Need Advice On Marketing My Rehab
Here is the situation:
As our first foray in RE investing, we purchase two properties in the Tampa (Seminole heights) area; one in August and one at the end of Sept. Both were 119K, had about 18K in rehab costs and were completed in about 6 weeks. The first was listed mid Sept for 185,000, the second mid November for 182,000. We have done CMAs and grid analysis on both and they were priced within the grid on the high end. Both have been completely redone within our time frame and budget; new roofs, ACs, hardwood, new appliances, landscape, paint, fixtures etc. Lots of positive feedback on showings and from other realtors.
Both these properties were located and listed through a Coldwell realtor I have know for some time who works with investors and is familiar with the area we are selling in. She has already made her commission on the backend of both properties. She is doing all the standard things direct mail, Coldwell mag., newspaper ad every other week, open houses (with little turnout) and one broker open house (also little turnout). I recently redid the flyers and requested tubes on both props. The props are down the street from each other and each has the flyer for the other attached.
I guess I am at a loss for why neither has sold. We have had two contracts for the first (pre qualified buyers supposedly). Both fell through on financing. My other issue is the realtor was not willing to negotiate commission at first and was offended when we finally had a sit-down a couple months ago and asked. We did get her to agree to go down to 5% on the first property and we did request that she pull the listing on the first property, lower the price to 179K and re list it the Tuesday after Xmas (even though she insists they are priced properly and she has never had to drop a price on a list).
At this point I am starting to feel the pressure. We are still at a pretax profit of about 20K per prop. after all costs and commissions. But the holding costs are about $1250 per property. Each month is eating into that profit. Should we do something different with the agent, try to sell at least the first prop. ourselves, do more marketing along with the agent?
Any feedback/suggestions would be greatly appreciated.
I am going to play Realtor for a moment... And I don’t mean to offend you.
1) There’s only three things that cause a house to sell. 1 Price, 2 Condition and 3 location. And with price there is the amount you’re asking from the buyer and the amount you’re willing to compensate the agent who sells the house.
2) you’re asking her to do is lower her agreed upon commission because you didn’t buy the house for the right pricing in the first place? That isn’t her fault.
2) If she is weak enough that you can convince her to lower her commission how weak will she be when negotiating on your behalf?
3) In the beginning when you over priced you property was the time to start blaming someone for it not selling.
4) Keep in mind that she works for commission and you’re talking to about pressure?
5) You ask why your houses haven’t sold as if that has something to do with your agent, let me ask you this question; would you expect her to show you and help you buy priced correctly houses or would you expect her to help you buy an over priced house?
6) All an over priced house does is sell something else... Realtors use an overpriced house as an example of a really great price down the street.
7) Lets assume for a moment that they are priced right... The housing market is famously slow between the months of November and February... Not too many people want to move a Christmas tree this time of year... So you may need to give it time.
Now lets talk about getting creative.. And stop blaming the agent...
Lower the price of one unit to a point that would cause multiple offers to come in... Multiple offers will do to things. 1) They will drive the price back where it should be and 2) they will sell the other house too.
When you decide to lower the price PAY for a Brokers open house... All you will be doing is buying a cheap catered lunch for a caravan of agents so they can see the house.
Have your agent withdraw the listings and reload them into the MLS... This will put your houses on the "Hot Sheet" and look like they are brand new listings. Not old over priced no one wants houses...
On one house offer seller terms.. Get creative... I would not have lowered the price before I offered buyer benefits.. On the sign rider put "5000 for closing cost"
DO a lease option or an installment wrap on one of the houses.
Add a bonus commission to the selling agent for a full price offer which closes with in 30 days…
When the listings expire convert them to an open listing agreements, which gives you the right to sell but still, leaves it in the MLS. I wouldn’t change agents. A new agent most likely won’t take an open listing agreement. Don’t compete with your agent’s advertising and don’t put out a FSBO sign, as it will turn off the buyers agents.
[addsig]
A more than fair bonus commission would be 750.00 Most brokers allow the bonuses to be 100% agents therefore they don’t have to split the commission with the house.
I am confused a little about your idea that she is getting 12%..
You have two separate transactions each of which cause a commission to be earned.
You bought the house and you’re selling the house.
If your agent doubled ended each transaction that is outstanding for her..
The cost of real estate commission should not be based upon who is representing the parties and how many times those agents will get paid from the same piece of property.
If you are not paying her an equal commission to one she would earn selling a different piece of property than your likelihood of her being motivated to sell is diminished greatly.
I am not in favor of using an agent when buying properties however if you do don’t use the same agent that is representing the seller.
They have a fiduciary responsibility to the seller, which could hinder their ability to represent you.
Good Luck
[addsig]
Instead of lowering the price 5%, you can use one of them downpayment assistance programs and contribute 5% to the charity. You would also be able to deduct the amount of the donation from your capital gains. If this saves you 2-3 mortgage payments by selling it faster, then it will have been worth it. It will also increase the pool buyers you can target. Put out signs that say "no money down, no closing costs" . Talk to your agent or other investors to find a good ethical mortgage broker that works with these programs. You can send the buyer to the broker. You can do a search for "down payment assistance", ameridream, neighborhoodworks, neighborhoodgold, and/or nehemiah in the forums and on google or yahoo. Look for the one that charges the lowest fees for your state.
If things work out well after the first closing, with no surprise fees from the broker. Then you found a new team member.
-Henry
[ Edited by hha8 on Date 01/11/2006 ][ Edited by hha8 on Date 01/11/2006 ]
Actually about the tax deduction, you might not be able to deduct it. Check with a tax pro.
you may get a better response from the commercial forums, rather than the residential here..