Wednesday, January 9, 2008
We were looking for real estate partners because we were new to the Tucson area. We found that two identical houses here can be $50,000 apart in price if they are three blocks apart. Also, the styles are different from anything we had in Michigan, so it would be good to have some help figuring value and what buyers want.
At the Arizona Real Estate Investors Association meeting I announced that we had money to invest in fixer upper real estate, and we were looking for partners. The host wrote our names and phone number down on the overhead projector along with the others. About three days later we got a call.
Sam and Nikki were nice people, and we got along well when we met. Their offer had been accepted on a house. Looking at the comparison sales they had found, it seemed like a good buy. They had done rough estimates of the rehab and remodeling costs, and it looked like we could make some money. There would be a third couple involved, so the expected $75,000 profit would be split three ways. Agreeing in principle to the deal, we arranged to meet the other partners at the house after closing.
Too Many Real Estate Partners
Six people with six opinions can be a problem. I never understood why the beautiful wood floors had to be torn up and replaced with carpet. For that matter, I never understood why they couldn't at least be carpeted over without the expense of tearing them out. Both my wife and I thought it was a crime to stucco and paint the beautiful brick exterior of the house, but were assured that buyers here would like that better. Raising the roof of one room seemed expensive and unpredictable, but the ceiling was a bit low.
There were plans and new plans, and weeks of stressful anticipation evolved into stressful worrying. We discovered that the houses in the area were selling for less than we initially thought, that the rehab cost would be more than we thought, and that all the other partners expected to do much of the labor, rather than hire it out. The profit projection dropped from $25,000 each to $10,000, and we felt there might actually be a loss.
We dropped out of the deal. Fortunately the other partners had procrastinated for several weeks on the signing of the joint venture agreement. They also were decent people, and had noticed our anxiety. Nikki called to suggest we let them find a way to finance it without us, about two minutes before I was going to call to say we were out. It ended amicably.
We learned a lot. I've had partners before, but I let the partner take my money and do his thing to make us a profit. This group decision-making, especially with so large a group, just doesn't work, at least not for my wife and I. One day, standing in a Home Depot hopelessly looking at carpeting samples, I also realized that non-financial contributions need to be clearly defined according to each persons knowledge and skills.
We truly hope they make a lot of money on the project. If they do, we may even be willing to be partners with one or the other of the couples. If so, though, we'll just look at the plan, put up the money, and let them do their thing. That's my idea of real estate partners.
Steve Gillman has invested in real estate for years. To learn more, get a free real estate investing course, and see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com
Home selling tips
There are many things that are important when you sell your house and the list here is definitely not an exhaustive one. The following brief is to give you the basic guidelines to get the best deal from the sale of your house.
1. Choose the right realtor: While it is okay if you want to sell your house directly – and you are confident you can pull it through – it is usually better if you have a good professional realtor do this job for you. To know whether the realtor is a good one you watch out for:
a. Have good references with a good turn over of recent listings in your locality; ask for names of recent clients
b. Before deciding make discreet enquiries about the realtor in your neighborhood, amongst your friends and relatives
c. The realtor should be easy to talk to. If you do not find yourself comfortable talking or asking questions, then definitely this is not the right realtor for you
d. Choose a realtor who can show you the minus points as well – one who speaks frankly – or you will never know why your house is not getting sold
2. Price your house well: Research well before fixing a price for your house. Beware of the fact that most house-owners think their house are worth much more than the market value. Be realistic and fix a price that the house really deserves plus a give and take 10-15% for negotiations.
3. Ensure that the house makes a good impression at first sight (and later as well):
a. You will need to first of all have the house painted and cleaned thoroughly. The window panes will need to be washed, shined; the walls cleaned (repainted preferably); courtyards should be free from any clutter and garbage or any waste; lawns should be mowed and garden maintained (even if that means to keep a part-time gardener); check that both the interiors and exterior are clean and give an open appearance; pay particular attention to toilets and kitchen cleanliness
b. If you are still living in the house when you have put your house for sale, remove all the clutter and keep the rooms furnished at the barest minimum. Remove clutter from staircases, closets and all those nook and corners in the house. Have the house aired, vacuumed and dust-free. The feeling and look of space always create good impressions.
c. Maintenance & repairs: Check that the plumbing is in order and there are no leaking taps and/or pipes; check that the wiring is okay in the house, the house should be well illuminated both inside and outside for a bright and welcoming look; oil doors which creak, repair stairs that creek, and replace/repair any window that are not closing, or bang when wind blows; check and replace loose door/ window knobs; see that fire places (if any) are in working order
d. Front door is welcoming enough: The front of the house should be welcoming enough for the prospective buyer to feel good about entering into it; have a good door installed if your door is dull and ensure that it is impressive; have the foyer well illuminated and tastefully decorated. Ensure that the doorbell is functional.
e. Pay sufficient attention to the backside of the house: Many commit the mistake of dressing up the front and leaving out the back. Most buyers will be more curious about the back than about the front (which they know has to be the best possible). Ensure that the back yard, garage, and surrounding are clean, well maintained and de-cluttered. In fact the back yard, just as the toilets of a house, will tell the prospective buyer the real level of maintenance of the house.
4. Lastly, be patient. You will definitely get the price you deserve for the house, and some times this takes longer. Stick to your guns, if you realistically priced your house, you will definitely get the price you quoted.
Here is a "Trade in program" - Want to sell your home and buy one of ours?
Selling a Home: Pricing for Results
Every home seller wants to get the highest price possible but setting the price too high, even if you are willing to take less, may not be the best strategy.
As an example lets assume we have a seller who is working with a good Realtor and through reviewing comparable homes that have recently sold and those on the market it is determined the value of the home is $500,000. The seller may even agree with the agents' assessment of value but feels it is worth trying to get more. So he requests the house be marketed for $550,000 knowing if he accepts a lower offer it may be higher than the $500,000 originally suggested by the Realtor. The agent does their job, places the home in MLS, provides online photos, prints flyers, advertises in the newspaper and even does open houses. The seller sits and waits to get offers he can negotiate.
At the same time buyers are out looking at homes to buy. They are qualified to buy homes in the $550,000 range and they see the listing and compare it with other similar priced properties. These potential buyers see our example listing is not as large or does not have the number of upgrades or features as other homes selling for $550,000. When there are plenty of houses to look at, buyers will skip some listings and only look at homes where they feel they are getting the most for their money.
They buyers who are qualified to by a $500,000 home are looking in that price range and generally do not want to look at homes much more than $525,000. Taking negotiations in to consideration prices above that amount are likely going to end up being more than they can afford and/or qualify for. These potential buyers will probably not see our example listing priced at $550,000.
In today's market this situation seems to happen more often than it should and causes homes to sit on the market for long periods of time. With our market of growing inventory levels, listings can become stale very quickly. The first two weeks on the market is the time listings generate the most interest and activity. When homes are on the market for longer than the average time, for a given price range, buyers start feeling hesitant to consider them. It is like the early days in the video rental store where people crowd around the "new release" section and some great movies in the drama isle get no attention. In this situation, it is my experience, even if the seller elects to lower the price to something closer to the market value, they will likely receive less than if they had started with a lower price.
There is a fair amount of research that indicates pricing a home at its market value from the start will generally result in getting an amount closer to the asking price. Sales prices of homes in the Sacramento area have been averaging higher than 97% of asking price. Getting the highest price for a home is best achieved by maximizing the number of potential buyers who see the home and that can be accomplished by avoiding overpricing.
A recent National email survey conducted by House Hunt, Inc and reported in a story by RISMedia indicated that overpricing was the number one mistake home sellers said they made when listing their homes. The margin was nearly three-to-one over the second choice which was "dealing with the same agent who represented the buyer." That and potential conflicts of interest are good subjects for a future article!
The bottom line in setting the price on a home is to set it within 2 to 3 percent of the market value. This increases your opportunity to sell at the highest price possible and in the shortest amount of time.
To learn more about Julie Jalone take a look at her website, www.jalone.com where you will find additional articles, monthly market analysis and her daily blog, "Keep it Real in Sacramento."
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