Posted by JPiper on March 03, 2001 at 02:00:10:
Check the How To Articles.
JPiper
Seller Beware! - Posted by SantaFe
Posted by SantaFe on March 01, 2001 at 11:32:25:
I bought my first investment property several months ago, a very nice free-standing adobe 2/2 condo in a great location, for 185K on a wrap and have had it in the local paper and on all the FSBO web sites offering it with owner financing and then as a lease/purchase. I tried to sell it ?as is? for a couple of months and when that didn?t work, I spent 3K to paint and fix and put it back on the market at a higher price. I’ve gotten well over 200 phone calls (no kidding-I enter all of them in a ?buyers? database), dozens of people have looked at the place - I have a keybox on the front door and give them the combo if they are interested so they can go look any time they like and I don’t have to go across town to show it until they let me know that they are seriously interested - and I haven’t received a single offer. Any profit is long gone on fix up, carrying, and marketing costs. It appraised at 197K a year ago. I?m offering to sell it at 210K but would galdly take 200K just to get rid of it. (Make me an offer!) And this is supposed to be a hot market with houses in this area appreciating at 10%. (I’ve done my research - my investment corporation joined the MLS as an affiliate member and I use their historial data to determine pricing trends.)
It seems to me that all of this owner-financing and lease/purchase stuff will work only if you?re selling at a discount to market, at least with higher-end properties. Ed Garcia says don?t buy any property that you can?t get for at least a 30% discount to market (see his How-To article Making Money When You Buy ) so that you can afford to have it fixed up, hire a realtor to sell it for you (I?m getting real tired of talking to tire-kickers at every hour of the day and night), and still make a decent profit. My experience with this condo strongly suggests that he is correct.
Similar experiences and remedies would be welcomed.
You made a couple of mistakes… - Posted by Sparky
Posted by Sparky on March 01, 2001 at 21:08:14:
First, the property wasn’t selling so you RAISED the price? Wrong move - especially the way the economy is going. You’re asking for an amount above market value and it’s going to be very difficult to sell at that price.
Second, the reason you’ve had 200 lookers and no offers is because of the price range of this condo. When my wife and I went looking for our first home, we looked at many condos and as we got to the $170K range we started thinking that for an extra $10K we could just buy a small starter single family home. I’m guessing your lookers are thinking the same thing. The problem with condos and townhomes is that at a certain price, it makes more sense for a buyer to put out a little more cash for a single family home which typically will appreciate faster.
At this point, I would cut my losses, lower the price and get rid of it before you sink further in the hole. If that means listing it with a realtor, do it!
What were… - Posted by Jeffers CT
Posted by Jeffers CT on March 01, 2001 at 16:13:38:
…The last 10 comps in this development??
And, yes, it’s not gonna sell itself.
Questions for SantaFe - Posted by Bud Branstetter
Posted by Bud Branstetter on March 01, 2001 at 15:04:03:
I would be interested if you bought with a land trust?
What is the average price of similar size condos within a mile or two radius of yours?
What courses have you purchased on L/O?
Re: Seller Beware! - Posted by joebaysh
Posted by joebaysh on March 01, 2001 at 14:58:32:
SantaFe - You gotta get rid of that lockbox. I’m new to this myself, but I do know that those same people that are looking at your property are also looking at other properties with a broker that’s pushing them to buy from them. Get out there and meet these people and sell that house.
Re: Seller Beware! - Posted by JD
Posted by JD on March 01, 2001 at 14:20:38:
I once miscalculated the FMV of a house in the same price range as yours. It just wasnt worth what I thought it is was when I bought it. Your house probably just isnt worth what you think it is worth. I had to drop the price. Lost 20K on the deal. so it goes. I think you make a good point re seller financing on 200k props.
Re: Seller Beware! - Posted by Eduardo (OR)
Posted by Eduardo (OR) on March 01, 2001 at 13:44:09:
SantaFe–
I have seen several thousand properties for sale over the years and several hundred transactions go together as a broker and an investor. What continues to amaze me in the business of selling real estate is the lack of knowledge of salesmanship skills that most real estate agents and many rehabbers and investors show. Anybody who is a survivor in this business should know it isn’t enough to buy a house at wholesale, fix it up, and expect to resell it at a profit. Unless you luck out by having your property up for sale in a seller’s market, you have to know how to SELL! How to talk people into buying YOUR property, how to CLOSE the sale! One of the best salesmen I ever met in this business had spent 20 years as a vacuum cleaner salesman. His company had sent him to innumerable workshops and courses in SALESMANSHIP over the years. He could talk you into anything. A few people do come into this business from a professional sales position somewhere, but most have never sold anything before in their lives and don’t have a clue how to. SantaFe, you say you’ve had 200 calls and dozens of people look at your property. If you haven’t sold it by now, there can only be two reasons: It’s overpriced or you don’t have the skills to turn those prospects into buyers (or both). Not trying to be harsh, but if you were an automobile salesman, you’d have been fired a long time ago. In your case, if I were you, I’d chalk this one up to experience and go out and read some books on selling (Zig Ziglar, Joe Girard, “How to Close Every Sale,” Larry Wilson, A. David Silver, “Close Any Deal,” Tom Hopkins, Bill Good, “Prospecting Your Way to Sales Success,” Philip Koerper, “How to Talk Your Way to Success in Selling,” Lloyd Purves, "Lloyd Purves on Closing Sales) and take a course or two (Dale Carnegie, etc.). There are hundreds of options, but realize it takes some time to learn how to use the techniques. I, myself, am only a mediocre salesman after a lot of experience and training (but I’m a good negotiator, which is something else). That’s one reason why I usually keep my real estate investments and rent them out. If you follow the “Buy and Hold” strategy, and wait for a seller’s market to sell in, you don’t have to know a lot about salesmanship (but you’ll always get a better price if you do). Remember what they say, “If you think education is expensive, try ignorance.” Good luck, my friend! --Eduardo
Welcome to the Recession… - Posted by JPiper
Posted by JPiper on March 01, 2001 at 12:51:11:
We all knew it was coming…and now it is here. At least in my area. I have contractors calling needing work. My wife’s chiropractor is going out of business…his appointments down severely in the last year. The last owner finance ad I ran got 5 calls…versus 75 last October.
Is it still too soon to call it a recession…or could it be the weather or time of year? I’ve made my mind up.
What this have to do with you? Tighten your numbers up. The deals that worked in the strong markets may not fly today. Garcia’s article is a good article.
But…and this is a key point in my opinion…DO NOT FORGET, this is a PEOPLE BUSINESS. YOU MAKE A DIFFERENCE. When you put a lock box on the door, and have them go look, and then wait for them to call you…CONGRATULATIONS, that is the weakest form of salesmanship known to man. Might work great in a strong market…but it won’t work at all in a slow one. You may need to go out and persuade someone to actually do your deal…heaven forbid.
JPiper
Re: Seller Beware! - Posted by Mike (IN)
Posted by Mike (IN) on March 01, 2001 at 12:44:41:
Tell us about your marketing; what do your ads say… do you advertise as “rent to own” or…"no bank qualifying? Give us some details.
Trying to determine who your “tire-kickers” are. Are you advertising to the right buyer.
What terms are you trying to get?..down payment, monthly payment, etc.
Mike
Re: Seller Beware! - Posted by Frank Chin
Posted by Frank Chin on March 01, 2001 at 12:10:12:
I’m currently selling a condo in Springfield, MA since December, but the weather isn’t the greatest. The realtor I’m using issn’t the greatest either.
For condo’s there appears to be more at issue in addition to a “Hot Market” and “Price”.
Some points:
1- My wife sold real estate part time once. She tells me many people looking at a property could mean two things. It could mean you have a good product. It could also mean you’re overpriced, and they want to see what an overpriced property looks like compared to what they’re actually looking to buy.
She usually take clients to look at overpriced stuff in order to convince buyers to buy her reasonable listing!
2- Is this a condo area? If it is, how does the amenties compare - if any. If not, how competttive is it to a standard 3BR house. If I can buy a 3BR house for 225K for instance, why bother with this 210K condo.
3- Condo buyers are often older folks giving up a 3BR house or professional couples looking to do no yard work. Are there any exterior work involved? What’s the demographics of buyers in the area. In other words, are buyers mostly families looking for houses?
4- We usually buy, hold it a few years, then sell, often when the price doubles. This way, we usually don’t lose any money if we have to take a few dollars less to move it. Its a little harder when you try to make quick cash.
Frank
Re: Good Point - Posted by Stacy (AZ)
Posted by Stacy (AZ) on March 01, 2001 at 12:03:37:
Santa Fe-
I think this post is important, and I appreciate the fact that you decided to share a deal that has not worked out to be a success.
Holding costs can eat you alive. It’s an important lesson to learn, and one that may not be emphasized well enough. I learned the same lesson you have. And I learned it the hard way, too. There tends to be an emphasis on all the quick-turn deals that worked out, and not enough on analyzing a deal, from the start, to include contingencies for when a sale moves slowly. I hope some of the new people listen to this and take heed.
-
Not every deal will turn out like a quick-turn success story, so plan ahead, assume a conservative holding period, and make only sensible offers. Consider always factoring-in an agent’s commission. I don’t use a specific percent of FMV, however, since each deal is different.
-
Have a back-up plan or two ahead of time. Your first back-up plan was to try an L/O. That didn’t work. Perhaps a straight lease would be in order, to stop the bleeding for now. Sell later, or keep it.
-
Don’t ever put yourself into a position where you become a motivated seller. Know that if selling strategy A doesn’t work, you can fall back on plan B, and then C, so as to decrease your anxiousness when A isn’t working.
Stacy
Selling from a rental viewpoint - Posted by Teresa
Posted by Teresa on March 02, 2001 at 18:18:29:
Do I need to look at things differently since I’m trying to sell people on the idea of them renting from me instead of someone else. I’m just starting out and I know I’ll be the best landlord there is, but no one else knows that (yet).
Teresa
Which article by Mr. Garcia? nt. - Posted by Ken(MO)
Posted by Ken(MO) on March 01, 2001 at 19:02:59:
nt
Re: I agree - Posted by Stacy (AZ)
Posted by Stacy (AZ) on March 01, 2001 at 13:11:00:
This exact realization came to me a couple of weeks ago. No more lock-box marketing. I’m hoping the slow-down I’m starting to sense is temporary, and will pick back up when school’s out for kids (moving season) and interest rates get another cut. But, until I see a change, 1) my new buys will have more conservative numbers, 2) The number of recent sales in the neighborhood will carry more importance, 3) I’ll operate the business with more cash available for contingencies, even if it means slowing down buying frequency, 4) I’ll factor-in the possibility of holding properties for rentals if they don’t sell, 5) Changes in marketing, such as more open houses and one-on-one showings, fatoring in gresater advertising expense, or listing commissions.
Any others you can think of?
Stacy
Re: Good Point - Posted by Santa Fe
Posted by Santa Fe on March 06, 2001 at 10:29:07:
Sounds like good advice. Thanks for taking the time to respond!
Re: Also… - Posted by Stacy (AZ)
Posted by Stacy (AZ) on March 01, 2001 at 12:16:08:
I’ve found that it’s very important to find-out why lookers are not interested in the property. You said that dozens have looked. Following-up with them and asking, in a non-threatening way, why they decided not to make an offer could determine what it is you need to change. It could be something with the property that you hadn’t considered, or possible confusion about how it will be financed, etc. But without asking, you’re shooting blind. Occasionally, simply clearing up a misunderstanding will get a looker interested again.
Tell them that you’d like to find out this information so you can market the property better. Ask them if they could help you out with some feedback.
Stacy
Re: Selling from a rental viewpoint - Posted by DanT
Posted by DanT on March 02, 2001 at 20:52:39:
Teresa,
I have been a landlord for 15 years and I believe it is always a people business, competative industry, and a service business. We supply, for a price, a service as well as a product. Further we are competing, if not for tenants in general, but for good tenants. I have stated this for years and too few people understand it in this neck of the industry. They seem to feel “if I own it, they will come”. Not the case I am afraid. I know of one landlord in my area that averages an 18% vacancy rate, while I and 2 others have less thatn 2%. Why? His unit are clean and functional but look as though they were renovated to a 1975 standard, and then his rent levels are premium. Sorry to get on the soap box, just and area of frustration. DanT