I read a blog posting recently on another site where someone commented that to sell an investment property faster, they should lower the asking price. That isn’t how the investor’s motto goes.
“Buy low, sell below market?” I thought it was, “Buy low, sell high?”
A simple comment from an investor suggesting that another investor should consider listing a property below market value, should not have gained my attention like it has.
But it did. In fact, it got me all riled up. It got me thinking so much that I decided to write an article about it. Let’s take a look at why…
I recently completed a rehab on a house I bought in February of this year. I bought it for $75,000 and had an ARV of $128,000. I am not going to break down the details of the deal but I want to look at the selling aspect of it.
Earlier in the year, the sub-prime mortgage market all but went away. I checked the comps in the area once a week during the rehab and as of late July, houses were still selling. I wanted to have the house on the market a month before school started and figured since I now had the nicest house in the subdivision, it would sell fast.
It is still on the market. Not only is it still for sale but in the six weeks it has been listed, I have had ONE showing. ONE!
To make matters worse, a neighbor four houses down with more square footage than my house, listed theirs the same day for $20,000 under market value! I went nuts!
I printed off all the comps and showed them to the owner. I suggested to her that she should raise her price based on the recent sales (I didn’t mention to her that her listing was killing mine). She seemed oblivious and later I saw she didn’t raise it. In fact, after four weeks, she lowered it $10,000!
The funny thing is, she hasn’t had any showings either. Why?
Should I take the advice from that investor and lower my price?
If the neighbor down the street has already dropped their price as much as they have and their result has been no one looking at the house… Well it tells me the problem is not price. So how am I going to sell my house if I don’t lower the price? In this market, it’s not price that is keeping the buyers away. No one is looking because the media has the public convinced that buyers can’t get a mortgage. If they think they can’t get a mortgage, they won’t go looking at houses.
Wait a minute! Other parts of DFW are doing alright with area sales. Why? Price range is why. The areas where prices are $200,000 and over are slow but they are still selling.
I would think most of those buyers are stronger credit & income-wise.
So if dropping the price won’t get more buyers to look, what else can I do to sell it?
My answer is… Let’s give “greed” a try and see if it helps get some interest.
I am going to print off some color flyers and take them to the Realtor offices in the immediate area to get extra attention. How is that greed? It’s not. Right now my house is just one in a big pool of houses in MLS. I need to get the house exposed and I will do that by getting to the Realtors. Once I have their attention, I will make it worth their while. Unlike most real estate investors who get Realtors to hate them because they want services for free and they want them yesterday… I will give Realtors what motivates them…Money. In other words, I am going to appeal to their greed (my apologies for using such a strong word).
The flyers will act as an invitation to attend a Realtor-only, open house. They can tour the house and see first hand all the work that went into it, while they enjoy a free, catered lunch. That tactic is nothing new to Realtors though. It’s not done a lot but it is done. Appeal to their greed by feeding them? Well not exactly.
The standard buyers’ agent commission in Texas is 3%. So I am going to offer 4.5% to the agent that brings a buyer. How about throwing in a bonus of $500 to $1,000 if the agent gets it under contract in the next 30 days? Not bad. I am betting my incentives will get several agents attention and my showings will see a dramatic increase.
If I don’t have any buyers looking at the house, I have no chance to sell it. I could offer all sorts of buyer incentives like paying some of their closing costs or buying their rate down but, that doesn’t matter if buyers don’t look at the house!
Who brings buyers? Realtors bring buyers. So my approach to selling a house in a “down” market is not to lower the price (which won’t help the market go up). My approach to finding a buyer is to “take care” of the people that bring the buyers…Realtors. The good investors know how valuable they really are.