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Last Updated: May 14th, 2012 - 22:24:01 |
The Six key elements of your marketing strategy for selling your rehab property
You need to begin planning your marketing strategy or exit plan before you actually buy a property. It’s not good enough if you wait until the rehab is complete because your buying strategy should be intertwined with your selling strategy. For example, did you assume a loan that can be passed on to your buyer or can you create an assumable loan when you buy? If a new loan will be required, what will conventional or FHA lenders require in terms of physical condition of the house? Start planning your strategies on the front end so that you can begin implementing them on the day you close your purchase.
There are six key elements of any marketing strategy, regardless of the product you are selling. Here’s a summary of them, put in the context of selling your rehab property:
- Sell a product people want to buy. If you have not created a house that people want to buy, you will not get it sold for top dollar. This speaks to your rehab plan and the “sizzle features” that you should have included. Certainly, people want to buy houses to live in. but what distinguishes your house from all the others on the market? Your product must have something about it that is unique or unusual, compared to competing products. If not, your house is mediocre and will likely languish on the market and cost you money in holding costs. Create demand by including features people really want and can’t find at a comparable price. This is a key element to your marketing strategy.
- Know Your Customer. In devising your marketing plan, it is imperative that you have a good knowledge of your buyer’s profile. Assuming you’re working at the lower end of the price range with your rehab investment, your primary target customer is the first-time homebuyer. In terms of selling the house to this buyer, you will need to be prepared to help in overcoming several potential problems – fear, down payment, and loan qualification being the most common.
- Make it easy to buy. With many products, sales will increase dramatically if you make it easy for a customer to buy your product, for example, by providing a postage-paid order form or a toll-free number. When selling a house, it’s a little more difficult to “make it easy”, but there are some things you can do. For instance, you could create and offer assumable financing or sell on a wraparound mortgage. You could work with a non-conforming lender in advance and put together a financing package that might include you carrying back a second mortgage coupled with a low down payment requirement. Work up a summary of the requirements for the first-time homebuyer financing programs being offered by lenders in your area. What else could you do to make it easy for your buyers? Think!
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Offer incentives. Your house will sell much faster if you are offering some additional incentives. This would include incentives to your buyer and incentives to your real estate agent, if you are using one. A common incentive for the buyer is to offer a home warranty program that you and/or your agent would purchase. How about a health club membership?
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Fair price. People will not buy a product if they think they’re getting ripped off. In terms of selling a house, this means that you never price it very far above current market value. You want to receive top dollar for your creation, but if you overprice it, you will see a lot of resistance in the marketplace. Your price should be fair and based on recent sales in the neighborhood. If it’s listed at a higher price than recent sales, you better have good justification for the price – for example, it’s in much better condition or it ahs a much larger lot compared with the recent sales.
- advertise your product constantly. To sell your product quickly, you must get the word out to people who may be interested in buying. You must devise as many avenues as possible to put your product in front of as many people as possible. Just putting an ad in the Sunday newspaper isn’t going to cut it. You must plan on a multimedia approach, which is sustained constantly and continuously until the house is sold. Anything short of an all-out, sustained advertising effort will only cost you more in the long run with holding costs.
These are the basic elements of a well-coordinated marketing strategy that you need to think through, devise, and implement.
Getting the Buyer to the Closing Table
This is your number-one mission in life – getting the buyer to the closing table. All of the blood, sweat, and tears that you have given up to this point have created only paper profits. Getting a buyer to the closing table is your chance to turn those paper profits into cash.
If you are using a real estate agent, all of the steps involved in this process are generally their responsibility to coordinate. But let me urge you to never, never, never just turn it over to the agent and forget about it. You need to follow the progress of every detail and double-check to make sure everything is completed in a timely fashion. Here again, you need to exert your brand of control, to the extent you can. After all, no one involved in the process has as much at stake as you do. Now is not the time to let your guard won and relax. Keep pushing – you’re almost there!
Your first step, once you have received an acceptable written offer and before you sign the contract, is to check out the buyer. Don’t ever agree to take your property off the market until you or your agent has confirmed the buyer’s qualifications. If the buyer will be getting new financing, has he or she been prequalified by a lender or at least by the agent? You need to feel comfortable that the buyer will most likely be able to get the needed financing. Has anyone pulled a preliminary credit report? You or your agent can et this done quickly by any of your respective lender contacts. This is especially important when dealing with first-time buyers who may have marginal financial qualifications.
Again before you sign, find out exactly how the buyer intends to finance the purchase. Which lender, if any, has the buyer chosen? Does the buyer have the necessary down payment in the bank? When working this end of the market, I have learned to be a little skeptical. You can’t entirely prevent people from making misleading statements, but at least exert some level of due diligence before you take the property off the market. Is the buyer’s loan application going to be dead on arrival or does it appear that they have a good shot at it? Talk it over with your real estate agent and one of your lender contacts. If everything seems to check out, sign the sales agreement, drink a toast, and prepare for the next phase of continuous and persistent follow-up.
Most sales agreements require the buyer to make a loan application within a specified period of time. Follow up with your agent to make sure that this was accomplished. If not, you’d better get your agent fired up to find out why not. There is no excuse for missing this deadline, particularly if your agent produced the buyer.
Once the buyer has made his or her loan application, it’s pretty much a waiting game. The paperwork is enormous and seems like it takes forever to finish. But this doesn’t mean you or your agent should just sit back and do nothing. Your agent should be in contact with the lender’s loan processor on a weekly basis. Your job is to make sure that this contact has been made. Keep pressing.
Your agent should be checking on the status of various loan documents including the buyer’s credit report and the appraisal on the house. Many lenders wait to order the appraisal until the loan is approved, wanting to save the applicant the appraisal fee in the event the loan is denied. To heck with that! Try to get the lender to order the appraisal immediately – and collect the money from the borrower. You might even consider including this in your contract: Buyer agrees to pay lender for appraisal at time of loan application. This will eliminate this phony issue and will eliminate any potential delays in getting the appraisal completed in a timely manner.
The next milestone occurs when the lender finally announces that the loan has been approved. It’s high-five time, but not time to celebrate – yet. There’s still plenty of paperwork to get done and potential obstacles to overcome. This is no time to let up! Get your real estate agent to check with the lender on the status of the tile policy, termite inspection report, survey, loan payoff letters, and the buyer’s hazard insurance policy. Follow up and keep the pressure on, because the closing date will not be set until all of these documents are in hand.
Finally, the glorious day arrives – the buyer goes to closing and the deal is done. Payday has finally arrived! Pick up your check and take your family out to celebrate! It’s been a long and tortuous journey, but today is the day that makes it all worthwhile.
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