Selling Houses In a Real Estate Downturn… Here’s a way…
Hey all…
We’re now at the end of another month and Christmas is just around the corner. I can’t believe it’s here already.
It seems like not too long ago when the housing market was hot (around the whole country) and houses were selling like crazy!
But… that’s the way an economy goes. Without the downturns, an economy can get out of control and inflation can eat us alive. So, you’ve got to see this real estate market downturn as somewhat of a blessing.
So, to the point.
First I’m going to go on a diatribe on how we got in this mess… then I’ll show you a simple way to sell real estate more quickly in this type of market. It is the way that many of the investors in the 1981-82 real estate downturn made it through alive.
Over the past 6 months or more, people in the real estate investing world (mainly the newbies with grand hopes of an easy million) have been crying out that it is harder and harder to sell homes today.
Well… that’s true. It is much more difficult to sell a piece of real estate today than it was 2-3 years ago.
Why is that?
Well… there are many reasons.
- Increased inventories (both new and existing homes)
- Less money floating around
- Less offers from buyers
- and on and on…
But, when you track it all back… one of the main reasons real estate is not selling as quickly is that financing has taken a huge hit… and corrected to what it truly should be.
Over the past 5 years (actually a whole lot longer than that), our nation has gone out of control with buying on credit and it is finally catching up with us… at least in the real estate financing world.
A couple years back when someone with no job and bad credit could get 100% financing on a home (not too big of an exaggeration), there were over 200 wholesale lenders in the U.S.
To put that number into perspective…
Let’s analyze our close neighbor Canada. Canada has a much smaller population than the U.S. (a touch over 30 million)… about 10% of the population of the U.S.
And… I do have to admit that Canada has never been the economic superpower that the U.S. has been… but this is kind of a good illustration.
As I mentioned before, the U.S. has over 200 wholesale lenders all out there trying to compete to “give” people money.
How many lenders does Canada have?
You’d expect it to be in proportion to the population maybe… right? So, let’s say Canada should have 20 lenders. RIGHT?
WRONG!
The last time I checked, Canada had 2 -4 wholesale lenders in the entire country. Yes, 2-4.
I’m not saying that that is how it should be here in the U.S. I like competition… it keeps an economy healthy and growing. However, when you have 200+ lenders all out there competing for borrowers… they are bound to start competing with their loan programs.
This is what brought about the 110% financing, creative sub-prime, weird @ss variable rate loans.
All of this competition on price, terms, and creativeness finally caught up with the lenders and the rest of the economy. Just a disclaimer… I’m not saying this whole problem is the fault of the lenders. It’s absolutely not. It’s the fault of everyone… including the government and they way they are managing the economy and our good ol’ dollar.
Anyhow, back on track…
So, what I’m getting at is that all of this has led to:
- lenders going out of business
- less buyers able to obtain financing
- less houses being sold
- the lowering of real estate prices
- the state of our real estate market
Go back to basic economic class. Prices are dictated by a little something called SUPPLY AND DEMAND.
If supply outpaces demand… prices go down. That’s what’s happening right now.
But… the magic is… when you turn the tides and create more demand… prices go up and properties sell faster.
So, how can you create more demand for your properties right now in this real estate downturn?
There are many ways to create demand. However, they all require you being a bit flexible and or creative.
One of the best ways to create demand for your real estate is to do what many of the investors who actually made it through the 1981-82 real estate downturn did.
CARRY A NOTE FOR THE BUYER <<
When times got tough for investors in the early 80′s, they had to get rid of their inventory before it ate them alive. The reason people weren’t buying homes was because interest rates were sky high (10%+ for a good loan)… it got too expensive for buyers.
So, savvy investors began to create their own loans and carry notes on the real estate they sold.
Yes, this can be a pain and does open the seller up to some degree of risk… but if done correctly… it is an excellent way to create a stream of tax deferred income and get the home off of your books.
So, if you are having trouble selling your real estate right now… think about ways you can get creative with the financing.
Remember, better financing = more demand = more buyers = selling at higher prices more quickly.
As long as you do your due diligence when screening the potential buyer for their credit risk, income capabilities, and other debt… you can come out way ahead.
In downturns like this, you need to change your strategy to fit the game. Creating special financing for your buyers is a good way to do this.
Other ways to create demand include:
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Offering other incentives (monetary, products, better terms, etc.)
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These incentives better be pretty darn good though… just about every home out there has some sort of incentive they are pitching buyers on
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Make an event out of the sale (good buzz marketing, an auction, etc.)
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Lower your price (obvious)
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Offer bigger commissions to realtors to sell by a certain deadline
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Play up the desirable features of the property that no other property has (if any)
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Cater to a specific market of buyers and go full force at capturing that market
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The wealthy – The high end market is one of the last parts to be affected by a downturn
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Low income – Create a creative financing package that gets responsible and worthy buyers into homes
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Specialty – Go after people who are looking at 2nd or vacations homes
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Reposition it – Just like the condo conversions were a craze a few years back… soon the craze may be turning the condos back into apartments.
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Sell to investors – This will be a huge market over the next 5 years. Sell to investors looking for rental properties… and become a real estate “syndicator” by matching investors with properties.
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Anyhow… that’s a short list of how to create demand. Simply throwing the property on the market with a realtor, placing a few signs around, newspaper ads, and an open house or two is not going to get the job done in this market.
I heard a quote a few years back that really made me think differently about business… I think it will for you as well.
“Most people think that they are in the widget (I used “widget” to represent your industry… just insert your business there… i.e.- home builder) business and marketing is something they have to do.
When, in reality… every single business on earth is first and foremost a MARKETING BUSINESS… that just happens to sell widgets (insert your product).”
So, for real estate investors… we are first and foremost marketers. We are in the business of marketing… we just happen to be marketing real estate.
The people who truly understand this concept are the ones who will see success. The ones who continue to think they are in the real estate sales business… you better start looking for another job.
Anyhow, the moral of this entirely way too long post is that in order to sell your real estate faster and for higher price points… you need to think of creative ways to market.
Marketing includes not only newspaper ads, bandit signs, realtors, etc…., but it is everything in your business that works to convert a prospect to a customer.
- Your price points are marketing
- Your creative financing is marketing
- Incentives are marketing
- Your exceptional service and honesty is marketing
- Putting out a quality product is marketing
- Your followup on buyers after they buy is marketing
… and a whole lot more.
Get off the computer right now and start changing the way you think abour your business and how marketing fits in. If you’re homes aren’t selling… change it up a bit. Offer creative (but not too creative… don’t do adjustable rates!) financing and profit how the banks profit.
Make this little mindshift and I promise you that the results will be awesome!
Hey, my name is Trevor and I'm the founder of The REI Brain and a real estate investor since the age of 21. Right now, my focus in real estate investing is multi-family income properties and I have plans on moving more into the commercial real estate investment world in 2008 and beyond. 
we used to sell house and lot , but now we are selling condominiums its hard to sell different properties , i mean shifting to another type of property.. there is always downturn and buying seasons .. but we will still continue selling