no way of finding out which ones are. It is enough work for buyers to deal with additional fees and costs associated with getting a mortgage done, let alone having to deal with it still again on the property side. I’m not saying that all realty companies are ripping off sellers, but I am seeing instances of this going to court, and there is a percentage of people who won’t take the time and effort to bring it to court over a few hundred dollars.

My point is that there should be at least one source for consumer reviews of real estate transactions, but the realty offices involved should also have the opportunity to respond.

Almost 3 years ago I was one of the sellers of a multi-unit investment property and was not able to choose the realty agent I would have preferred. This agent did well at a couple of things, but also, in my opinion, screwed up on another which delayed the transaction and cost me an additional legal fee. Even knowing people on the inside, I realized that taking the time to complain to the brokerage or realty association may or may not have accomplished anything. I am 99% sure I wouldn’t have benefitted financially from doing so, and these matters remain internal. Yet, if I had a “public” place to show the documentation I had about the mess-up, I would put my side of the story against anything that agent could show in defense, and let the public make their own intelligent decision about whether or not to use her services.

For the thousands of properties which have sold within the past month, there are thousands of good and bad stories about the services rendered to make them happen, with thousands of dollars at stake. I’ll admit it took me seeing the story about a consumer web site not related to or specific to real estate to make me realize the need.

My “to do” list now has another entry. To work on getting a “real estate transaction review” source in place and to do it soon. I’m sure almost every current and past home owner has a story (whether especially good or bad) about a realty agent or company to share. Meanwhile, thousands of realty agents and companies also have a response or defense ready, if only they had the opportunity to defend themselves. I’d like to get “future” home buyers and sellers to that information.

Please share yours at ideas@firstin.com .

Pizza and the real estate market

As much as everyone else, I got a chuckle out of the story from Cincinnati about somebody finding the online promotional code for a free pizza from Domino's and spreading the word to the point where local Domino's wound up giving away more than 600 pizzas in less than one day.

But if you are a realty agent or a mortgage broker/lender, my suggestion is to stop chuckling and start taking action when you hear about something like that in time. In this instance, a Domino's official supposedly got wind of this "not supposed to have been used" code being discovered and they were able to pull it after a few costly hours.

If I were a realty agent and found out about this, I would send out an e-mail to my client base ASAP to alert them to the possibility of a free pizza and which site to go to before it is too late.

Why, you ask?

Think about it. It is really all about marketing. Chances are a percentage of the people you send it to will e-mail you back or call you to thank you for letting them know, and/or to ask how you found out. I am here to tell you that is some valuable information, and it is exclusive to you.

Suppose even one or two people find out in time and GET a free pizza. It is because of you and they will thank you. More importantly, you know that they frequently monitor incoming e-mail and are prepared to act. Think about that when you SELL or even book your next listing. Chances are you will get some "thanks anyway!" responses over the next 24 to 48 hours. Let's say your "immediate client list" has 50 e-mail addresses on it.

Even if your result is, say, 20 (and that's less than half) people responding in some form to your helpful "alert" within a couple of days, you now have a personal and exclusive list of 20 people who will open e-mails from you. Keep that in mind when you have a listing that is hours away from hitting the MLS and being seen online. That is why you ask!

If you are a mortgage broker/lender, having a similar list of people who will definitely check your e-mails can be very handy when rates next take a dip, which seems to be every week of late.

Heck - an agent or lender could offer to take the family out for pizza to review their current situation against the other financial opportunities out there.

Every business day I contact and consult with realty agents and mortgage brokers/lenders looking for low cost ways to attract immediate business. It can be done, whether with cheese or sausage.

How Supernanny can help lenders and realty agents

I’m going to once again pick up on the theme for industry professionals to be the messenger. More than ever, consumers need to be reminded that you are still in business with each day’s news of some other large company being in financial trouble.

If you are in Milwaukee, Chicago, Madison, or Green Bay (within 100 miles or more of Milwaukee), you have a reason to contact current and potential clients with a large family household within the next few days. ABC-TV show “Supernanny” is having a casting call in, of all places, the Milwaukee area on March 28th at an area restaurant. (Those in that part of the Midwest can contact me for the specifics. I’ll be happy to provide that for you. E-mail me at Dave at firstin.com.

True, this has nothing to do with real estate and won’t lower your mortgage for April. But it could have something to do with some easy self-promotion. Think about it. Even for those families who do not wish to attend, chances are it is news targeting them they would likely spread around to friends and other family members. Followed by the inevitable “How did you hear about this?”.

The person asking that question is not expecting to hear “My mortgage broker told me” or “From my real estate agent” in response. For once, it is a chance to have your name associated with something other than a stalled homes market.

So are home owners who have been waiting to refinance getting spoiled? The 30-year fixed at 80% LTV has been hovering around 5% for weeks now. The constant lowering of the rates that started just before Thanksgiving and continued for 10 consecutive weeks seems to have leveled off. That is still a good thing.

I could certainly understand people waiting to see if and how much the rate would drop “next week” while it was dropping. But now that it has been holding steady, isn’t it time to get the ball rolling? Some lenders have been telling me they have clients who are “still waiting” to refinance.

Some of these same lenders are not telling these potential borrowers that the fees associated with getting these loans are still expected to increase before year’s end. It is possible some lenders might be screwing themselves (and the potential borrowers) by playing the waiting game.

After all, if it would cost a borrower an additional $1,000 to refinance 6 months from now, and you factor in (for example) $200 “extra” per month by not refinancing, it means the borrower has really spent an additional $2,200 to wait that 6 months. And that is if the 30-year fixed rate doesn’t go up. We don’t know for certain that it won’t. If it goes down slightly, it might not be enough to recover $2,200 using this as an example.

Some of the mortgage lenders who are not explaining this to potential clients now might be out on the street themselves by the time those 6 months pass.

Same theory applies when a potential buyer decides to wait on a good deal for a home or investment property. True, the price could drop and the loan rate be lower in 3 months. But the property might not be available at that time either. The creative people are the ones who are succeeding in this market.