Wednesday, May 18, 2011

Try The International Angle

Desparate times call for desparate measures, to borrow the cliche. This real estate market is certainly as desparate as many of us have seen in our lifetimes.

Sellers shouldn't give up hope, even if their agents have. I have commented several times over the past couple of years about looking to identify the logical potential buyer for your property. Face it, if your property has been listed for weeks (or longer), chances are the one buyer you need is not local, or has not been approached with an enticing reason to act.

While doing some research for one of my clients, I came upon an interesting piece from this past weekend. It contains suggestions for Canadians about steps to take in order to purchase U.S. real estate, and explains some of the factors to consider.

Upon first reading, the article seems complicated. Then again, I don't know Canadian tax laws and how their financial dealings within the U.S. work in comparison to this country.

This brings me to an important point. Properties are not selling. Yet, too many realty agents are staying within their territory, comfort zone, and the same approach no matter what. Sellers should expect more, or start doing their own research and homework to help their property sell.

Instead of reading the constant flow of negative sales statistics and passing out business cards at the local flower show, agents should be at the library or online researching the answers to questions they have about the Canadian tax laws raised in this story. I would do that in an attempt to find out which price range(s) would be most appealing to Canadians. If I had to, I would contact a financial planner or expert I know and have him or her help me with answers.

And I would do this by this Friday, with the idea of identifying a price range and ways to make properties appeal to Canadian buyers both financially and logistically.

Why by Friday? Because I would want to place an advertisement for the coming weekend's publication, perhaps the Globe & Mail which ran this story. They would be publishing stories geared toward their target audience, which tells me they are reaching at least some affluent investors who would find the story interesting.

If those same people saw an advertisement the following week (while the original story is still fresh in their minds) it would likely draw some responses.

Presto. I could gain some Canadian buyers ready to move on one or more properties to their liking, and demonstrate the financial advantages to them. And then collect buyer commissions in the near future, while developing a network for the future.

If I had a large property to sell, I would probably do this personally, and then tell my realty agent I have a buyer but I'd want a commission reduction because I got that buyer on my own. Even if I don't get that consideration, I would have helped to get my property sold while others are still sitting around on the market.

Although I don't normally give away my commission generating ideas this easily, for the sake of example, here is the article I'm referring to:

Keep thinking about who COULD buy your property, instead of retreading who can't or won't.

Tuesday, May 10, 2011

One Sale Does Not Change The Market

I'd like to think it was a reporter's attempt to make a story look like an important news story. No matter how large the amount of the transaction, this multi-million dollar mansion purchase is not a "market changer":

This story won't put a halt to other sales. But it also does not signal any trend. It is one transaction. In any real estate market, there are a limited number of multi-million dollar residential real estate transactions.

However, the story does cast a slightly negative light on the local market, and that is not good when it comes to the marketing of real estate. This story goes as far as to point out that this single transaction has a lot to do with the reported 18% increase in home sale prices for the quarter. Even though the property actually sold for less than it could have in better markets.

In other words, another potentially positive local real estate statistic shot down in flames. In this instance, it was by a reporter and not by a realty association, which seems to be the case in so many other cities.

As I have been saying for all these months, we need to change the "reporting" in order to change the mindset for marketing available properties.

I would like to think the reporter meant to say "Someone out there is willing to invest big bucks in the local real estate market" in a positive slant. Yet, adding in that this transaction was the reason for a home price increase and making it appear to be starting a trend took away any intended positive message.

Tuesday, May 3, 2011

The Rent vs. Buying Debate Continues

This is about to sound like I'm contradicting some past columns, but I don't think so. web site has introduced statistical research designed to show that in many large cities it is "better" to buy a home than to rent.

Obviously, I'm in favor of ways to get homes to start selling at a much higher pace around the country. Yet, I don't think this is a way to accomplish this. For as much as I use statistics to make a point, to enhance my enjoyment of sports, and for a variety of reasons, I also understand that there are instances where statistics need to be better qualified to make the intended point(s).

In this case, the "decision" of whether to buy or rent is not based on statistical reasoning. The plane is not equal.

Fewer and fewer potential home buyers can qualify for a mortgage these days. Even fewer have sufficient funds for enough of a down payment to purchase and then secure a mortgage. Each time either or both of those situations occur, it takes away the "rent or buy" as an actual option. If they can't afford to buy, then renting becomes the only option.

Many people already know that the current real estate market is a buyers' paradise. Yet, as our elementary school teachers would have told us in this sentence, the same market does not contain a paradise of buyers.

What the statistics in the article fail to point out is that the majority of the people are not making the choice they are basing their information on.

One of my suggested results actually reduces the distinction between renting and buying, and it would open up both avenues for years to come.

I'll say it again. Make "Rent To Buy" a major part of our vocabulary. This is a drastic measure, but the state of real estate calls for it.

Make homes currently in status as bank foreclosures available for rental only via annual (or longer) leases. The monthly "rent" payment could be used toward a purchase after 5 years if the renter so chooses. After 5 years, the bank would have been collecting the "rent" money and would know the reliability of the tenant. This, instead of sitting on an empty home not generating any revenue at all.

If investors can't buy foreclosure properties at bargain prices, it instantly raises average home prices back toward the level of "real" sellers, instead of foreclosures pulling down the prices for everybody.

And those who currently cannot get a mortgage and/or afford a down payment have instant options.

Meanwhile, apartment buildings would then need more competitive rates for shorter term leases, which would likely help the rental market.

My reason for suggesting the 5 year period before the tenant could then "buy" the home is significant. Again, those consumers who have no other options (or a choice) would be able to establish some equity without the hassle of a down payment and initial mortgage. Yet, those who do have the funds for a down payment and the credit background for a mortgage could then buy now at lower prices. It is possible that 5 years from now, those who buy now could be able to turn that profit by selling high.

This situation can be created, and for everybody's benefit. But as of now, the 'rent' vs. 'buy' consideration is still not a choice. At least 80% of the time.

Monday, May 2, 2011

Finding The Best Candidate To Buy Your House

Looking to sell a home? Know your audience!

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 4th 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 4th 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.