Real Estate Investing – The father figure.

August 6, 2009

Dealing with the father figure
by James Miller

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I have seen it over and over again, and here is how it works:

You show an apartment or a house to a young couple, they love it and are anxious to rent or buy, but they want to bring their dad, step father, father in law, or other paternal type figure over to take a look at it. 90% of the time, this blows the deal. Here’s why…

We all play roles in our life, mother, daughter, teacher, golf pro, author, etc. When the young excited couple bring Dad over to see the place, he knows he is being brought over to evaluate, as he is the “expert” on such things. Even if he is not at all qualified, he is placed in this role, and feels a strong need to live up to it.

While the young couple is doing this to feel as though they are covering their bases and being as careful as possible, the truth is that they have already made their decision. What they really want Dad to do is to tell them what a great place they found, what a great deal it is and how smart and lucky they are for finding it.

Dad’s role is not one designed to placate. He instead feels a need to critically evaluate the place, point out any and every little issue he finds.  This action, while making the young couple feel less secure about their decision, serves to validate his role.   By it’s very nature, his role needs to be contrasting to theirs. He needs to serve as devils advocate.

For the Real Estate Investor or Landlord, the father figure is one of the worst characters to introduce late in the game.  At best, they create points of contention, about the property, which easily turn into negotiating points.  The father figure is not really objective, but critical, as for him to go into a place an not find anything means that he isn’t really serving a purpose. After all he if he doesn’t find anything, he isn’t doing his job.  Right?

It is a different story if Dad comes along on the initial viewing. His role is on a more even playing field with the young couple.  They are evaluating it together, before they fall in love with it. His role is less of a critical one and more supportive. Often times Dad will be the first one to commit to a place, and once committed, it is hard to change his mind.

Since the young couple has really already decided that they like the place before they bring Dad on the scene, his critical inspection also can cause arguments between them.  This brings a whole negativity into their minds as they stand in the apartment or house. You don’t want their impression and feel for the place biased by the emotions brought out in argument.

How do we counteract the father figure?

Always be around when the father figure is there.
If you are in the apartment or house when the father figure is giving it the white glove treatment, it is much less likely that he will be as forthright in his observations. He will hold some comments back for the car ride home. Hopefully he forgets before they get to the car, but at least that negative impression is happening in the car and not in the home or apartment.

Get them to commit to it before letting Dad have a crack at it.
If you can get a down payment, or deposit from the young couple they will have mentally committed to it.  If Dad later comes through with a bunch of reasons why they shouldn’t buy the place, they will actually respect his opinion less, as they are mentally tied to it.  In psychology this is referred to as cognitive dissonance.

Use the “take away”.
The take away is a sales strategy where you start to tell a potential customer how the product may not be right for them, or how they may not want to go ahead with a purchase.  If you are standing in the home with the young couple, Mom and Dad, and Dad starts going off about how the light fixture needs to be replaced. Just start telling them that if one little light fixture makes that much difference, maybe the place isn’t what they are looking for, and that you do have some other people who are interested.
Watch how fast dad starts back peddling when he realizes he is trashing the deal for his kids.  His role of evaluator evaporates and he quickly starts thinking about how mad they will be at him.

I have to admit it is absolutely magical to see in action.

* I often refer to this role as the father figure, as it is more traditional. In reality it is can be any authoritative figure in the young couples life, regardless of gender.


A Letter from Eric – Pricing the assignment of contract.

June 12, 2009

Hello sir.

I was wondering if you could give me a little bit of information referencing assigning contracts. Can you please let me know how to do this correctly. I think I get the gist of it I am just confused in one area. What if the seller talks to your investor about the original purchase price?  Next I wanted to know how you find your investors? And lastly how much should the whole transaction cost, and what is average profit? I notice that some say 1 to 3k but I have heard of 10-20k.

Best Regards

Eric

Hi Eric,

The basics on assigning a contract is that you are selling your position in a real estate deal for a sum of money. Setting that price really depends on how sweet the deal is and as they say in Economics class…” what the market will bear”

If you can put yourself if the position of the seller and it seems to be a great deal, then you should have no problem commanding a  premium for it.

As an example I have a blog post on a deal that one of my partners did where she got great terms on a property that had quite a bit of equity in it. The sweet part was that the seller was carrying back financing at zero interest.  In that instance, she was able to command $8500 for assigning the contract.

In essence, the better the deal is the more you should be able to get for it.

On your question as to what happens if the seller talks to the investor on the original sale price, I think you are getting at one of two things:

1) Can they go around me and make a deal without my help?

The answer to that is “no”, not while the property is under contract. However, they may try to wait you out, hoping that you won’t find an investor, or close on the property yourself. Once you fail to make deal, they can then go back to the original seller and do the deal themselves.

This is why you generate the buyers list first and have a ton of people that are ready and waiting for you to find them a house.

Or else you must mean

2) Won’t they be upset when they see how much money I am making off of them.

This is really a moot point as if you are assigning a contract, the buyer of the contract will certainly know what the original price is.  It also really doesn’t matter what you paid as long as the new buyer sees the value in the deal for themselves.

Now you may be talking about creating another contract to sell the property at a higher price, but this would ultimately involve two closings or a compressed closing,  the simplest and most straightforward way is to assign the existing contract you have with the seller to the investor/buyer and walk away. Let them worry about financing the deal, inspections and closing dates.  You just take the check and hand over your position in the deal you have created.

There is some legal jargon for a general assignment of contract found at: http://www.lectlaw.com/forms/f203.htm

Keep in mind that I am not an attorney and I recommend that you use one whenever possible. Getting connected with the right attorney will save you more money than they ever cost.

Wikipedia has a good section on assignment of contracts:

http://en.wikipedia.org/wiki/Assignment_(law)

As for finding deals….

I have a few posts under “finding deals” and “marketing” at the right, but the best one is probably the “finding deals on Craigslist” blog post  post  at:

Take care,

James


Here’s a Real Estate Marketing Idea…

February 13, 2009


Here’s a Real Estate Marketing Idea…
by James Miller

A few years ago, Luke Ploessl and his wife began to invest in Real Estate in the City of Cassville.  With the current situation on Wall Street, they can no longer afford to keep all their properties. They tried to sell them, but no buyers emerged. So they are giving six of them away to the people who write the best essays.

I am sure that part of the motivation came when the proposed 1.3 Billion dollar Alliant energy plant expansion fell though. The community had high hopes for this plant as the downtown is dying.

I had a lot of four commercial buildings under contract in Cassville late in 2008′ . When the Alliant plant fell through, so did the upside potential of the deal which gave our lender cold feet.

Desperate times call for desperate measures.  Mr. Ploessl certainly has a novel marketing idea.

I am guessing the essay is a requirement to meet some sort of Wisconsin law, otherwise I would think a raffle would have been a bit easier.

Besides generating $100 per entry.  They have already been given coverage on the local NBC affiliate,  Channel 15 .

check out the video coverage here:

http://www.nbc15.com/home/headlines/38828567.html#

I bet this method of marketing their homes is also getting them a pretty big buyers list.  Every entry is a potential home buyer.  He is getting paid to generate a list of buyers.

As the English say:  “Brilliant”.

You can find out about the essay contest here:

http://www.winahouseessaycontest.com/


Real Estate Investing – The Greater Good

February 6, 2009


Real Estate Investing – The Greater Good
by James Miller

So much of the focus on Real Estate Investing seems to be on making money. That is the first and truest motivation for what we do.  I feel that there is nothing wrong with this. Being a capitalist, I think anything that gets the Money moving in our economy actually does us good.

But before I turn this into  Gordon Gekko’s Greed is good speech, I want to talk about the other side of what we do, when we buy or sell a place using creative real estate techniques.  I want to talk about how it helps people and the overall good it does.

Think of the benefits to our local economy and community when we do the following investing action:

When we buy a fixer upper, repair it, and resell it with seller financing:

1) We are saving this home from further ruin that time can create. At some point homes become so deteriorated that after enough time only the only choice is the wrecking ball. By saving these homes we are indeed recycling them and keeping a large amount of material out of the landfill.

2) We raise the property values in the local neighborhood. This may or may not happen to any significant degree, but it makes it easier to sell your house if it is sitting next to a freshly  restored Victorian, as opposed to being next to something that looks like a haunted house.

3) We increase local tax revenue. While we never like to see it coming, we benefit the community by creating more assessed value in a home that benefits the tax roles.  This is a dollar savings that  minutely lowers everybody elses taxes.

4) We minutely lower the cost of housing by providing another viable living space.

5) We give hope, usually to a family that is transitioning from renting to the American dream of home ownership.  We are providing renters a way to start building equity in their home even though they may not be able to qualify with a bank right now.

6) We give hope, to the seller we buy from who could not move their home otherwise. This is especially true in this tight market.  I have talked to Realtors who have sold nothing over the past six months.

With our ability to sell via lease options and other creative means, we are constantly and consistently able to sell homes.

7) We are good for the economy. I believe that if there were a massive push from our government to educate it’s population on the ways of creative Real Estate Investing we could pull out of this economic slump without the need for huge bailouts.

The banks would still have to take a hit, but a nation of savvy and creative Real Estate Investors and home buyers could eliminate the inefficiencies in the market.

If you think about all of the people out there right now who would gladly rent or sell their property with creative financing, just to get out of it, but they don’t know how, so they are letting it go into foreclosure.

Compare that against the amount of people that are ready, willing, and able to come up with a little money down and make the monthly payments in order to get into a home of their own… but they don’t know these options exist.

If you compare these two things then we know that there is room for us to make a difference in our economy without a huge infusion of bailout cash.

…..Then again, maybe I am just an idealistic dreamer.

Since posting this I have read Francine Hardaway’s open letter to two mortgage companies. In her blog, she talks about how much better things would be for her and her lenders if  they would accept a reduced interest rate as opposed to her only other option…Foreclosure.


How to Market your property in this Market

January 23, 2009


How to market your property in this Market
by James Miller

I am assuming that you are in the same boat as a lot of Real Estate Investors. There are plenty of deals out there to buy, but how do you unload the ones you already have.

Here are a few of the techniques I use for unloading properties in this market.

Tip#1:   You have to make it easy to buy your property.

If you try to sell your home or investment property traditionally, and by that I mean looking for offers that completely pay you off the day of the closing by being either the all cash, or bank loan types.  you will have severely limited the market that you can sell to.

Things have already gotten tougher as 720+ FICO’s and 20% down are now virtually standard. You can also bet that appraisers are not as lenient with their property valuations as they once were.

Here is a list of my alternative selling methods.

Lease Option
You can think of this as a rent to own type program where you get a substantial down payment as option consideration and in exchange you agree to sell the property to the buyer at a given price within a certain time frame.
The tenants are buying the home and tend to take better care of it. You can also get higher than market rents, by agreeing to put some of their monthly payment toward equity build up.
Since the Deed does not transfer until they cash you out with a bank loan, you get the added benefit of being able to write off the depreciation.

Carry back a Second
In this scenario you agree to hold a note for some portion of the purchase price.  This amount can often times be credited toward the down payment amount that they need to bring to closing table making it easier to buy.  The amount of a seller second is often limited by the lender of the first mortgage to a certain percentage, typically 5%, or 10%.
The Deed will transfer so getting your money back if the sellers default can require a foreclosure action. You are also second in line behind a lender who may eat up all the equity in the property in a foreclosure.

Carry back a First Mortgage
If you own a property free and clear, or if the buyers are putting down enough to eliminate any mortgage you have on the property you can hold a mortgage in first position, essentially becoming the bank for the seller.
The Deed will transfer so getting your money back if the sellers default can require a foreclosure action. You are in much better position by holding the first.

Land Contract, or Contract for deed

Similar to a rent to own scenario, but the buyer has a much stronger ownership position.  Many banks will allow a Refinance after a buyer has proven himself or herself under a land contract. The deed does not immediately transfer, but you may need to bring a foreclosure action in the event of a default sue to a stronger ownership position.


Tip #2: Your property needs to have an edge

Anything you can do to differentiate yourself from the competition will help in this respect.  This is kind of like my “why houses need a hook” post.
One of the properties we rehabbed started as a four bedroom one bath home.  We decided to turn one of the bedrooms into two bathrooms making it a three bedroom three bath home. While losing a bedroom is not something you typically want to do, I knew the three bathrooms would give us an advantage over other homes of the same caliber when listed on the MLS.

There are a lot of three bedroom two bath homes out there, but not nearly as many three bedroom three full bath homes.

Tip #3: You will need to spend more on marketing
It is easy to sit back and blame the down market for a lack of results, but the truth is that we are still getting calls on our advertising and the number of calls is always a direct result of how much advertising we do.
It doesn’t feel good to be less results for the same amount of money, but advertising is a cost that directly relates to sales. If the sales numbers for the same marketing dollars spent are dropping,  it is harder and more of a waste of time to try to come up with better, more creative advertising, when you know that increasing your marketing budget will bring you the traffic you need to sell a property.


The +/- theory of showing a home

January 16, 2009


The +/- theory of showing a home

by James Miller

We all hear about how important the first impression of a home is when showing it.

I actually break it down a little further into my own sort of pseudo science.

It is pretty much common sense that when a potential buyer goes through a home everything they notice will be looked at as a benefit or “positive” thing, a determent or “negative” thing, or will have no impact at all on them.

On rehab projects that I take on, I like to keep this theory in mind when I am considering buying a property and I certainly keep it in mind when I am deciding what features to add or fix on a property.

It goes a little something like this:

As I walk through the property I evaluate things that catch my eye.  Is there a chip or crack in a floor tile? (-1 )  Did they just refinish the hardwood floors (+1 for each room).   Are the colors in the bathroom dated? (-2).  Is there a deck on back (+5)

For the most part these numbers are pretty arbitray, but I stick with a few rules:

1) The first thing you notice get weighted by 5. So if you pull up to the property and the first thing that strikes you is an unkempt lawn, then that is a -5.  If the first thing is spectacular landscaping, then it is a +5

2) Most things are a +1 or a -1, unless they strike you as severe, in which case I will assign a somewhat arbitrary point value.  For example a home that has a significant slope in the floor would get much more than a -1, I would probably put that in the -4 or higher category.

3) Things noticed at the end of the walk through are given a weighted value of 2.  So if it is something like a nicely contrasting wall it becomes a +2, if it is a very noticeable crack in the wall it becomes a -2. The thinking on this is that the last things you see, much like the first things you see, will be the ones that are most memorable, and therefore carry much more impact when thinking back on the property.

4) Things of average quality should not be given a value. For example new appliances would be a +1, and damaged or very old appliances would be a -1, but if they are in good condition and acceptable, there is no value to score as there would be no visual impact one way or the other.  You need to score only the things that make you go “Ohhh” or “Ewww”.

You should not only try to come up with a total, but more importantly review the order in which these items are seen.  The most desirable distribution of pluses and minuses is to have the negatives mostly in the middle and most of the positives when first entering the property, and just before leaving so they sandwich the negatives.

This is, of course, a pretty subjective and arbitrary way of evaluating a property.  It should only be used to understand how other people may view it when they walk through.

The highest benefit obtained for doing this evaluation is that you can identify the problem areas of the property and decide how important it is to take care of them.

While It is true that the goal should always be to fix everything until it is perfect, in my experience, there is a sort of triage that sets into a project when there is pressure to start marketing the home, yet not enough time to get everything done. This +/- list can help evaluate what will be most significant in the minds of the potential buyers.

One thing I have to point out is that there will be some people who will feel that the weighting of each item will depend on the route you take when walking through a property, and that each person may choose to walk through it differently.

In my experience, most single family homes tend to have a natural path or flow that is followed as people walk through them for the first time.  You can alter this path, but will only want to do so if you can stack more positive items toward the front or very end of the showing.

Also keep in mind that these numbers are not intended to adequately reflect how easy or difficult  it is to repair an item, but rather the aesthetic aspect of how heavily it will impact a potential buyer.  A deck might be a +5 but it may also be out of the range of the budget.

A good exercise would be to have a partner of friend go through the property with you to compare totals and distribution.

Below are some numbers that I would assign for certain items. This is far from a comprehensive list, but does give a general idea of how I tend to see it.

Remember to weight these items heavier if they are seen at the beginning or end of the walk through.

Dishwasher + 1

Garbage disposal +1

Stained/ dirty carpet -1

Deck +5

Two car or larger garage +3

Fireplace +2

Hardwood floors +1 per room

Tile floor +1 per room

Bad odor/ pet smell -2 (depending on severity)

Clutter -2

Small sized rooms -2

Poor layout -3

Attached garage +1

Any needed small repair ( I.E. drippy faucet) -1

Overgrown landscaping -2

Marks on walls -1

Small crack in window -1

Wainscoating +1

New appliances +1



The Housing Market – run for cover or buy like mad?

January 15, 2009


The Housing Market – run for cover or buy like mad?
by James Miller

We are scared.  That’s surely no secret, but what can we do about it?

I have a technique I use when I feel myself becoming afraid or apprehensive about any situation.  It has served me well and I find it somewhat elegant in it’s simplicity.

Whenever I am faced with something that I either don’t know how to handle or is confusing me, I ask myself the following question:

“What is it about this situation that I don’t yet know?”

Then as a follow up I ask

“What can I do about it?”

It seems pretty simple, maybe too obvious for some to believe, but when I ask this question aloud, my mind always seems to answer.  When I get that answer it allows me to take action to to relieve that fear.

So in this market, we can ask ourselves “What is it, that we don’t know, that is making us afraid?”.

What immediately pops into my head is that we have no idea whether housing prices are going to go any lower.

Now what can we do about it?

Well… nothing really.

Nothing to change the situation that is, but you can position yourself to avoid the pain of falling home prices.  What this means to me is that I am not going to go out and sign on the dotted line for any new loans any time soon.   There are, however,  ways to buy property with little or no money down and no personal guarantees.  If you can do that then you have an automatic safety net built in.

In fact, wouldn’t it make sense to so that all the time anyway?

The other side of this is that the market very well may be at a relative bottom and if it is, wouldn’t this be a good time to start buying property?

On the opposite side of fear is greed.  In market terms fear is fast and greed is slow.  And fear always trumps greed. This means that it will likely take a while for this market to turn around, and when it does the climb will be slow.

Now is the time to be talking to sellers about buying their property using seller financing terms.  Taking over a property “Subject to” the existing mortgage is one of my favorites, followed closely by the seller holding a first, land contracts, and lease option purchases.  None of these should require you to personally guarantee the debt.

If you can couple these types of purchases with the possible future potential for the market to turn around, you can have no credit risk with a significant upside potential.

If you can get good at negotiating with sellers to be able put very little money into the properties you are buying – or be able to take money out of them as you buy- you will have very little financial risk as well.

With all of those pieces coming together,  the fear can be eliminated.

Compare seller financed deals with the current very common practice of buying foreclosures from banks.

Foreclosure purchases can often have strict down payment criteria and still require you to personally guarantee the debt. The two things you want to avoid if you are afraid of the housing market once again pulling the rug out from under you.

Yes, there can be some deals in forecloseures, but when you aren’t sure where the bottom of the market is, do you really know that are getting a good deal, or is it still just speculation with a different face?


Why Houses need a Hook.

January 11, 2009


Why houses need a Hook.
by James Miller

When I started in rental houses,  I took to noting how people went through an apartment and what they focused on.  I had, at the time  two properties with fireplaces.  While fireplaces aren’t on the list of favorite things for my insurance agent, they did get the attention of those looking for an apartment.  I also noticed that they tended to rent faster.

I realized that apartment hunters and home hunters alike, might look at a lot of places in one hunting session.  My fireplace made the place I had to offer stand out. It made it different from the rest.

It was the “hook”.

I am sure people like the idea of curing up in front of a fireplace, but I think there was  a little more to it than that.  First off, my fireplace became a focus of their walk through. Their attention turned to it and possibly made them miss a few of the less desirable things, like how the refrigerator was from circa 1960 or how the carpet could really use a shampooing. Or maybe they did see these things, but discounted them because “this apartment has a fireplace.”

The other thing I believe happens is that my apartment becomes different than the rest of the places they looked at.  I have been though a lot of the apartments in my area.  I know how the other landlords stick to a strict pallet of pure white, for walls, trim, and outlets alike,  making it look like everything in the place was hit by an albino tornado. I realized then that the nice couple with good credit, the kind who can take their time to pick instead of taking what apartment they can get, when they  got home that night the way they would refer to my apartment would be:

” You mean the one with the fireplace?”

After that, I started to look for places that had a hook, or ways to create one in my existing apartments.  I found that it didn’t have to be much, just something memorable.  Although I don’t consider it much of a hook, A wall with a contrasting color would often do.  Hardwood floors and claw foot tubs get all A’s for their ability to set the hook.

One of the simplest hooks came about by rather serendipitously.  I had installed a dimmer switch on some can lights by the entryway door of one of the apartments. I had committed to some  expensive high wattage bulbs which made the entry area very bright.  I could have replaced them, but I had a cool new dimmer switch on hand, and as an Electrical Engineer by trade, changing out a switch was easier than four bulbs and a ladder. Besides the switch was a newer illuminated one with the slider on the side.  I thought it might add a little class to the place.

When we were showing the place, I demonstrated how to adjust the dimmer switch to the woman who was thinking about renting.  I didn’t place any particular importance on it, or think much about it until she asked for a second viewing of the place.

This time she brought a friend.

When they arrived, the woman who I had shown the place to the day before took over my role and reiterated much of what I had told her to her friend.

The big focus?  You guessed it.

The dimmer switch.


Ten things to do before listing a property with a Real Estate Agent.

January 9, 2009


Ten things to do before listing a property with a Real Estate Agent
by James Miller

1. Ask around to find a good agent.
I read about a study where most people think of Real Estate Agents as all being pretty much the same. In reality nothing could be further from the truth. The skills and abilities of Agents vary wildly.

In order to quickly sort the chaff from the wheat, ignore the slick advertising and fancy signs. Talk to people who have had luck selling their house recently.  Word of mouth is still the best way to locate good dentists, auto mechanics and Real Estate Agents.

2. Find out how they are ranked.
Real estate agents are ranked regularly by the dollar amount of sales they have been a part of.  See if you can find out how they rank in comparison to other agents.  It doesn’t cost any more commission to have the #1 ranked agent as it does to have #25, so you might as well go for the best.

3. Find out about your agent’s marketing plan.
The MLS is a given, but which newspapers will your property be advertised in and how often?  Do they send out mailers or post cards? Do they have any Radio or television spots and is it possible for your property to be mentioned on one of those?   All of these things cost the agent money and their goal is usually to spend the least amount possible to sell your property.  I could get into why that thinking is really self limiting on their part, but the point of it is to get them to commit to what they will be doing for you up front, and in writing.

4. Does the agent have a “go to” person to fill in for them?
We all have emergencies from time to time, but you don’t want you property to get passed up on a showing because your agent had an emergency root canal.  Most good agents do have some sort of agreement with the other agents in the office.  Often times it is the Broker who fills in, but you will want to find out how plugged in these other agents really are as to what is going on with your agent’s portfolio of listings. It may be beneficial to establish rapport with another agent who is in the office, just in case you need to get through to somebody who can make things happen.

5. Find out if the Real Estate Agent you are considering has been involved in any lawsuits.
Litigation is commonplace today, with property managers being most sued profession.  As Many Real Estate Agents do property management on the side, don’t be surprised if you see them listed on the court house records. While this may not affect their ability to market your home, it may taint their image in the eyes of the buyer.  It is best to know their background and be comfortable with it.

6. Does your Prospective Listing Agent have an existing Buyers list?
All good Agents and brokers are in constant contact with their list of potential buyers and sellers. They should have at dozen people who they will call right away after they get your listing.  A good buyers list is instrumental in creating an immediate sale.

7. Find out the Average Days on Market for their listings.
This is so you can get a feel for how long it will likely take to market your property. Their Days on Market should be at or below that of the local average.

8. Find out the average discount that the agents listings have sold for.
This number is usually inversely correlated to the days on market, as the deeper discount your give the quicker you should be able to sell. This is also just to get you prepared for what sellers may be coming in at and how your potential Listing Agent stacks up.

9. Ask what it will take to get out of the Listing Agreement.
They really cringe at this question, and there is a lot of back pedaling on this one.  What it comes down to is that you want to be comfortable that you can do two things; first, get out of the agreement if you are unhappy wit the service, and second, get out of the agreement if you find a buyer yourself.
They will fight at each of these points and you will likely have to concede the second, but a good Agent will be comfortable in their ability to sell your property.

10.  Ask if you can list your property for three months if you pay a 7% commission.
This may seem like we are paying more for less marketing time, but for a moment put yourself in place of the Real Estate Agent:

You get a new listing. The first few days are spent getting the listing in the MLS and into the papers. You may even call up the buyers that you know are looking and tell them about the property.  The next couple weeks you field some calls on it that were generated by the advertising, and do a few showings, maybe even an open house.  While there is some modest interest from tire kickers and looky-loos but nobody is biting. You get a call for a new listing and you are now excited about that one.  You lose excitement over this now “old” listing, as you attention turns toward this new possibility.

After about a month of limited action on a listing their attention turns elsewhere. It’s just human nature and I’m sure I would be the same way.  What we have to do is compensate for this by getting the listing for a shorter time and try to keep their attention by raising the amount of commission.  The listing sheets that the other Realtors get contain information on how the commission is split. Everything else being the same you property with the higher commission stands out from the rest.  I have even gone so far as to offer a $1000 bonus if the property is sold within the month.  You can see how that can motivate Agents and have the added benefit of making your property stand out.


Writing Classified Ads that pull

January 9, 2009

Writing Classified Ads that pull
by James Miller

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When writing classified ads, it is good to keep in mind that the ad has one primary purpose and one secondary purpose. The primary purpose is usually to get people to contact you in some way, whether it be pick up the telephone, or send you an e-mail. The secondary (and more hidden) purpose of an ad is to prescreen the people who will be calling you.

If you have one home for sale and selling that property is all you are after, then you may want to get specific with your advertising, listing prices, and specific terms. People who cannot afford, or don’t want to pay your price, will not call and automatically screen themselves out.
I have a lot of homes for sale at all times, so my ads tend to be more general. I want to get everyone who is interested in buying a home to call me.  Even if I don’t have what they are after right now, I may in the future, so it isn’t a waste of my time to talk to them now.

You can think of it as how narrow or wide you want to cast your advertising net.

Here are a few of the ads that I run:

When I am interested in Buying Houses:

NEED to sell your house?
I buy houses

Investor looking to buy houses
in [your area].
Any condition, any price.

I am sure a lot of you out there have the same apprehension running these ads as I first did. It just seems to sound too cheesy…. Like I just got done with one of those late night infomercial courses and are out to score my first deal.

Well, regardless of how you feel about it, the honest truth is that these ads get the phone to ring. They are simple straightforward messages that bring in sellers.

If someone thinks too little of the ad to call, then the ad has also done it’s job prescreening out that person as someone who can afford to wait to sell their home. If you are in dire straights and need to get rid of your home, an ad like the ones above are manna from Heaven.  You certainly won’t turn up your nose at it.

When I am interested in Selling Homes I place ads likes these:

Rent to own home for sale
Owner will finance, Bad credit ok
3 bedroom 2 bath home in [your town]
Call now to set up a showing
or for more information

Easy to finance home for sale.
$5000 down gets you into a 3 bed 2 bath
Ranch style home in [your town]
Perfect for someone who has troubled
credit, but a small down payment.

I am sure many of you are thinking that classified ads this big are gong to cost some money. It’s true, they do, but what costs even more is a vacant house.  The small extra amount you spend getting your message across is insignificant if you can shave a month off of your hold time.

If the cost of the ad is a concern, you can try a two-step advertising approach where you use minimal words to direct people to a low cost web site where you do all of your selling.  In that case you can use ads like this:

Homes for sale at bargian prices
http://www.[your web site].com

When they get to the site you can have all kinds of information and photos about the properties you have. Google Sites allows you to set up a web site for free where you can post your property.

Buy a House, Sell a home.

Did you notice that I always buy a “House”, but sell a “Home”. In my mind these words have two very different connotations. To me, a “house” is a small building with a bunch of empty rooms inside, whereas a “home” is a furnished building with people living inside of it.  I envision friends gathered around a  fireplace eating holiday goodies and having an enjoyable time. I think this is what people tend to think of, and are in fact, after when buying a home to live in.

This also comes into play when you are looking at ads of properties for sale. Someone selling a “house” has less emotional attachment than a person selling their “home”.

While I am not always as good at using it as I should be, effective advertising normally ends with a “call to action” or some request of the reader. For me it is usually “call now” or “go to [website]”. It is some sort of instruction to motivate you to get up and take action.