Follow Us on Social Media

email icon rss icon linked.in icon google plus icon twitter icon facebook icon

A Proven Strategy for Selling Houses Faster and For More Money

by Ken Corsini on November 21, 2013 · 39 comments

  
Leverage to Sell Properties

I was at a real estate investor mastermind meeting last week and was introduced to a simple concept that I think has the potential to revolutionize the way you sell your real estate deals.

It’s an idea most of us intuitively understand, but probably haven’t formalized into an actual strategy that can be used literally anytime you sell a property. In a nutshell, it’s about positioning yourself so that you control the selling side of a transaction. When implemented correctly, this strategy not only makes the sales process smoother and less cumbersome, it also enables you to increase your margins.

Ask a typical real estate investor what his last sale was like and chances are you’ll get a story along these lines:

Typical Selling Scenario

After rehabbing the property to the nines, I listed it for sale somewhere near the top of the neighborhood. There were recent sale comps of 189K, 185K and 192K … but none of them were as nice as my property so I listed mine for 199K. The property sat on the market for 45 days and so I took the first offer that came in at 190K. During the due diligence period, the buyer determined that certain items needed to be upgraded in order to meet their expectation of the property. Not wanting to lose the contract, I ended up lowering the price by 5K to satisfy the buyer and allow them to make the upgrades after closing. Instead of selling for 199K as I had hoped, I ended up settling for 185K and got pushed around by the buyer in the process.

Now how many of us can relate to this story? I know I can. For years, I’ve listed retail properties at the high end of the market in hopes of getting somebody to bite at that price. As time goes on, you end up dropping the price to attract more buyers. The problem is, when agents and buyers see that a property has been reduced and is aging on the MLS, they smell blood in the water. You lose all leverage in the deal and end up getting pushed around all the way to the closing table.

Now take that same story above and see how the strategy unfolds when leverage is used.

Scenario 2 Using Leverage

After rehabbing the property to the nines, I knew people would want it once they came to see it. Instead of listing the property at the top of the neighborhood, I actually listed the property below recent comparable properties to create immediate interest. While I thought the property might be worth 199K, I listed it at 180K to generate activity. Sure enough, in the first week of listing the property, I got 8 phone calls from very interested agents. Instead of giving out the lockbox code, I told the agents that the property would be available for viewing on Saturday between the hours of 1pm and 3pm.

On Saturday, there were 7 different couples walking through the house, murmuring about how great the house looked. Later that day we started getting calls from agents asking what it was going to take to get the property. Rather than throwing out numbers, I simply told them that as they had seen earlier that day, there was a lot of interest – and to come in at their highest possible price. We ended up getting 3 over-asking-price offers of 192K, 198K and 201K. After looking at all three offers, we decided the 198K offer was stronger because it was a cash offer with a quick closing and no contingencies. The property closed in 3 weeks and we didn’t end up spending a dollar on inspection items.

Was the house any different in scenario 1 vs. scenario 2? No, it was the exact same property, but the approach was very different … as well as the outcome.

As a seller, you want as much control as you can possibly get. When you can create competition and demand from multiple buyers, you put yourself in the position of leverage. You want the agent to feel lucky that their offer was selected. Do you think that agent is going to try to bully you into concessions if they feel lucky to even get the property? Probably not.

Learning to create this type of selling environment may very well change the way you approach buyers and agents going forward. Not only do you control the outcomes, you create selling scenarios that end with more money in your pocket!
Photo Credit: Jeremy Brooks

Email *
  



{ 39 comments… read them below or add one }

Michael Gammage November 21, 2013 at 1:36 pm

This is a awesome post.. very simple process but a very effective strategy. Thanks

Reply

Ken Corsini November 21, 2013 at 4:10 pm

Thanks for the post Michael.

Reply

Brent Hall November 21, 2013 at 1:50 pm

How is pricing below market value a revolutionary concept? If you’re flipping houses consecutively, then you probably benefited from a better market environment on the second property, which would partially explain the increased buyer interest. There was a period in early 2013 where fairly priced properties were getting bid way over ask in a lot of US cities. That is the market speaking, not a revolutionary pricing strategy.

I do however agree with pricing somewhat below market to increase your pool of potential buyers, but low balling the list price just means a ton of extra showings (more work), frustrated buyers/brokers and potentially ending up with a buyer who suddenly get buyer’s remorse and backs out.

Reply

Ken Corsini November 21, 2013 at 4:21 pm

Brent, I’d like to think the strategy is more than just “low-balling the listing price.” It goes beyond that and speaks more to the fact that you have more control over the process and the agents involved.

I disagree that this strategy creates more work b/c “it just means a ton of extra showings (more work)” …. I think it can do the exact opposite. In fact, in scenario 2 that I wrote above, the seller actually limited the showing to a single 2 hour window for any interested buyers. The goal is to create the feeling of competition amongst potential buyers so that offers come in stronger and with less concessions.

Perhaps this is not revolutionary for you … but I guarantee there are other investors like me who will see valuable results in their business as a result of implementing this strategy.

Reply

Brent Hall November 23, 2013 at 1:54 pm

Ken, the idea of controlling the process is a “wish” strategy. Recall 2009, 2010, 2011 and think of how many homeowners were pricing below recent sales and not getting any results. In a seller’s market, pricing almost 10% below market value is an effort to manipulate the sales process.

You are a smart guy, you know your market and thus, you were never planning to sell for $180K. The market spoke and paid a market price. True, maybe the buyers walked right into your web with blinders on and thought they were going to get a steal, but one might assume you could have had just as many offers if you had priced in the mid $190k range (assuming this sale took place sometime in 2013, a HUGE rebound year for real estate values in the US).

To your point, letting the vest for a few days on the market and having a single group showing or open house is very effective but it violates MLS rules/regs (at least in Chicago) and prob in most other cities.

Reply

Brandon Turner Brandon Turner November 21, 2013 at 3:13 pm

Hey Ken,

I make the mistake over and over of pricing too high and being on the lower end of the negotiation table because of it. I appreciate the post and the reminder that greed is often harmful!

Thanks :)

Reply

Ken Corsini November 21, 2013 at 4:23 pm

Thanks Brandon … man, I have been guilty of listing too high on so many occasions. The second I start dropping my list price it’s like a flashing red sign “I’m desperate to sell!” …. I would so much rather be in the driver seat then the other way around.

Reply

Sharon Vornholt November 21, 2013 at 4:06 pm

Great strategy Ken. I have heard a number of people say that this methods works great for them.

Sharon

Reply

Ken Corsini November 21, 2013 at 4:23 pm

Thanks Sharon!

Reply

Jaz Cook November 21, 2013 at 4:52 pm

Ken, I couldn’t agree with you more. Great strategy! I have tried this Strategy as a sellers agent it works like a charm!

Many quick showings, phone keeps ringing, multiple offers, quick close, what else can you ask for?

Creating competition makes the job so much easier to sell a home, more dollars in the sellers pocket. Love it!!

Reply

Ken Corsini November 26, 2013 at 8:10 pm

Thanks for the post Jaz – I agree, there is no better asset than competition when selling a property!

Reply

Tracy November 21, 2013 at 6:32 pm

I’ve done this. It works!!

Reply

Ken Corsini November 26, 2013 at 8:11 pm

Thanks Tracy! … good to hear from other agents who have made this strategy work for them!

Reply

Angie November 21, 2013 at 8:46 pm

He’ll of an article and 100% on point, I had to learn this the hard way. thanks for the tip about
getting everyone there about the same time, I will try it!

Reply

Ken Corsini November 26, 2013 at 8:22 pm

Thanks Angie!

Reply

Brian Linnekens November 22, 2013 at 3:52 am

Selling house can be an overwhelmingly complicated process. I think every home seller want to fast sell their home and get maximum money. Almost people are prepared before actual time of home selling. This information will definitely help people for selling house faster and for more money.

Reply

Sharon Tzib November 22, 2013 at 6:57 am

Understanding the kind of market you’re in would be important though, right Ken? If you happen to be in a market with low demand and you use this strategy, you may find yourself having only one offer submitted at the low ball price you set.

Reply

Ken Corsini November 26, 2013 at 8:12 pm

Sharon – I agree – I don’t necessarily think this strategy is going to work in every market. Its best to understand what kind of demand exists in your market first.

Reply

Mark Ferguson November 22, 2013 at 7:13 am

I agree that overpricing a home is usually a very bad idea and will net you less than if it was priced right, but I personally don’t under price them either. I have a lot of listings as an Reo and HUD broker. I see a lot of highest and bests and have some highest and bests on my own flips as well.

My observations are that buyers and agents expect highest and best from the banks and they know HUD has their sealed bid period, but agents don’t like it when investors or regular home owners try to create bidding wars or limit showings. I see many buyers drop out when I ask for higher and best, even though it makes absolutely no sense for them to drop out. I want to keep buyers agents happy in my area, because they know they are dealing with a pro who will not screw with their buyers. I can see using a slightly lower price, but limiting the showing availability on a vacant home would look sketchy to most agents.

I also think buyers are hesitant to pay over list price, especially first time buyers which is the segment I am in a lot. In my experience we have a priced home right when we get an offer three weeks after it is listed. If we price the home too low we usually end up with a lower net than if it was priced just right.

If you are in a crazy market with no inventory this might work, buy so would pricing the home high in my opinion. It is difficult to say these two sales are exactly the same because of market changes.

Good article and interesting strategy, but I wouldn’t feel comfortable limiting showings.

Reply

Shane Woods November 24, 2013 at 6:15 pm

In my opinion, potential buyers “dropping out” when asked for highest and best may speak to their ability to actually complete the sale. May be saving you some time & headaches…even if it takes them out of the “pool”.

Reply

Bill Wallace November 25, 2013 at 6:54 am

I think Mark’s right here Shane.

As a full-time Realtor I seem to be working with a lot of first time buyers recently. There’s something about buyer psychology that makes them think that they shouldn’t pay more than list price and that they prefer not to get “into a bidding war”. It usually has nothing to do with their finances.

I’ve seen the idea of paying over list price be a sticking point even after we’ve lost out on 2+ houses in multiple offer situations.

In the original scenario, if the house listed at $199k and was worth more than the $192k comp then I think you priced it about right and, at least in my market, it would have gotten a bid pretty quickly at close to list price. Also, the idea that you’d cave on an additional $5k in improvements is just poor negotiating if the house is really worth $195k.

Reply

Alan Mackenthun November 25, 2013 at 4:34 pm

I really like the article, but I agree that asking for highest and best will turn off some buyers. When I 1st started I’d withdraw anytime a seller came back asking for highest and best.

Reply

Ken Corsini November 26, 2013 at 8:14 pm

Mark – you know your market better than most – if you’ve got a system that works – go with it.

Reply

Jason November 22, 2013 at 8:26 am

Ken,
I saw this done by REO agents for banks in the last few years. They would put a low enough price to entice many investors (especially newbies), then would have one showing. They would then get 30+ offers on the house. The sales price would make no sense for a rehabber.

I’d be very curious to hear some real life examples on it working for retail sales.

Jason

Reply

sandy November 22, 2013 at 11:06 am

i am still learning this business but that sounds right to me. In the second Scenario you were in control not the buy/ agent. this would be an approach I would want to take thanks so much.

Reply

Roy Schauer November 22, 2013 at 11:14 am

We’ve seen both sides of that selling strategy. We did the high selling point recently, had new gunstock flooring, granite counter tops, new stainless appliances, sat on the market 45 days before a realistic offer came in, only lowered the price $5k but wanted 75% of buyers closing costs paid.
On the other one, we priced it at the lowest end of homes in the same area, had 8 couples look at it over 6 hours in two days in one weekend, one right after the other, was perfect because it gave one on one time but each couple got to see the next one coming or leaving so it generated that interest. Had 3 offers by that following Monday. Sold for over asking price, no extra items requested, and the weirdest part was this was a solid older home but needed updating (flooring, bathrooms, kitchen). To expedite the closing, because it was FHA, we offered to pay an extra $3k of closing costs but because the appraisal came in over value, we adjusted the sale price to compensate for the extra costs. Made it easier on the buyers and no extra money out of our pockets.

Reply

Ken Corsini November 26, 2013 at 8:16 pm

Awesome example Roy – thanks for posting.

Reply

Diana November 24, 2013 at 4:50 pm

Excellent article, Ken. We actually had the same experience with a rental that was going to be vacant but our nice tenant was still living there. We priced it at the bottom of the CMA recommendation and asked the tenant for a day/time that we could bring potential tenants to visit. The interesting thing was that our tenant was the tour guide (we were present but he took this upon himself!), pointing out all the nice features of the house! By that afternoon we had 4 offers, where 2 were offering more rent than what we were asking. We took the highest one with a nice family that has been renting the property for 2 years and just signed another 2 year extension. Great strategy!

Reply

Ken Corsini November 26, 2013 at 8:18 pm

Thanks for the post Diana – sounds like you lucked out with a great tenant who was willing to help you sell!

Reply

Mark November 25, 2013 at 12:05 pm

Excellent article. On my first flip my Realtor used method #2 and we ended up making (literally) twice the profit we expected. Next ones after that we used method #1…bad results. It took me a bit to understand this and why it works. Your article explains it nicely. Thanks.

Reply

Ken Corsini November 26, 2013 at 8:19 pm

Thanks Mark – great that you’ve had the opportunity to see transactions from both angles!

Reply

Alan Mackenthun November 25, 2013 at 4:39 pm

Anything you can do to get multiple people at showings at the same time is great. When I sold my house late last fall I had open houses the 1st two weekends advertising each in different ways and getting good traffic through on each. When people are there with others and they’re all making great comments the buyer fells scarcity and they move when otherwise, they may just put it on the list to consider later (and later never comes). When we rent a place the same is true. We always start advertising as soon as we get notice and then schedule group showings. It works wonders.

Reply

Ken Corsini November 26, 2013 at 8:20 pm

Thanks Alan – yeah, I definitely believe in scheduling showings if you can. Getting multiple buyers in the house at the same time is almost always going to create a sense of urgency and competition.

Reply

Tanja Hollowell November 28, 2013 at 8:33 am

Ken,

great strategy (similar than auctions)….I will try it on my next flip!

Tanja

Reply

Ralph Ramey November 28, 2013 at 9:42 am

Ken
Im a little late reading this post, but this is awesome information. This strategy is going in my tool box for sure!
Ralph

Reply

Ricky December 1, 2013 at 9:48 pm

Your technique of using leverage looks really successful. Whenever I will make next property deal I am definitely going to try this one.

Reply

Shaun December 4, 2013 at 2:11 pm

I’m with Mark and Bill that if you have the same market conditions that it seems unlikely that the $199 place languishes while the $180 place gets 2 bids at close to that other price.

I think this can work but it will be in same market that trying to push the top of the market.
If it is a buyers market you might still get more offers but you probably get highest and best just over $180. If you price it right around $190 you probably sell close to $190.

Reply

melodee lucido December 6, 2013 at 4:31 pm

Ken, great article and awesome strategy. I use this one regularly and it always surpasses the “regular” selling scenario. You laid it out well—to the benefit of all. I LOVE out of the box thinking and action.

Best,
Melodee

Reply

sandy December 8, 2013 at 7:06 am

I am new to all of these but this made a lot of sense to me and I haven’t even sold or anything as of yet. Ken I think i will use that formula as well.

Reply

Leave a Comment

Comment Policy:

• Use your real name and only your name in the field designated for your name.
• No keywords allowed as anchor text in the name or comment fields.
• No signature links allowed under your comments
• You may use links in the body of your comment, but it must be relevant to the discussion at hand, and not merely be some promotional link.
• We will have NO reservations about deleting your content if we feel you are posting merely to get a link without adding value to our discussion.
If you add value, but still post keywords, we'll use your comment, but remove your link and keywords.
• For more information about acceptable practice, see our site rules.

Want your photo to appear next to your comments? Set up your Gravatar today.

Previous post:

Next post: