5 Simple tips to help improve buyer’s mindset of your home
We all know that we are in a “seller’s” real estate market; however, there are still some basic things that you as a home owner can do to help not only increase your chances
of getting maximum value but also sell it faster to qualified buyers. These things I am going to suggest below really do not cost a lot of money, in fact some of them are going to be of zero cost and are things you may (or should) normally do in the first place.
- Remove the clutter - When a prospective buyer comes into your home they are imagining themselves living there. If you have a kitchen island do not stack up a lot of mail, kids school papers and other misc. junk as most of us do. This will send the message that the home may not have a lot of storage space (sub consciously) and turn could sway the buyer to have a negative opinion.
- Use air fresheners - When the prospects first through the door you want it to create a warm, positive environment and feeling. I suggest getting some nice smelling plug ins or something that is on a timed release and keep up on them to make sure that they do not run out. You want buyers to associate your home with a positive experience so when they are considering other potential properties yours will keep coming to the top of the list.
- Clean and tidy up the home – This kind of ties into number 1 but not really. Make sure the floors are swept, bathrooms are clean (have some towels hanging in there), soap in the dispenser and things like that. It would also be a benefit to make sure the bed is made. An entire bedroom can be clean as a whistle but if that bed is unmade then the entire room looks dirty. Same goes for toilet seats in the bathrooms, close them.
- Make sure the home is set on a seasonal appropriate temperature. Now if you live in the house this will likely be something already done but if you have already moved out then pay attention. If it’s summer time, make sure the central air is on and keeps the home cool and the opposite goes for winter. Last thing you want is a buyer to have any type of negative “vibe” coming from the viewing of your home. Chances are if the home is cluttered or dirty then the prospects will start picking apart lots of other things thus resulting in them selecting something different.
- Be sure to maintain the landscaping and outside for the appropriate season. If it’s warm and spring / summer the grass needs to be mowed, mulch down, bushes trimmed etc. If it’s winter, then make sure that if there is snow on the ground that the sidewalk and driveway are salted and shoveled etc. You don’t want buyers getting the feeling that the home is neglected as anything that can push their mind into a negative mindset will not be good for your end result in a maximum dollar offer.
There are more things you can do but obviously these 5 steps are things that you will most likely do anyways if you are living in the home the trick is to stay on top of them regularly in case you get a request for a last minute showing.
We live and work in a society and market that is always changing. The millennials are now buying their 1st (and even 2nd homes), investing in property and becoming the professional work force of today. This means the way we all do business, purchase property and communicate with each other has drastically changed and continues to change today and if you are in the business of selling homes or mortgages then you need to get with it or get out of the market.
I have heard several agents complain that their buyers lost out on a deal because buyer and seller couldn’t come to an agreement on price. Recently this happened to a good friend of mine who sells a lot of first time homes and she was telling me that her buyers would not come up from $102,000 to meet the seller’s demands of $106,000 and walked away from the deal. After listening to her tails of real estate woe I processed the information and asked her how did she present the information? At first she was puzzled then went on to tell me that she showed them the comps and that the property was worth well over $115,000 so they were not overpaying and that this house met all their “have to haves” and some of their “want to haves” in a home. It made sense for them to buy it at the $106k and she was right in that statement; however, where she failed to close the sale was how she presented the information.
She looked at me with a sense of confusion so I went on. I asked her “when was the last time you bought a car?” She told me it had been a couple years and then I asked if she financed it and she nodded. I then went on and asked her did she remember that process and how the salesman presented the information? They never discussed price of the car at all. Instead they focused on the monthly cash outlay. For example, if you were ok with spending $350 per month for the car and the salesman came back and said “I can get you in the car you want for $377.00 per month out the door chances are you didn’t focus on the price of the car but the $27 bucks per month and rationalized that as two lunches out per month, couple packs of smokes or maybe a round of drinks (depending on where you live) and chances are if you really wanted that car you would pull the trigger and spend the extra $27 per month. All the while what the salesman did was get you to increase the purchase price up on the car say an extra $1,500 bucks without you realizing it because you were focused on the monthly cash outlay.
I then went on and used her example of the purchase of the home. I suggested instead of focusing on going up $4,000 (because we all want a deal and we will be damned if we increase our offer because we see on TV all the time how people buy these houses on the cheap and why should we be suckers… WRONG). I proposed that she ask them if the house that meets all their wants, that is ideal for them (according to them) was worth paying an extra $20 dollars a month than they originally budgeted. This type of thinking stimulates a different part of the brain as now when presented this way you start to think “shit that’s only a lunch or two out a week, maybe a couple shots at the bar on Friday night or something along those lines and when you look at it in that context it makes it hard to pass up on the house you really want for just a couple shots of whiskey per month or lunch out occasionally.
This tactic isn’t something new and edge cutting. It’s been around for years just most real estate agents are not hip to it and let their deals fall apart because they are focused on the purchase price and comps, and while those things are important you need to also be prepared to go at your clients in a different way to make the decision that ultimately they will probably thank you for. So if you’re a real estate agent invest in a mortgage calculator app on your phone (most are probably free anyways I think) and have the conversation in a different text and watch more of your clients “sign on the line that is dotted.”
Today’s real estate market has clearly rebounded in a lot of areas since the crash of 2007 and it is definitely a seller’s market once again. Some things are different than the “good ole days” of past such as more regulation, some needed and some questionable, tighter credit restrictions, again some of these were needed as there was some crazy shit going on pre 2007 and of course the inventory is not as plentiful since building new product definitely slowed down from 2008 and is just now starting to pick back up again. But we all know what goes up must come down and the economy and definitely the real estate market are very cyclic and it has a lot of people wondering, preparing and bracing for the next “crash” or “bubble” to pop and speculating on when and exactly what that will be.
If you paid attention to the banks and their activity post market crash, you can make some educated calculations on the next wave of activity about to hit In 2008 the US Government in its infinite wisdom decided to force a lot of the banks to take money “the bail outs” and put restrictions on them to make loans in hopes to stimulate the housing market and economy. The banks, being much smarter, savvier and definitely greedier gladly accepted and responded to the market by pushing a lot of the money out into the commercial sector. Why commercial loans? Well that’s because most of the commercial deals were larger in size, thus requiring more capital, the borrowers had to put “skin in the game” which means they had to put 20% down typically, sometimes more, sometimes a little less, and by doing that defaults were less.
In theory this was a great move on the banks part. They were compliant with the government on their bailout dollars, got to reload and keep making more money after they pulled off the biggest con in American history with all the credit default swaps and destroying the housing economy and it was time for the next set of good times to begin. Some side effects of this new aggressive lending are still lingering and we do not know exactly what will happen. First of all, with the new “ease” and availability of qualified loan products and capital commercial real estate prices started to see some compression. In other words, if more people want your shit, the more expensive it will get, if less people want, the cheaper it gets, the old “supply and demand” principle working in its truest and rawest form.
Now here is where it gets “interesting” and really will make you think. In 2008 in order to ease the fears of borrowers and lock in “long term” money they started originating 10/20 and 10/25-year type products. Before I go on let me explain exactly what that means. The first number “10” is how long the note is fixed for before it balloons or starts adjusting and the second number “25” is how long it is amortized for. So a traditional 30-year mortgage would really be 30/30 if you broke it down in terms like this. The banks cranked out a lot of loans like this from 2008 through 2011 or so and still do some today but nowhere near as many as they did then.
Why is this important to anyone and everyone involved in the real estate market? Well think about it. I’m not a math wizard but I can do some simple basic shit. We are midway through 2016 and if these banks started these types of loans in 2008 that means in 2018 they start to come due right? Well if you can use a calendar you can see that is in about 18 months and then it begins. A lot of the smaller community banks did very few (they didn’t take bail out money) so they are insulated a bit from this and the ones they did originate like this they have most likely already been on top of their customers to refinance or restructure them anyways but a lot of the larger banks, the ones that do not necessarily have the means or personal ability to stay in touch with their customers, they cranked these out all day long and the day of reckoning is coming soon.
The big question mark is what exactly will happen. Anytime you have forced activity that is not natural the ball can bounce in any direction and many people will experience different results. You will have a lot of borrowers being forced to either sell or refinance. The few that “let it ride” with large loan amounts are either stupid or have balls of granite and don’t care but for most of us that have these loans we will want to re-secure the debt. Now the good thing is a lot of people will have some equity so a refinance should be easy but there will be people that will do their evaluation and decide it’s time to sell, pull cash out to go reinvest in other properties etc.
Either way you look at it there is going to be a lot of activity and a lot of big dollars being re-casted and for those of us aware of that and prepared for that an opportunity to make some serious money could be in the making. For loan people a good platform to do commercial lending on projects like this is a no-brainer, either for the ones refinancing or the ones selling. For real estate agents it could go either way. If you have a lot of investors refinancing and pulling cash out to buy this will cause some more market compression and could drive up prices and values making it even harder, if they chose to sell then you could have the opposite effect. No one really knows what’s going to happen but we do know something is going to happen and we need to be prepared for either.
My opinion is this. If you are a loan officer or a real estate agent it’s time to consider diversifying yourself into both worlds. Traditionally most people either only do residential or only do commercial but what about a “hybrid” type business plan. This way you are prepared, have some different avenues to capitalize on the chaos and not only ride the storm out but come out on top swinging and making some serious cash.
This is a fun little writing I put together awhile back that is in my "Jesse Brewer Tenants uncommon 2" book. I hope you enjoy
Stupid things or questions applicants have said:
- “Your paper says you don’t take felons. Who exactly do you consider a felon?”
Three tips for rents to help get their application accepted in a timely manner
- Make sure your car is clean.
- Landlords will think if you have a dirty interior on a car then that you will treat their place that way, so if you can make sure the interior just does not have over flowing trash that would be great. It does not need to be perfect by any means just not overly cluttered.
Manufacturing the value add opportunity
In these market times if you are a real estate investor then you are familiar with the term “Value Add” but if you are not familiar, value add simply means do something to a property to improve its value. Typically this refers to cash flow properties, more specifically apartments but the term and its application can be applied to any commercial income producing property, and it means you are doing work to increase the cash flow, which increases the value. It may include doing physical upgrades to get higher rents, bringing in new management to run the property more efficiently or filling vacant units with paying tenants. All of these things would increase the cash flow, which increases the value thus making it a “Value Add” opportunity or project.