HOW TO SELL YOUR HOME IN A VERY COMPETITIVE MARKET
Transcription
HOW TO SELL YOUR HOME IN A VERY COMPETITIVE MARKET
HOW TO SELL YOUR HOME IN A VERY COMPETITIVE MARKET By Don Cook Page 1 of 33 Don Cook, Realtor® 214-734-7629 For Sale By Owner...................................................................................... 2 Preface......................................................................................................... 4 The 4 P’s of Real Estate Marketing ............................................................ 4 Chapter 1..................................................................................................... 5 Planning ...................................................................................................... 5 Commitment ........................................................................................... 7 Security ................................................................................................... 7 FIRST THINGS FIRST .......................................................................... 8 YOU NEED TO KNOW WHO’S COMING, TOO!.............................. 8 Build a team .......................................................................................... 10 Chapter 2................................................................................................... 12 Preparation ................................................................................................ 12 Chapter 3................................................................................................... 16 Pricing ....................................................................................................... 16 Chapter 4................................................................................................... 19 Promotion.................................................................................................. 19 News ads. .............................................................................................. 19 FSBO DREAM DEAL ..................................................................... 20 Yard signs. ............................................................................................ 20 Open house............................................................................................ 20 FSBO OPEN HOUSE....................................................................... 21 Post cards. ............................................................................................. 22 Take Away Package.............................................................................. 22 Chapter 5................................................................................................... 25 Showing, Negotiating and Closing ........................................................... 25 Chapter 6................................................................................................... 30 Your 30-Day Action Plan! ........................................................................ 30 For Sale By Owner This workbook has but one goal -- to give you as much information as possible to assist you in selling your own home. This may sound a bit odd coming from a real estate agent, but happy people are my best resource for future business. As you read this manual and hopefully employ my concepts, my reasons for helping out will become clear. The “For Sale By Owner” concept is as American as apple pie. One of the most treasured rights we have as citizens is the ability to buy and sell real estate – with or without using an agent. Page 2 of 33 Don Cook, Realtor® 214-734-7629 First, let’s set the stage by dispelling a common myth. Selling a home has little or nothing to do with real estate! It has everything to do with basic marketing techniques. So, this workbook starts with explaining the basic tenets of real estate marketing that agents employ on every sale. Understanding the intricacies of the real estate marketing process can help you sell your home faster and for more money. Included in this workbook is my 30-day action plan designed to attract a number of qualified buyers to your home within the first month. Experience has shown that you can expect to have an offer made on your home within the first 10 qualified showings. My plan will enable you to boost the total number of qualified showings, which should produce an offer to purchase. Most For Sale By Owner (FSBO) properties become so because the owner wants to save the commission on the sale. Others become so due to curiosity or a bad experience with an agent. Whatever your reasons, I really do want to help. As an agent, I derive my livelihood through the buying and selling of real estate. While helping someone sell the home without my help may seem to be a contradiction to my personal goals, it is not. Real estate is a business based on personal relationships. If I help you reach your goal, you will likely tell others about your positive experience with me. Of course, sellers often become buyers and I would appreciate the opportunity to assist you on your next purchase. Last, a good percentage of FSBO properties change to an agency sale after a short time. In the event that happens, I hope that my marketing plan and approach has gained your trust and earned your future business. Good selling! Don Cook Page 3 of 33 Don Cook, Realtor® 214-734-7629 Preface The 4 P’s of Real Estate Marketing In every business endeavor, there are basic concepts that act as the foundation to success. Ignore these fundamentals and the business is poised for failure. Embrace these same ground rules and the business will likely flourish. Selling an individual home is a business venture. This venture has but one product to sell and when it is sold the business can cease to operate and distribute the final profit, if any, to the business owner – YOU! For those reading these materials that have taken marketing courses, the concept of the 4 P’s is readily understood. The building blocks of modern marketing are: Product, Price, Place, and Promotion. Going into each of these elements is beyond the scope of my program, so I will instead relate the same concepts to real estate. In real estate, the 4 P’s are: Planning, Preparation, Pricing, and Promotion. Each warrants attention in a successful sale yet some are weighted more heavily when measuring their impact on the selling process. Your FSBO venture will benefit from a faster and more prosperous outcome when you take the time to apply these principles. Remember that this is a business and a good business needs and deserves a good business plan. Page 4 of 33 Don Cook, Realtor® 214-734-7629 Chapter 1 Planning Go ahead and admit it: When you first put the FSBO sign in your yard you had the dream that someone would stop by within the first few days and see your home as you do. This ideal person or couple would have money and good credit, and your home would suit their purposes beautifully. They would offer you a fair price and the two of you would amicably sign a contract and then meet at some title company where you would get a big fat check. End of story. Most of the time, it doesn’t work out that way but sometimes it actually does. The purpose of this workbook is making sure the chances are in your favor that this story unfolds as easy as our example. We start with a good plan because Planning is the first “P” in real estate sales. Think of Planning as being shaped like some giant Tinker Toy. In the middle is Oversight, which is surrounded by Budget, Promotion and Preparation. This shape is important, because a lack of oversight is one of the most common elements of an unsold property. In our Tinker Toy example, if you pull out the wheel in the middle the whole structure falls apart. When something goes wrong in the selling process, you can almost bet the farm that someone dropped the ball on a critical issue that may have seemed trivial at the moment. Here’s a real life example, but I will leave the actual name of the agent out of it because I don’t want to embarrass him (OK, it was me). During a follow up phone call to someone who had attended an open house, this conversation could be overheard… Agent: “I just wanted to check back with you because you said that the house I was showing on XX Street was what you were looking for. Are you ready to sit down and make an offer?” Prospect: “We did love that house. But, we bought another house this weekend because we needed to be in by the end of the month because our apartment lease is up. You told us the seller’s new house wouldn’t be ready for two or three months. We liked your house better, but this seller would allow us to move right now on a Page 5 of 33 Don Cook, Realtor® 214-734-7629 temporary lease and the agent just wrapped the lease amount into the contract. Sorry.” Agent, shoulders drooping to the floor: “I’ll bet we could have done the same thing with this house. The owners probably would have moved into an extended stay hotel to accommodate you if they had known it would make a difference.” Prospect: “Well, I wish we had known, because your house was our first choice. But, we’ve already signed the contract and the seller has accepted. Sorry.” Shoulda, coulda, woulda. Now, how would better planning have prevented this lost sale? Part of the planning process is determining where you are moving when you sell, and how fast you can make the move. If you are building a house that won’t be ready until a few months down the road, then having alternate living arrangements in place is a must. In this case, the lack of written plans prohibited the agent from knowing what planning had been done. It was someone else’s listing and there was no information showing that moving prior to the new home’s availability had ever been discussed. Of course, the agent could have asked! That’s just one example out of many situations that could arise, and you can use the grid below to make certain key elements are covered. The subjects in the grid are to trigger your imagination and are not meant to be all-inclusive. If you are using a FSBO Coach, he or she should help you cover all of the bases. Each section of the grid is a topic for discussion with every family member and everyone on your selling team. Someone needs to coordinate the overall activity so that each topic is covered and nothing is duplicated. Schedule regular update meetings. This may seem to be overkill if you are the only person on the team, but even when handling everything yourself it is best to have a set time each week to review your plans. Title Work Security Contact Method Where To Go/Moving Staging Gather Forms/HOA, Disclosure etc. Showing Signage Open House Follow Up Survey Utility Time Lines Advertising Garage Sale School Systems Page 6 of 33 Don Cook, Realtor® 214-734-7629 Pricing Analysis/Appraisal /CMA Repairs Negotiating Off Site Storage Pets Write your plan down. When something is in writing it has more validity. That doesn’t mean that you can’t change something as new information becomes available, but when you see your plan in black and white errors or omissions become easily identified. Commitment More times than I can count, I’ve heard new FSBOs say, “I want to try selling it myself for a few weeks first, if nobody want to buy it then I’ll list.” Does this sound familiar? If it does, your FSBO venture probably is destined for a short life. The lack of commitment to the FSBO process is usually followed by the same lack of dedication to implementing a sound make-ready and advertising program. Think about it. How comfortable would you be with an agent that started a listing presentation with, “I’ll try listing it for a month, but if it doesn’t sell soon you should go FSBO”? There’s some serious money at stake here. Going FSBO isn’t something you try, it’s something you do. Anything less than full commitment will shortchange your selling effort. With that said, it’s a completely different situation when you say, “I have a plan that I want to enact that gets my house ready to sell at a competitive price. I’ll promote it heavily, but if I don’t get at least ten qualified buyers to look at it within thirty days, I’ll put it in the MLS system and open it up to agents.” The difference may be subtle, but it is significant. With the first attitude, the FSBO is passive. The second FSBO is aggressively marketing the property with a plan, but knows that exposure is the only missing element. Security It shouldn’t be this way, but it is. Security of people and property must be considered when your home is on the market. Here’s why. • There are people that look at homes as a prelude to burglary or other felonious acts. Page 7 of 33 Don Cook, Realtor® 214-734-7629 • People showing homes - EVEN SEASONED AGENTS - have been assaulted too many times to mention. FIRST THINGS FIRST How do you protect yourself, your family and your belongings? You can start by putting in place the same safeguards that most real estate agents use. Before my first visit with a new client, I tell them to bring the following to our first meeting: A driver’s license with photo and a pre-qualification letter from a lender. When a new customer calls to see a listing; 1. I never meet them at the address they want to see; they must come to my office first. I ask them to fill out a simple form that supplies their name, address and phone, plus I make a copy of their driver’s license. 2. I ask for a copy of their pre-qualification letter from their lender. If they can’t produce one, or if I can’t talk to their lender on the phone right away to get a verbal approval, I respectfully decline to show them the listing. If they can’t buy, why waste my time? 3. When showing the home, I ask them to please stay with me during the showing and let them know that this is for security and safety purposes. This is especially true if they have small children, because the liability issues of showing a home are just too great. I don’t let anyone wander off on his or her own while in a seller’s house. 4. Depending on the feeling I get from the prospect, I watch where I stand. I make sure to position myself between the door and the prospect. This keeps the possibility of a means of escape easier should the need arise. Sound like too much? I don’t think so. People today are more accustomed to security measures and should readily comply. If they don’t, what does that tell you? Frankly, I’ve never had a complaint from a client because of these measures. In fact, I think there is a sense of respect on their part that I am so careful with my seller’s property. YOU NEED TO KNOW WHO’S COMING, TOO! So, how do you accomplish the same type of security as a “For Sale By Owner”? Here’s what I suggest. 1. If possible, have at least one other adult present during the showing. 2. Never show the home to a “walk-up”. This can be dangerous. Always request that an appointment be made to see the home. If anyone does stop by and wants to see the home without an appointment, just be firm and tell them no. Page 8 of 33 Don Cook, Realtor® 214-734-7629 3. Tell the prospective buyer that you will require verification of their lender’s pre-approval letter before showing. You can soften this the same way I do by saying something like: “I’m sure you understand that I can only show the home to someone who can afford to purchase it. So when you come, would you mind bringing me a copy of your pre-qualification letter?” If they don’t have one yet, tell them that your lender will call them and then call you back when they are pre-approved. 4. Ask for their current address and phone. Tell them that you have arranged with a friend or neighbor to know who is seeing your home and when. 5. When the buyer asks what time you can show the house, never say that no one will be home during the day even if that is the case. Always say something like “Well, I’m in and out all day but around 6:30 tomorrow night or Saturday afternoon will work best for me.” Similarly, when showing the house to them, don’t let them in on your schedule. When they arrive, be friendly and cordial, and ask “Did you bring your pre-approval letter?” If not, tell them that you would be glad to arrange the showing at another time, but you must have the letter before they can tour the home. Tell them you have a friend that is an agent and he said it would be better this way. (I’m that agent, so you told the truth). If they have the letter, great! Before the tour starts, let them hear you call a neighbor or friend and say “The Smith’s are here to see the house, I’ll call you back when they leave.” When you hang up, say something like: “I’m sure you understand why I have to be so careful. He always makes note of the make of car and license plate number of anyone who sees the house. I think he’s paranoid, but he says that’s a sign of the times”. If you don’t have someone you can call, you can always call me since I know what you are trying to do. After the call, just dismiss the whole issue as being trivial. Suggest that they stay with you during the visit. You can tell them that this is for insurance liability purposes. (Call your insurance agent if you wish and they will tell you this – you won’t be telling a fib!) Before the showing, pay special attention to the BIG THREE – GUNS, DRUGS AND JEWELRY. These are the targets for most home robberies along with electronic items. Since you can’t take your TV and computer out every time you show the house, you just do what you can. 1. Hide any jewelry and jewelry boxes. This isn’t necessarily because they might be stolen during the showing, but because they might become the target later. Page 9 of 33 Don Cook, Realtor® 214-734-7629 2. Conceal all prescription drugs. Temporarily take them out of the normal storage area and put them in a cardboard box in the garage. You can put them back after your prospect leaves. 3. Make sure all weapons are stored off-site during the entire time your home is on the market. If someone asks about your security system, such as “Are the windows alarmed?” just say that your system is flexible and if they purchase the home it can be set to their standards. Don’t tell them how your system works on the first visit; after all, most people see a home 3-4 times before making a purchasing decision. While these measures may seem impractical, they aren’t. Don’t become a statistic. There are dangerous people out there that target homes for sale. Build a team Realtors® never work alone. They have office staff for the mundane tasks, plus they have experts in every field of real estate to help them cover all of the bases. Selling (or buying) a house is simply too much work if you have to do everything yourself. I have several mortgage experts on speed dial, along with title companies, home inspectors, home warranty people and so on. It doesn’t cost me a penny to have the best advice available when I need it. It won’t cost you, either. As part of your planning process, sit down with a loan closer at a title company for a little chat. Learn what to expect when you come in with a contract and what forms you will need. Find out if you need an attorney to help you draw up the documents. If your buyer has an attorney, do you really want them to call the shots? A loan officer, mortgage broker or mortgage banker can provide invaluable assistance to FSBOs by helping you pre-approve prospects. They can also help with financing plans that can make your property more attractive to buyers. Consider hiring an agent as a coach in the selling process. Many are happy to do so, and some will even offer extended advice for free because they hope you will end up listing your house with them. Use the checklist after this chapter to get ideas on areas that need planning. After you browse the checklist, try to honestly answer the following questions. 1. What is my primary goal in selling FSBO? Page 10 of 33 Don Cook, Realtor® 214-734-7629 2. How fast can I move if I sell my house? 3. Do I have everything I need to complete a sale? Page 11 of 33 Don Cook, Realtor® 214-734-7629 Chapter 2 Preparation Builders call it a “Punch List”. This is a list of repair items that are insignificant when looked at individually but can be time consuming and expensive when viewed in the entirety. While you don’t want to turn your house into a money pit, there are certain to be items that you should pay attention to before you put your home on the market. An item on a punch list may read, “caulk baseboard on east wall in bedroom three closet”. “No big deal”, thinks the painter that will do the work. But, to the owner buying the home the missing caulk shows a lack of attention to detail in building the house. If something as obvious as this has been overlooked, how many hidden defects are there? In older homes, the list can be voluminous. You don’t see them anymore because after a while it is human nature to overlook them. Some defects are bothersome, like a sticking door or window that is hard to open. Even though we know about them we rarely have them repaired because the repair is more bothersome than the defect. When I do a new listing, I use a pre-listing checklist to make note of defects or go through each room and point out obvious problems. This is painstaking and usually results in a lot of groans on the part of the homeowner. Invariably I’m asked whether or not a certain item must be repaired in order to sell the house. I always have the same answer: I don’t know. That’s the truth because I don’t know which crack in the wall or sticking drawer will cause the potential buyer to turn away. I don’t know for certain that you have to paint over the purple walls in your child’s room or remove Grandpa’s WWII Nazi memorabilia from your family room. What I do know is the cumulative effect of repair items and décor issues will make other homes look more attractive. Why give them more reasons to say no to your house? Pay particular attention to the theory of CKB – Curb, Kitchen, & Bath. When you have a tight budget, spend your repair money on these items first. Curb appeal is essential. If your house doesn’t look good from the street you are going to have a tough time making them feel comfortable Page 12 of 33 Don Cook, Realtor® 214-734-7629 inside. In real estate, we often feel that a purchasing decision is made at the curb and confirmed inside. Curb appeal encompasses the lawn, landscaping, paint condition and color, roof, neighborhood and so on. Maybe you can’t do anything about your neighbor’s choice of house paint, but it’s possible you can ask him to help you maintain a good appearance while your home is on the market. Make sure your front door looks good and opens and closes easily. If your hardware is showing signs of age, change it. Chances are, your prospect will be standing at your door waiting for you to answer. While standing, they have nothing better to do than stare at any defects. Stand on your porch for a full two minutes. What do you see? Once inside, the rooms that will be most closely scrutinized are the kitchen and bathrooms (including the half-baths). Make them spotless and odor free. While your home is on the market, keep cooking to a minimum if at all possible. If you must cook, avoid food that has pungent odors. When you visit a new model home that has been professionally furnished, the rooms are deceivingly spacious. On close inspection you become keenly aware that no normal family would actually live with the sparse furnishings displayed. Not for long, at least. If your potential buyer is typical, he or she is looking for a home with more space than they currently have. It’s human nature that most of us want more than we have, even if we already have plenty. Clutter Kills. One of the reasons we want more room is that we are creatures that accumulate. Knickknacks, souvenirs, collectables, clothes, and the like make our homes seem smaller over time. Every closet and cabinet is stuffed with things we will not discard even if we no longer have a use for them. Personally, I use the services of a Home Staging Professional to help my listings sell. Take a tip from the professional new home decorators by turning your house into a model home for the entire time it is on the market. Remove clutter from your house to make it appear larger and therefore more attractive to prospective buyers. Remember, you are leaving anyway, so why not pack as much as possible and get it ready for the moving van? Start with closets. Remove all out-of-season clothing, sporting gear, hatboxes and so on. Make each closet appear to have room galore. If Page 13 of 33 Don Cook, Realtor® 214-734-7629 needed, add potpourri to eliminate clothing odors and make sure that the shelving and carpet is clean. Use the same techniques with the pantry and kitchen cabinets. Remove any oversupply of pots, pans, utensils, and dishware. Don’t forget other spaces such as linen closets and attic storage. Your goal is to reduce any sense of overcrowding in these areas so that the buyer feels they will have plenty of room. Most of us use very little of the items we have, so inconvenience to your family will be minimal. Remember, you only have to do this while your home is on the market. Now it’s time to work on the rest of the house. It helps to make this a family project, so enlist all of the help you can. In every room, make a list of furnishings you can do without through the selling period. Can you remove a corner table, exercise equipment, extra seating, toys, and etc. without affecting your lifestyle too adversely? Maybe it’s time for a garage sale to help recoup some of the moving costs you will face. If your budget allows, rent a storage unit to store the overflow instead of putting it all in the garage. People want garage space too, so making it seem small with all of the above stacked inside may not maximize the desired result. If the garage is your only option, go for it and just remind buyers that you are moving and are just trying to get a head start on packing. During the selling period, convince your family that you must act as though you live in a vacation resort. There may be some complaints, but they can do without the clutter and the superfluous material possessions that normally surround them if it helps the house sell quickly. The faster the sale, the faster everyone can get on with their lives. While we’re on preparing your house to sell, let’s talk about home inspections. One of the major reasons a sale fails to consummate is the breakdown of negotiations about repair issues arising from the buyer’s home inspection report. In Texas, home inspectors are licensed professionals whose sole purpose is to find out how many skeletons are in your home’s closets. Usually, the inspection follows the seemingly successful arrival at a selling price of your house formalized by signatures of all parties on a purchase contract. At this stage, most contracts move to the “option” period in which the buyer has the opportunity to substantiate that the condition of your home is as you say it is. Not all contracts have an option period, but it is rare that a contract is written in such a way that prevents the buyer from taking due diligence in Page 14 of 33 Don Cook, Realtor® 214-734-7629 regard to a home purchase. If the buyer is working with an agent, you can be almost certain that the option period will be in force. The results of an inspection can be startling to an unsuspecting homeowner. The inspector may say that you have less than 2 years of life in your roof, or that your foundation is suspect plus conditions are conducive to termites. The list can go on and on. The net result is that a buyer may demand an amendment to the contract adjusting the sales price to compensate for repairs. Real estate transactions are famous for the “treble damage” rule: If something costs $1000 for you to repair, the buyer will want you to drop your price $3000 if they have to fix it. The best way to protect yourself is to have a preventative inspection before you put your home on the market. Call a licensed home inspector and have them prepare a report for you as though you were purchasing – not selling – your home. The cost of an inspection is about $200 and well worth the investment. Having your own inspector prepare a written report will assure you ample information about any necessary repairs without resorting to price concessions later on. You can also present prospective buyers with a copy of the report and receipts for the repairs you made. Your negotiating posture will be improved throughout the selling process in ways far exceeding the initial cost. Take a moment and candidly question yourself in the following areas. 1. How much money am I willing to spend to get my home ready to sell if repairs or updating is necessary? 2. Have I had an objective opinion from a disinterested party as to my home’s condition and market appeal? 3. Have I looked at the competition in my price range to see what they offer? Page 15 of 33 Don Cook, Realtor® 214-734-7629 Chapter 3 Pricing You simply must understand the basic premise of the real estate market. Price your home too high and it will stay for sale indefinitely. I wanted to get that out of the way first, because pricing is perhaps the most sensitive issue that agents face when listing a house. Just because you are going FSBO doesn’t mean that pricing correctly and competitively have lost any importance. In theory, FSBO properties should be priced lower than similar Realtor® properties simply because there is no commission involved. Actual real world conditions regularly prove this otherwise. FSBO properties are normally priced over the competition, resulting in a frustrating cycle of advertising, showing and negotiating offers. The reasons are many, but the reason doesn’t really matter if the house doesn’t sell, does it? Let’s talk for a moment about how the majority of Realtors® arrive at a suggested selling price for a property by using the Comparison Market Analysis (CMA). In a nutshell, the subject property (your house) is compared to recent sales of like properties in the area and priced accordingly. The CMA is designed to parallel the Uniform Standards of Professional Appraisal Practice (USPAP) theory of “Substitution”. Substitution is a technical term used by professional appraisers, and could be viewed as the process of determining how an informed buyer would spend his or her money when presented with an array of similar choices. Think of Substitution as being an “apples to apples” comparison. Substitution doesn’t care what you paid for the property or improvements, nor does it care how much you still owe on your house. It doesn’t care what your relatives or friends think you could get for your property, and it doesn’t take into consideration how much you want. It is a cold, impersonal, unbiased, and objective comparison of your home to alternatives in the marketplace. Page 16 of 33 Don Cook, Realtor® 214-734-7629 A professional appraiser under the USPAP guidelines does not consider other properties currently for sale when arriving at their estimate of value. Why? Because the selling price is often different from the asking price. For that reason, only actual “sold” properties are considered as comparables to your home’s value. The end result of the appraiser is the published finding called a Uniform Residential Appraisal Report (URAR). The difference in a URAR and a CMA can be dramatic at times. Appraisers are licensed by the state and must conform to the USPAP standards in determining value. The URAR process usually takes about 4 hours, and follows a rigid format. A Realtors’® CMA, on the other hand, is often no more than a quick average of sales prices in a given area and reduced to a square foot price projection. Some Realtors® go into greater detail than others, but usually the process takes less than an hour. In addition to the time and format differences, there is a fee for the URAR while Realtors® usually offer the CMA at no charge. The middle ground – and the one I personally recommend – is the Broker’s Price Opinion (BPO). This is the format that Fannie Mae and Freddie Mac normally require for their own properties when establishing a selling price. The complexity matches the URAR, but also includes the estimated selling time, marketing plan, and budget for any required repairs. The BPO compares your property to current listings as well as recently sold properties, plus it rates the marketability of the your property before arriving at a value. The BPO is a time-consuming analysis that you can normally get free from any Realtor® that is familiar with the process, but you have to ask. Otherwise, you’ll get a CMA. As a FSBO, the single most important marketing decision you will make is setting your selling price, which may be different from the market value. Remember that market value is not as important as the selling price you actually set for your home. As an example, let’s say that a homeowner’s CMA, URAR or BPO suggested a market value of $150,000 on a home, yet the selling price was set at $159,000 so they could have some wiggle room to negotiate. The end result would little or no showings because of the perception of overpricing. So, instead of wiggle room, the homeowner in our example would have no offers at all. In our example, the price was only six percent (6%) above market value yet the property sat on the market. This situation happens in real life on a regular basis. Page 17 of 33 Don Cook, Realtor® 214-734-7629 For every one percent (1%) you overprice, you will drive away a significant pool of potential buyers. Here’s why. At market price – the actual best projected selling price of your home – you will appeal to seventy percent (70%) of the buying public. Drop the price by five percent (5%), and you will appeal to eighty five percent (85%). But, when you raise the price by five percent (5%), your appeal level drops to about fifteen percent (15%). If our pool of buyers was an even one hundred to begin with, we only have fifteen who would even look at the home when we overprice by five percent (5%). It goes downhill fast from there until there are no buyers left that will tour your home. If no one is looking at your home, you won’t get offers and discouragement will set in. So, by raising your selling price above the market value you incur more carrying costs, advertising costs and the hassle of keeping your home in constant showing condition. Before long, you decide that the selling process is too difficult and you list your home with an agent hoping to get the whole thing behind you. Look at setting the price as just another task that has to be tweaked for mass appeal. If you painted the outside of your home to make it sell faster, you wouldn’t pick hot pink with purple trim even if you really loved those colors. You would pick safe, middle-of-the-road colors that would appeal to the majority of buyers. The same could be said about pricing. Use the price that appeals to the majority – price at market value or slightly below and you’ll end up with a sold home. With few exceptions, the overpricing of For Sale By Owner properties is the key reason they don’t sell. Don’t be another statistic – price it right! Here are a few questions to ask yourself about pricing your property. 1. How did I arrive at my selling price? 2. Do I look at my selling price weekly to see if it is still competitive? 3. What data can I provide to prospective buyers that my home is a strong value? Page 18 of 33 Don Cook, Realtor® 214-734-7629 Chapter 4 Promotion Since it’s your job to introduce your home to the buying public, let’s look at marketing. Where do you spend your money? And since we mentioned money, how much are you prepared to spend to advertise your house? Do you run newspaper ads? What about yard signs and information boxes? Do you do an open house? Do you mail postcards around the neighborhood? Do you need a “Take-Away” Package (TAP)? Let’s make this an easy test – the answers to all of the questions above are “yes”. Your home needs exposure to the marketplace so qualified buyers can find out about it. News ads. This is the second most used medium for advertising a home for sale. Newspaper ads can and do help, but don’t bet the farm that a news ad will sell your house. When you look in the newspaper, you will notice that a huge number of Realtors® running big ads with pictures. What you may not know is that most of these agents are not trying to sell one particular house in the advertisement. Instead, they are enticing potential buyers to call them because they offer so many listings. Agents also use these big ads to show potential home sellers how they will advertise their property if they decide to list with them. Agents know that newspaper advertisements are helpful in creating the critical mass of buyers required to consistently sell a large number of listings. Of course, you don’t need a steady flow of buyers – you only need one! Your ad doesn’t have to be big or fancy; it just has to be effective. So, don’t waste your money on big ads or daily placements. Sunday is the best day to run an ad and usually will give you all of the exposure you will need with this medium. Here are a couple of sample ads: Page 19 of 33 Don Cook, Realtor® 214-734-7629 HOT! FSBO Special 3/2/2, 175K 214-555-2121 FSBO DREAM DEAL 3/2/2, 175k 214-555-2121 The second ad plays on the reality that people look at FSBOs for “The home of their dreams at a deal of a lifetime”. You can add volumes of information that will increase the cost of your ad but have little or no impact on the results. This comes from my own personal experience of placing hundreds of newspaper advertising formats. People browsing ads look at 2 key elements – the amenities (3/2/2) and the price. If you have a pool, go ahead and say so because it will filter out the people who don’t want one. Always put in the price! There is no need to field calls from people looking for a home far above or far below yours. Never put your address in the ad! If you do, you’re setting yourself up for security issues. Do offer the fact that you are FSBO in every ad. Some people are more comfortable calling a FSBO than an agent ad because they feel the agent will hassle them (obviously, I disagree with the whole “hassle” issue). Yard signs. The majority of yard signs that FSBOs use are the ones purchased at hardware or home improvement stores. They’re inexpensive and look it. Most of the time, the phone number will be written in with a marker. Your option is to go to a sign shop and have one made. It may cost a little more but it is a good investment. A professional sign will make your home look as though it is professionally marketed and not just a trial run. Open house. In the same way that they don’t run a newspaper ad to sell a specific property, Realtors® don’t hold an open house to sell that particular house. They do so to attract buyers who may or may not be interested in that specific property. Realtors® see it as just part of the overall process of prospecting. For Sale By Owner properties are perfect for open houses. In fact, I recommend that it be your primary method of showing your property. You Page 20 of 33 Don Cook, Realtor® 214-734-7629 can tell every caller that your home will be available for preview on the weekend. If you are using a dedicated phone line for taking your calls, make sure you advertise the open house in your message. By consistently having your home open on the weekends, prospects feel more at ease to drop by during the open house time than when making an appointment. It’s definitely safer for you, because ne’er-do-wells never know when someone else will come to the door. Plus, your family is disrupted less because you are showing at a specific time every week. Maybe you will elect not to use an open house as your primary tool. You should do at least one open house, targeting your particular sub-division or neighborhood. That’s because people like to live around friends and family and your neighbor’s curiosity will help you sell. I suggest post cards, flyers and phone calls when possible to attract your neighbors to your home. It may be their family or friend that will be the buyer you are looking for. It’s also a good time to solicit comments on better ways to show your home. I suggest offering an incentive drawing to fill out a showing card for all of the neighbors that attend the open house. If they fill out a card, they have a chance to win a $50 gift certificate to a home improvement store (or something similar). Advertising an open house is as easy as posting signs on the street corners in your neighborhood. Usually, 4-6 well-placed signs will be sufficient and be sure to add a sign directly in front of your home. Balloons or flags during the event will help you attract visitors. If you feel you want to advertise your open house in the newspaper and invite the public in general, keep the ad simple and offer something special. Here’s an example: FSBO OPEN HOUSE 3/2/2, 175k, 2-4 This Sunday 2020 Main. Prizes, Free Stuff! Grab bags with candy, pens, scratch pads and such make a good giveaway. You can usually get the pads and pens free at a title company. Put these items in small, white paper bags and tie them with a red ribbon for handing out. Have your guests sign a card with their name and address for a drawing you will hold at the end of the event for a $25 gift certificate to Home Depot or some other store. The best results I’ve had when doing an open house is to hire some teenagers to hold up signs at key intersections for about two hours. They jump up and down and attract a lot of attention. This cost about $50, but it’s worth it if it brings in more lookers. Page 21 of 33 Don Cook, Realtor® 214-734-7629 Post cards. Realtors® send out “Just Listed” and “Just Sold” postcards with regularity. Again, this is usually done for self-promotion and not to sell a particular house. As a FSBO, you don’t need self-promotion, but you do need to keep the fact that your home is for sale in front of your neighbors at all times. Within a 60-day period, I was personally involved in two sales where the home was purchased by a neighbor for an elderly parent. This may sound like an incredibly rare event, but remember I am one agent out of thousands in my market place. If it has happened to me, it has likely happened to them also. Your postcards will say “New On Market” rather than “Just Listed”. Make them as simple as your newspaper ad when writing the copy and have a big picture on one side. You can purchase the postcard blanks at any office supply store. Take Away Package This is a folder that will include all of the pertinent data about your house and neighborhood. It will have a flyer, seller’s disclosure, tax information, utility costs, copies of applicable warranties and so on. The more information you include the better, because people like feeling as though you are telling them everything. In your TAP, also promote your neighborhood. Stop and think for a moment about all of the places you go that are only a few minutes from your door. A great place to eat, a hardware store, the gas station, your favorite grocery, and the dry cleaner you use are examples. Use this memory exercise to jot down all of the amenities that surround your home and make it a great place to live. When you purchased your home, it probably took you a while to become comfortable with the neighborhood. You didn’t know the people next door or how many children lived on the street. People who come to see your house may not be familiar with the neighborhood or even the DFW area. They may not know the best places to eat and shop and are probably unaware of the local school system. They need your help. One service that Realtors® provide prospective home buyers moving into North Texas is a welcome package that promotes the area and includes Page 22 of 33 Don Cook, Realtor® 214-734-7629 coupons for area businesses and brochures about attractions. You can pick up a look-alike at your Chamber of Commerce and have it ready to show buyers. If your candidate is already familiar with the area, it is likely that they still may not know about the schools that serve your address. Make a list of them and be sure to include phone numbers and names of administrators. Schools are fiercely proud of their accomplishments, so be sure to include any exemplary ratings they may carry. Most administrators will be happy to write a letter telling about their school while welcoming prospective new students. Be sure to include data on private schools and day care as well. You may not know the information yourself, so don’t be afraid to ask neighbors or look in the Yellow Pages. Maybe this sound like overkill, but remember that the buyer may not know local neighborhoods as well as you do. The things you take for granted might just be the incentive someone else needs to push the purchasing decision your way. They may be concerned about driving time to work or somewhere else, so go ahead and prepare for the questions. How many minutes does it take to drive to Legacy Park or the Dart rail station from the house? How about downtown Dallas? How far is DFW airport or Love Field? When you can produce the answers on all of these questions on a printed page, you have just elevated your home from the competition and helped to increase its value as a place to call home. Many buyers may attempt to trivialize this information because they feel that appearing to be impressed may hurt their negotiating posture. But remember when all is said and done, they want more than a house; they want a home. Now a few wrap-up questions about promoting your property. 1. How much am I willing to invest to promote my FSBO property? 2. How much time each week am I prepared to spend on marketing? 3. Do I have a good method to keep track of what I’ve spent and where? 4. Do I know what marketing avenues I will try next? Page 23 of 33 Don Cook, Realtor® 214-734-7629 Page 24 of 33 Don Cook, Realtor® 214-734-7629 Chapter 5 Showing, Negotiating and Closing OK, we’ve done our marketing in hopes that someone will want to see our house and sure enough, the phone rings! Now what? When a prospect calls you have to change from homeowner to real estate agent in the blink of an eye. The same sales rules apply to you as they would to any professional selling any product or service. When you call someone for information, you appreciate when they exhibit: • A firm, upbeat voice. • A friendly attitude. • Informative but not pushy answers to your questions. For FSBOs, the circumstances are a little different than when you’re an agent fielding the calls. As agents, we rarely get calls from investors on a property unless we advertise the fact that it is being marketed as an investment. And, of course, we don’t get calls from other agents wanting the list the property themselves. Both are common with a FSBO property. In fact, the majority of the calls you receive might well fall into one of these categories. Neither may immediately identify their intention although it is the law that a real estate salesperson must tell you that they are a licensed agent. There seems to be a plague of investors in the area currently, maybe due to the uncertain economic climate we face. These well-intentioned individuals have often just completed some seminar or audiotape series that promised them there was a fortune to be made in FSBO properties. Agents call you to check your psychological pulse – hoping that you’ve become tired of the selling process and are ready to list your home. Here’s the best way to get around both while improving your customer service to actual prospects. Get a dedicated cell phone. Simple, quick and hassle free for all involved. Never answer the phone directly. Instead, use the outgoing message feature to record a quick commercial about your home. This will take between 20-30 seconds and will let them know if the home is something they want to see in person. Page 25 of 33 Don Cook, Realtor® 214-734-7629 At the end of the message, have the caller leave a name and number in order to schedule a showing. Respond to all messages as promptly as possible, but never before you have all of the information about your home in front of you. If the caller wants to see the home, ask if they have been pre-approved by a lender. This is critical! If they have been pre-approved, go ahead and set a time after you have verified the information with the lender. If it is impossible to contact their lender for verification before the showing, my suggestion is you wait until you can. What about the occasion where the caller is not been pre-approved, but promises that it won’t be a problem? I personally don’t schedule a showing when this happens, but you are in charge so follow your instinct. The main reason you are asking for the pre-approval is for security although not wasting your time is important also. This is one of the reasons I suggest you have a mortgage team member on call, so you can tell the caller that your lender will call them right back to get some quick information. If they balk at that, what does that tell you? Let’s assume the best – the caller is pre-approved and wants to see the home. Don’t let them in on your personal schedule, but be as workable as possible around their required times. One-half hour before they arrive, go through the home with a fine-toothed comb. Light some candles, turn on all of the lights and open the blinds and drapes. This helps the home to look roomier. Soft music at a low sound level helps the home seem more inviting. Pets should be contained because some people have adverse reactions to animals. Children should suspend any loud or distracting activities. Turn off the TV, and make sure no cooking odors linger. When the guests arrive, meet them quickly at the door and bring them inside. Always tour the inside of the home first. The best way is to give them a quick recap of your home’s size and amenities, and then ask if there were anyplace in particular they would like to start. Resist the temptation to state the obvious. You don’t have to tell someone that they are looking at the kitchen. They should know. Let them know that they can browse freely and you’ll be close by if they have any questions. (Check the section on security for more detailed information.) Don’t suffocate them, but don’t be hard to find either because you never know when they might need an answer. Be forthright with all responses Page 26 of 33 Don Cook, Realtor® 214-734-7629 and you will avoid any feeling that you are hiding something. Buyers are skeptical by nature, especially with FSBO properties. Make sure you have everything handy to accept an offer! Contracts, deposit requirements, moving schedules, and so on. If they make an offer, stay calm! Buyers are looking for “The Home Of Their Dreams With The Deal Of A Lifetime”. If you are the one doing the selling, this may seem like an unrealistic attitude and can lead to tension during negotiations. You are not about to sell your home at a discount just so the buyer can brag to friends about the deal they brokered. Agreeing to a sale price is one of the most difficult issues surrounding a For Sale By Owner. In an agent based sale, the two agents involved argue back and forth about price, closing costs, possession, timing, etc., and only involve the parties when needed to finalize the transaction. This keeps the buyer and seller insulated from the process and eliminates any bad feelings that could cloud the deal. The agents have the luxury of being somewhat disinterested, because the sale is only one of many they may be working on at the time. It’s not personal to them, merely business. When buyers and sellers interface directly, the tenor of negotiations changes. As the seller, you may feel insulted with what you see as a lowball offer, and the buyer may be just as insulted with what they interpret as your attempt to gouge them. So, how do you keep such an adversarial position from ruining the deal? First, mentally step away from viewing your property as your home, and look at it instead as a house. This is not a trivial distinction, but one of emotional investment. A home is where the family exists; a house is merely a structure that could turn into a home under the right conditions. Next, look at any offer as better than no offer. In fact, instead of being offended at a low offer, be offended by someone who looked at your home and made no offer at all. Don’t answer questions such as, “What’s your bottom number?” Rather, answer back that you’ll consider any reasonable offer if it is in writing with a check for earnest money. This lets them know you’re not playing games. Likewise, don’t answer questions concerning your mortgage payoff, your timing for needing to sell, or any other question that could signal any sense of urgency on your part. Investors are famous for taking such an invasive posture. If asked, answer that those issues are irrelevant, and refocus their attention to some feature of the house. Page 27 of 33 Don Cook, Realtor® 214-734-7629 Look for buying signals. More often than not, it will be a couple that will be looking at your property. Listen for one of the strongest buying signals around: One will turn to the other and ask, “What do you think?” The other will respond with, “I don’t know, what about you?” If you hear a similar conversation, respond immediately by asking in a calm voice how they want their name to appear on the deed. You’ve got a fish on the line – make sure you have a contract and pen handy. Sometimes an offer is made that is simply too low to even consider. Let’s spend a couple of minutes talking about counter offers. A few years ago, some marketing consultant/guru coined the term “WinWin” to describe a negotiating scenario where both sides came out feeling as though they had won. The operative in the sentence above is “feeling”, because actual negotiations rarely produce two concrete winners. So, when some other agent tells me that he wants a deal we’re working to be “Win-Win”, I start getting tense and instinctively protect the wallets of me and my client. Your prospective buyers may very well use the phrase with you. Here’s what they mean when they say “Win-Win”: Meet them in the fictitious middle of some arbitrary number they have thrown your way. Example; you want $200,000 and they offer $180,000 but are willing to negotiate for $190,000 because they want it to be a “Win-Win” situation. After all they posit, what could be fairer than meeting in the middle? Surely, the story goes, you will split the difference and settle the deal! The problem with this is that the middle is determined by where they set the beginning. The middle would be $150,000 if they started at $100,000, and $199,000 if they started at $198,000. Since they chose the beginning number, they can make the middle be anywhere that suits their purpose. (Of course, if they did offer $198,000 for my $200,000 property, I would whip out my pen and be writing the contract before they finished the sentence.) Here’s something that has worked for me over the years, and I hope you can put it to good use. Please remember that I am normally working with another agent representing the other side whereas you will likely be negotiating directly with the buyer, but the technique works the same. In the first example above, your potential buyer has just offered $180,000. First of all, you don’t flinch or bat an eye at such a low-ball offer. You respond with, “I appreciate the offer. Give me a minute to massage the numbers.” Then you play with your calculator and scribble something on a Page 28 of 33 Don Cook, Realtor® 214-734-7629 notepad that they can’t see. You spend at least 2 full minutes mumbling unintelligible numbers under your breath while keying the calculator. After the time pause, lay down your pen and say, “I don’t think we’re that far apart.” Let that phrase sink in for about 10 seconds, because it makes them feel as though you are about to make a huge concession. Your follow up is, “I can drop my price all the way down to $198,416 if you will pay for my title policy at closing.” If the buyers are truly interested in your property and are not trying to steal it as an investment, they will move their number up substantially. Coming off of your price with an odd number after careful deliberation sends the signal that you are at your bottom line. Splitting the difference is no longer seen as an option to them, and they will begin either to move toward your price or away from the deal entirely. Let’s recap what we’ve learned by asking ourselves the following: 1. Do I have a showing method rehearsed and ready to enact? 2. What measures have I taken to protect my family and myself during showings? 3. Do I have someone I can call for a quick mortgage pre-approval? 4. If someone makes an offer, am I ready and able to complete the sale on the spot? 5. Do I know what I will do if the buyer wants an option period? Contingency sale? Owner finance or second lien? Lease purchase? Page 29 of 33 Don Cook, Realtor® 214-734-7629 Chapter 6 Your 30-Day Action Plan! Now it’s time for the meat and potatoes – putting together a plan to attract qualified buyers to your home. Your action plan is designed around the following philosophy: One prospect in ten will make an offer on your home. Of course, we don’t know which one out of ten will make the offer, and this is a broad statistic based on agent’s experiences. You may get an offer right away and you may have twenty people come and receive no offers. But, day in and day out, the general rule we follow is that one in ten will make an offer. Our goal then becomes to attract ten qualified buyers to our home within thirty days. If we do, it is likely that one or more will make an offer. This statistic is most valid when: 1. The home is competitively priced. 2. The home is priced according to condition. 3. You have been available to show the home when required. 4. General economic conditions are conducive to the sale. As an agent, I spend the majority of my time marketing to other agents because they are involved in over 90% of all sales. I don’t spend a lot of time or money marketing to the general public for the same reasons. As a FSBO, your tactics will be a little different. Let’s start with discussing how I personally arrive at a marketing budget and strategy. Before that, let’s dispel a rumor: Real Estate Agents make a lot of money. How I wish that were true! Your agent probably makes about 45-50% of the commission on their half of the transaction after splits with the broker, marketing, insurance, listing fees and association expenses. The math on a house selling at $165,000 is ½ of the commission on the listing side, or $4,950 (supposing a 6% fee) will go to the agent that lists the property. Of that amount, the agent receives about $2,200-$2,500 before taxes. Industry average is that it takes around 110 man hours to see a house through until closing. That means that your agent could earn as high $22.72 per hour to monitor your sale and protect your interests. However, about 20% of listed homes do not sell, and about 35% of homes that do are not sold by the original listing agent although they invested their time and resources. After deducting the latter from the hourly rate, we arrive at a probable wage of $14.77 per hour. When you think of the Page 30 of 33 Don Cook, Realtor® 214-734-7629 educational requirements, the hours on call and the liability involved, it’s a wonder that anyone wants to sell real estate for a living. And remember, that wage is not guaranteed! Maybe this helps you understand why commission rates are as they are. Those wages are one of the key factors in the growth of discount realty firms. The premise is that if fewer hours can be directed toward the sale by offering fewer services, the actual hourly wage can increase. If you charge $495 for a discount listing but only invest 20 hours because the homeowner is doing most of the work, you make $24.75 versus $14.77 when offering full service. On with the budget. As a general rule, I set aside one-half of one percent (.5%) of a home’s target retail value as a marketing budget. On a $165,000 home that amount would be $825. That means that when I take the listing, I am prepared to spend $825 of my own money up front to market the house. My normal listing period is ninety days. This gives me time to market the home adequately and allow for market forces to move in my favor. The next step I take is to make a monthly marketing budget. The first month is when the most activity takes place on a new listing simply because of putting it in the MLS. In the first thirty days, I spend 65% of my budget. Every plan is shared with the client because I feel they have a right to know how much I invest in marketing their property and where and when I spend the money. This makes us partners in the success of selling the home. As a FSBO, you can achieve the same psychological results by seeing your plan written down on paper. This is no small thing! Written plans are more likely to be followed than plans that we keep inside our head. If you plan to spend x dollars on a marketing activity, you are more likely to go through with it if you have committed the action to paper and have budgeted the money. The second month, I allocate 25% of the marketing budget and the remaining 10% is spent in the third month. The latter months require less expense because of the impetus of activity generated by the money spent in month number one. Activities are broken down into two broad categories: “Agent” & “Public”. Agent activities are those in which my marketing dollars are spent to advertise your home to my fellow Realtors®, and Public activities are monies spent on items such as newspaper ads. Page 31 of 33 Don Cook, Realtor® 214-734-7629 Further, I break down the activities to each of these into two more categories: “Broadcast” & “Target”. Here’s an example. Let’s assume your home is in Serenity Acres, a pleasant subdivision of $200,000 dollar homes. I would find every agent who has sold a home in Serenity Acres within the last year and personally e-mail them about your listing. This is an “Agent-Target” marketing ploy that has zero cost but highly effective. If an agent has had two or more transactions in your subdivision, then I know that they focus on the area. Within this group, I hand-deliver a CDRom with a Power Point presentation about your home. This is economical to produce and it gets their attention every time. Remember, I have allocated $650 for the first month of marketing in this hypothetical example. You can probably see why money spent wisely goes a lot farther than funds spent on newspaper ads. Post cards in the neighborhood are “Public-Target” because they have a specific audience. Newspaper ads are “Public-Broadcast”, and flyers sent to area real estate offices are “Agent-Broadcast”. I’ll bet you get the picture. Your marketing will be geared to the public, but you can use the broadcast-target sub-categories if you like. I suggest you spend the majority of your dollars on target marketing within your neighborhood because it has the highest return possibilities. FSBOs almost always neglect this pool of potential prospects, opting for newspaper ads as the primary tool. Open your 30-day Action Plan and look at the weekly calendar. Starting with the month you want to plan put the date along side the day for the entire month. On the right-hand side, put in the amount you allocate for the first 30 days. Next, browse the A-Z marketing suggestions at the bottom of the form and choose an activity. Let’s say you pick “B”, the New On Market Post Card and you plan on mailing them on the 3rd day. Put the letter B on the calendar on the 3rd, and then also put the letter B in the first box on the budget and expense column. Write in the amount you spent and the date when you wrote the check. It’s as simple as that! Fill in the entire calendar until you have allocated your first month’s budget. Now you know what you will spend, and when Page 32 of 33 Don Cook, Realtor® 214-734-7629 and where you will spend it. If you have acquired a FSBO Coach, ask them to go over your plan before you enact it. In the area below the calendar you will see the Marker Legend. Use a blue marker to indicate every phone call or e-mail inquiry about your home whether or not the contact is from a qualified prospect. You’re just counting “hits” to your marketing. Use a red marker to indicate any showing to a qualified buyer and a green marker to show you received an offer. Using colored markers may seem unnecessary, but this quick visual will show you where you stand at all times. On the back page you’ll find the Prospect Tracker. Here’s an old sales gimmick: Most people make major purchasing decisions after the 5th contact and most sales people quit calling on prospects after the 3rd turn down. Persistence pays off. Start with a Thank You card and then find a reason to call 5 more times! If you have a valid reason you won’t be seen as pestering them. Ask you Coach for hints on this one or call me. I make it a point to call every agent that views one of my listings 5 times. It’s a habit and I don’t even have to make myself do it any more because the system is on autopilot. If you have adequately exposed your home to the marketplace and it is competitively priced, you should receive an offer within 30 days. Keep tweaking the plan as necessary to increase the number of qualified showings. Remember, your goal is to get ten in thirty days. At the end of the thirty days, review your plans with your Coach if you have one. Think of what could be done in the next month to increase showings. Don’t give up or give in. If you work the plan effectively, it will pay off in a Sold Home! Good Selling! Page 33 of 33 Don Cook, Realtor® 214-734-7629
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