Rich Dad Education Blog

A buyer’s market creates both opportunity and challenge for the real estate investor. On one hand, America is on sale and deals are everywhere, so it is easy to find properties. On the other hand, when the time to sell those properties has come, the investor becomes only one in thousands of other sellers competing for the same few qualified buyers.

But don’t despair. An educated real estate investor can win at the selling game. Knowing how to sell a property in a buyer’s market is a learned art, a skill that one must master in order to survive as a real estate investor. The more selling techniques one masters, the easier it will be to compete with other property sellers.

Here are some tips that will give you an advantage in selling your properties in a buyer’s market:

1. Competitive pricing will set your property apart from the pack. Pricing is probably the most important thing to get right when selling a property, as a good price can allow one to overcome almost any obstacle. To get the selling price right, you must:

• Get to know the local market. Before you buy in a certain area, do your research and get a good feeling for property values. Go to open houses to find out what others are asking for their properties. Remember, however, that an asking price is not the same as a selling price; by knowing average asking prices, you can price your property substantially lower than the competition.
• Have one of the real estate agents on your power team run a comparative market analysis (CMA) on the comparable sales for the past six months. Be sure to note if there were any seller concessions used to help with the sale. Use the lowest values for “sold” properties to guide you when making offers on properties in that area. A note of caution: in some areas where property values are still falling, be sure to use only very recent sales comps. Data from properties sold as recently as three months ago may be outdated. Another note of caution: If the buyer for your property needs to get financing from a lender, that lender will require an appraisal. Banks are being very cautious in their lending in today’s market, especially in areas where home prices are still falling. Many times the comps the bank appraiser uses are from sales of distressed property, REOs and short sales. These comps will be low and if the appraisal comes in lower than your selling price, the deal will fall apart. Be proactive, and make sure you interact with the bank appraiser during the visit to your home. Show the appraisal you have based on sales of properties that are in the same condition as yours. Hopefully this will help the bank appraiser give you a more realistic appraisal, but there is no guarantee and the bank has the final say. If you are lucky and get multiple offers on your property, a cash offer, even if it is at a lower price, might be more appealing than a higher offer that is contingent on bank financing. Also, you could put a 48 hour clause in your acceptance of an offer contingent on financing, giving you the option to accept a cash offer that might come at a later date.
• The major key to being able to offer a selling price that beats the competition is to first buy the property at a very low price. Buying low and selling high doesn’t work in a buyer’s market. You need to sell low, but buy lower.
• Don’t play the game that most sellers play by setting a high asking price, then reducing the price every few weeks until you get some action. Start with a low asking price, sell your property fast, and move on to the next deal.

2. Be prepared to offer some incentives to your buyers. Sellers are offering plasma TVs, vacations, golf memberships, sometimes even cars and boats to entice a buyer to close the deal. If your asking price is low enough, you shouldn’t have to offer incentives, but be prepared just in case. The cost of any additional incentives should be accounted for in your original purchase price for the property.

3. Remember that at times, cash is king; rather than offering TVs or other stuff, consider offering to pay part of the buyer’s closing costs, a few months of Homeowner’s Association (HOA) fees, their first mortgage payment, etc. Be creative, but only offer these concessions if it is truly necessary in order to save the deal.

4. Clean, clean, clean…and clean some more. Other than price, nothing will help sell a home more quickly than having it nice and clean. Very few people really want to buy a home that needs extensive cleaning. A weekend spent hauling away junk and trimming a yard can potentially add tens of thousands of dollars to your sale price.

When cleaning the inside of the home, the two most important places to focus on are the kitchen(s) and the bathroom(s). If the toilet can’t be cleaned spotless, put in a new one. It will be a few hundred dollars very well spent. If tubs can’t be cleaned, consider having them resurfaced. Although this can be expensive, it is also worth the cost. Kitchen counter tops should be replaced if they can’t be cleaned properly. A lot of people in the construction industry are looking for work right now, so you should be able to negotiate good prices for this type of work.
5. The home not only needs to be clean, it needs to smell clean. This means that even though the carpet may look good after being cleaned, if old smoke or pet odors remain, you may need to replace the carpet or have a professional deodorize the entire home. Remember, if you can smell it, you can’t sell it!

6. Once your property is clean from top to bottom, consider staging the home. You could hire a professional, but if your budget is tight, you should still seriously consider staging the home yourself. You don’t need a lot of extra stuff; in fact, for good staging, less is better. If you don’t have any extra furniture in your own home or from homes that you have purchased and resold, you can rent items at a fairly reasonable cost. You should stage the inside of the property, as well as the outside.

Inside

• Living Room/Family Room – Living rooms and family rooms are the places where families spend time together; you want your potential buyers to be able to visualize doing just that in your home. Your goal is to get your buyer to mentally move into the home. Make the room look as big as possible. For staging, an average size family room should have no more than five pieces of furniture: a sofa, chair, small table, coffee table, and a TV (you can get a nice looking, but non-working TV from the secondhand store for a really low price). Add a decorative lamp and a house plant to give the room warmth.
• Kitchen – Again, you want to make the room seem as big as possible. Nothing should be on the counter tops, indicating that there is enough room for toasters, blenders, etc. to be stored out of sight. A small table with a couple of chairs and nice, simple place settings matching the color of the room add a warm feeling.
• Bathroom(s) – Bathrooms are one of the main features that sell a home. Take extra time to make sure that bathrooms show just right. Assuming they are very clean, you only need to add a neutral shower curtain (if required), one small throw rug in front of the tub, a plush bath towel with matching hand towel and wash cloth, all hanging neatly on the towel bar. Scented soaps and candles are not necessary and may be ill-advised, as some people may be allergic to or turned off by the scents.
• Bedroom(s) – You want the bedrooms to look as large as possible, so keep your staging simple. A neatly dressed bed, nightstand(s), and a dresser are all you need. If you have a large room, you could add a reading chair and a lamp. Closets should be kept empty so they appear as large as possible. If the closets don’t have lights, you can get battery operated lights for a minimal cost.
• Plants do add warmth to a home, but add no more than one plant to each room.
• Furnace rooms, utility rooms, and garages should be empty, but cleaned thoroughly. If you have a nice car, you could park it in the garage for the showing.

Outside

Creating great curb appeal is probably the most important part of your staging efforts. No matter how nice the inside of the house is, if the outside isn’t inviting, people are not likely to come inside.
• Haul away all the junk.
• Trim all bushes and trees, and cut the grass as needed.
• Flowers are great if you are selling in the flower season. Be sure to pull any weeds from flower beds.
• New paint and/or siding will be an investment that will not only help you sell your property fast, but get a higher price, as well.
• A new front door is always a good investment if the old door just looks bad. At a minimum, a brass kick plate and new paint can make an old door look more inviting.
• If the home has a porch, one or two nice chairs/rockers add a warm feeling.
• Don’t forget the mailbox. Make it fresh-looking and rust free.
• If it fits the style of the home, a nice white picket fence across the front yard can add curb appeal. It makes a home look clean and inviting.

7. Hire a professional inspector to provide a complete inspection report for the property. The report should address: plumbing, electrical, roof, pests, mold, heating, cooling, foundation, etc. Have this report available to show prospective buyers. It goes a long way toward bolstering a buyer’s confidence that he or she is buying a sound property without any hidden flaws.

8. Consider purchasing a home warranty plan that covers heating, cooling, plumbing, wiring, appliances, etc. for a year or two. This will likely cost between $300 and $500 dollars, but it will give your new buyer peace of mind, and may be just what it takes to close the deal.

9. You could also have an appraisal done by the appraiser on your team or a local bank’s appraiser. Make sure that he or she will give you a fair appraisal based on the condition of your home. The value should come in at the value of other properties in similar condition that have sold in your area in recent months. Assuming you bought the property right, your asking price will be below this appraised value. This way the prospective buyer has further proof that they really are getting a good deal. Be sure to have the home staged prior to having the appraisal done.

The next thing you need to do to sell your property fast is to advertise, advertise, advertise! Details on the many ways to advertise your property will be presented in Part 3 of this series on “Selling Your Home in a Buyer’s Market.”

Selling a property (especially for the new investor) can be daunting even in a good market, let alone a buyer’s market. But knowledge and preparation will go a long way toward making it easier to sell your properties fast. Make sure your exit strategy is very clear before you buy a property, and make sure the analysis accounts for all of your expenses, including being able to offer a substantial discount to your prospective buyers. Remember, buy the property right. Then it’s just haul, clean, fix, and sell!