Using the Web and social media to sell real estate

Today I participated to my local real estate investor association meeting (you see a short video below). The consensus amongst the active investor present there are at least six strategies that are working TODAY in the current market to sell a house.

There are at least six different ways for selling a house today.

Not all of them work equally well in all markets, but again real estate is a field that requires judgment and you will need to figure out by yourself what works for you.

The six strategies are as follow:

1.FHA loans are the king of the hill since they provide a very easy way for home buyers to get into their new home. The qualification process is somewhat stringent: they need to have at least 620 credit score and the house you are selling need to appraise correctly, otherwise they will not get the loan and you will have to reduce the price to what the appraiser has established to drop the deal. Yet there are is a big number of buyers in this category that are using this system.

2.Cash buyers: they are still pretty much around and looking for very good deals, therefore you need a house in good shape that is below current market value (let’s say 80% but this is just to give you an idea – there is no fixed number). Domestic cash buyers are estimated to be 40% of the buyers out there.

3.Lease option or rent-to-own buyers. These are people who can’t qualify for a loan yet, but could qualify later, once they have corrected their credit score. They usually get in the house by paying an option fee (often non refundable) and them by paying rent every month untile they can get a loan and cash you ouy.

4.Seller financing is still one of the preferred techniques in creative real estate transactions. You need a seller who owns the house free and clear and who doesn’t need all the money right now. It is the fastest way to get a buyer since you bypass all of the lending process, but will tie up you capital for a longer time.

5.Foreign cash buyers: they are not so common but yet are out there and can pay cash for close to full market value, if you provide them all the needed services for a long distance transaction and for the subsequent management of the property.

This shows that the real estate market is still alive and kicking even if the rules of the game have changed.

Roberto Mazzoni

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Banks and lending institutions have been at the center of the US real estate storm for the last three years and it is no wonder that many of them have gotten into trouble. What surprises me is that there is an “Unofficial Problem Bank List” that now includes 644 institutions for an aggregate assets value of $326 billion. A very informative article to this effect was just published by calculatedriskblog.com and it gives full detail on which institution is in trouble and the reasons for it.

Actually it is no surprise that these banks are in trouble considering the sharp reduction of lending activity, just dropped to the low levels of 1997, and considering the staggering amount of foreclosures still waiting to come out. What is actually amazing is that many banks still manage to survive despite everything, thanks to the support funds they are getting form the government and that would be intended in promoting lending and reducing foreclosures.

But now, despite the government props, banks are actually starting to fall off the chart again, some just disappear and other are acquired by other banks and merge with it. Many of the recent additions are banks traded at the stock exchange, so the crisis is getting also to the bigger institutions.

Roberto Mazzoni

Warren Buffet, the billionaire entrepreneur become very famous for his foresight, recently sent his annual letter to his shareholders. This year he has a special section dedicated to real estate where is is directly involved because Berkshire Hataway Inc, his company, owns the house manufacturing company Clayton Homes.

According do Buffet’s analysis, the manufactured homes market is in very serious trouble because the economy is still slow and because of the number of new houses that started production in 2009 (housing starts) is the lowest in 50 years in the US. The overall figure being: 554,000 compared to the 2 million annual production that was going on a few years ago.

New house starts (new construction beginning) is at the lowest in 50 years.

It is a dramatically strong reduction that has serious impact on employment (it is actually pretty easy to find tradesman and construction people available for work today) but that is helping the recovery of the general real estate market.

Indeed, with so little new homes being constructed or manufactured, the inventory on the market has a chance of being unloaded faster. Actually January has been a very slow month after the rush of the buyers who wanted to take advantage of the tax credit that was supposed to end in December 2009, but Buffet sees the dramatic drop in new houses as a very good indicator for the overall real estate market and he estimates that within a year “the residential housing problem” should largely be behind us.

Looking at the figures, 650 thousand net housing units were added during 2009 and during there were not as many new households: about 650 thousand, therefore just enough to balance the houses that had been added but not enough to seriously reduce the inventory, which should instead start reducing for real in 2010. How fast? It depends on what the banks do with their foreclosure backlog and how people will take advantage of the tax credit and of the government support to new first time home buyers.

Roberto Mazzoni

I have just reviewed an interesting training package written for Realtors and home owners who want to speed up the sale of a property in this slow market. I found it quite interesting and I want to tell tyou about it in this post. First of all it is compiled by home owner who tried various ways to sell a property and then finally found a way so elicit a lot of interest in the property he had been desperately trying to sell.

A luxury bath in a house for sale in Nevada.

The story begins with this 46 years old guy who, after living a care-free life as he describes it, ended up divorced, living with his mom and verging toward a financial catastrophe. He then decided to sell a rental house that he had been owning for 20 years and found a Realtor that, after running some comps, gave him a price he was very comfortable with. The Realtor also added that with such a price the house was going to attract a lot of interest.
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One interesting story comes from Riviera Beach, a Florida resort just North of West Palm Beach. It is a pretty small place built around a harbor on the Atlantic Ocean and with a very nice beach. Wikipedia reports that it “is predominantly an African American city” and “consistently has crime rates well in excess of the United States average and is also notable for its high levels of poverty”.

But, as it sometimes happens in other very poor cities or neighborhoods, Riviera Beach became the target for massive redevelopment so to create areas of very expensive real estate with the objective of eventually turning the whole market around. One of these developers was Cornerstone Group from Hollywood that created a whole gated community called Marsh Harbor with 402 units and various amenities like a fitness center, lighted tennis court, swimming pool and heated spa.

One of the townhomes in Marsh Harbor, apparently the bigger one, sold as a shortsale by Palm Beach Florida - Real Estate

They were selling these townhomes for as much as $ 310,000 in 2007, now these same townhomes are worth between $55,000 and $75,000, according to the County Property Appraiser and to the current listing prices of the many shortsales in the community, and they are very difficult to sell. So Cornerstone Development will auction off 64 of these townhomes on March 13. The first 20 of these townhomes will be sold “absolute” to the highest bidder regardless of price, at the highest discount possible, as a push to get rid of the remaining inventory. The remaining ones will be sold to the highest bidder, with prices subject to approval by the seller.

It is the exact same concept as used for major stores: where you have low cost products that are being offered at a loss so to get people through the store and getting them to purchase other more profitable merchandise. One would never expect to see the concept applied to real estate, but times are changing and any marketing tactic goes, apparently.

Roberto Mazzoni