If Trump and Buffett can do it, so can you
Part 2: Capitalizing on new market conditions
By Bernice Ross, Friday, April 18, 2008.(This is Part 2 of a two-part series. Read Part 1, "Push home buyers off the fence now.")
If you're struggling with reluctant buyers, you can get your buyers to buy now!
Last week's article looked at four strategies for motivating buyers to buy now. Here are four additional strategies to help you persuade a reluctant buyer that today is the best time ever to purchase.
1. The smart investor conversation
It's no secret that people like Warren Buffett and Donald Trump are actively involved in purchasing as much real estate as possible. Explain to your buyers, that like Buffett and Trump, the smartest people in the real estate business are contrarians. They sell when prices increase and buy when prices are going down. This may be a little difficult for some buyers to grasp since it is exactly opposite to how most consumers behave. When prices increase, buyers stampede to buy property to capitalize on the increases. Of course, when markets fall, those who bought at or near the peak are generally the ones who are stuck with properties that are not worth what they paid. As one economist put it, "I know it's time to get out of the real estate market when my manicurist and the man who cuts my hair start advising me on how to make money by flipping real estate." If your buyers are feeling reluctant, encourage them to be smart like Trump and Buffett -- buy now when the interest rates are at historic lows and there are plenty of bargains as well.
2. The Bargain Bus
A trend that has been popping up in several places in the country is the "bargain bus." Rather than taking individual buyers out to look at various foreclosure, REO (real estate-owned) or other well-priced properties, some agents have been taking out groups of buyers in a bus to tour these properties. It's certainly more time-efficient for the agents. It's also an excellent way to have reluctant buyers become more motivated to purchase. When the agent sets up the best properties available in a given category and uses print and Web advertising to attract investors or savvy home buyers, there are usually multiple purchases from a single tour. The tour creates urgency in much the same way that an auction does. The fact that there is a busload of buyers also creates the impression that "others are doing it -- perhaps I should do it as well."
3. Provide financial incentives
Oftentimes, providing a financial incentive is a good way to attract buyers who will take action. Seller strategies include having the seller pay part of the closing costs; pre-paying the buyers' homeowner association dues for one year; or providing a home warranty policy. Since 35 percent of the properties in the United States are owned free and clear, having the seller carry part or all of the financing can be another viable option. Properties with financial incentives are excellent choices if you're conducting a "bargain bus tour."
One caveat: Avoid "wrapping" mortgages (i.e. expecting the existing lender to continue its loan after you sell to another buyer) unless you have negotiated a written approval from the senior lienholder(s) prior to closing.
4. Locate sellers who will provide an interest-rate buy-down for their buyer
Numerous lenders have buy-down programs, including the Federal Housing Administration. For example, on a $500,000 purchase price with a $450,000 loan at 6.5 percent, a permanent buy-down would cost the seller $18,000. For $18,000, the buyer's loan is reduced by $289 per month. To reduce payments by this amount would require a $45,800 reduction. (Please note that permanent buy-downs for 30 years are available only at a limited number of lenders. The typical buy-down is two or three years.) This approach may be too sophisticated for some buyers and sellers. The best way to explain it is to show the buyers what their payment would be with and without the buy-down. Next, show them how much the monthly buy-down amount would amortize over a 30-year period. A permanent buy-down is a win for both the seller and the buyer.
5. Reverse contracts
"Reverse contracts" was one of the most innovative ideas from the book "Transforming the Market in 2008" by BestAgentBusiness.com. Many times buyers have challenges determining which property to purchase. The proactive listing agent can begin the negotiation by having their sellers write a "reverse contract." In other words, the seller drafts an offer, slightly under asking price, and the listing agent presents it to the buyer. This can be the gentle nudge required to persuade the buyer to purchase.
Buyers today have the best possible opportunity to make their dream purchase. Use your marketing and your creativity to get the word out that if you're thinking about buying a home, now's the absolute best time to do it!
Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of "Waging War on Real Estate's Discounters" and "Who's the Best Person to Sell My House?" Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com.
***
What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.
All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.
Bookmarking Sites
Add A Comment
You must login or register to post a comment.
Submitted by David Podgursky on April 18, 2008 - 7:58am.
www.themortgagegotoguy.com
Interest Rate Buydowns... just make sure that the lender you use will allow a Seller Concession and how much they will accept. FHA and Fannie Mae programs CAN allow up to 6% so measure that in with whether the Seller will also pay closing costs.
Remember that anything a Seller pays for can be considered a concession - including warranties, incentives etc... so make sure the loan program fits!
Also... if you're dealing in investment properties - the properties MUST cash flow! The borrower does not need to be responsible for negative rent hurting their current financial status.
http://themortgagegotoguy.com/florida-mortgage-investment-properties-sho...
Now is a GREAT time to buy...
Submitted by Bob Smith on April 18, 2008 - 8:58am.
On the positive side, this installment doesn't seem to recommend use of the same level of criminally misleading assumptions as your first installment. However, as a skeptical potential buyer, I question the statement:
"It's no secret that people like Warren Buffett and Donald Trump are actively involved in purchasing as much real estate as possible."
Can you point me to some evidence that Warren Buffett and Donald Trump are currently buying residental real estate? I spent a little time doing a search for Warren Buffett and I came up with nothing. If you're recommending that Realtors use this as a way to push potential buyers off the fence, I think you should also help them be prepared to respond to clients who want to see some evidence to back up this statement.
Submitted by bob jones on April 18, 2008 - 11:55am.
I don't think Trump and Buffet are investing their fortunes in real estate, so I find that argument misleading if not a full lie.
Besides that, I find the excuse of billionaires buying homes to be insulting to the average middle class person. If Buffet loses 30% of his property's value, he will be just fine. If Joe and Jane Six-pack lose 30% in their house's value, it is devastating and crippling to them and their kids.
That is one of the worst reasons I have ever heard to buy a house, because allegedly some billionaire is doing it. Hey, Warren Buffet bought a private jet, does that mean we should all be out there buying private jets?
Submitted by Orlando MagicPants on April 18, 2008 - 2:19pm.
"buy now when the interest rates are at historic lows"
What is this nonsense you're spewing?
Interest rates are low but AFFORDABILITY is still out the window in desirable locations.
We are in the early stages of the greatest housing price crash any of us will live to see and you want these poor buyers to jump off the fence into a pit with sharpened stakes.
Why not just be honest with them and say:
"WAHHHHHH, BERNICE WANTS COMMISH, BERNICE WANTS COMMISH, WAHHHHHHHH."
Submitted by Glenn Race on April 19, 2008 - 12:58pm.
Are you whiners sure you should be in the real estate/mortgage business? Your "positive attitude" is underwhealming at best. Perhaps you would be better suited for a nice safe civil service job or some other "handout" work.
For decades the adage is "smart money buys on bad news." The bad news in this situation is the opinions and attitudes of negative nellies like you.
Great job Bernice! Keep it up.
Submitted by Christi Borden, CIPS, ABR, GRI on April 19, 2008 - 1:23pm.
Wow, strong comments on this one. I guess it depends on location as we are still a great place to put your money. I am sure that the speculators (that is a correct term for folks like Messers. Buffett and Trump) have been investing in the current down markets, but on a commercial level and not necessarily residential. But for your everyday buyer, it will depend on the individual market. In some areas of the nation, perhaps it would be prudent to ride out the crisis before purchasing a home. That said, in Houston, Texas and specifically Katy, we are still healthy, strong and welcome your buyers.
Your Katy, TX Realtor,
Christi Borden, CIPS, GRI, ABR
Prudential Gary Greene, Realtors
Email: Christi@ChristiBorden.com
Web: www.ChristiBorden.com
Cell: 832-372-7470
Submitted by bob jones on April 21, 2008 - 9:48am.
Glenn Race: "Are you whiners sure you should be in the real estate/mortgage business?"
That depends, does being in the business rely upon the need to dishonestly portray market conditions and reasons to commit to owning a large and potentially dangerous liability?
Glenn Race: "Perhaps you would be better suited for a nice safe civil service job or some other "handout" work."
Great way to elevate the discussion: attack other people for having, as you suggest, a less value-adding job than a banker. God forbid anything less than glowing is said about market conditions. It would be a shame if because of public sentiment, not market conditions, you were to receive less of a cut than you feel entitled to.
The fact is that it is a potentially dangerous move to buy a house right now. Insinuating that one should do so because billionaires are doing so, whether factually accurate or not, is demeaning and misleading in terms of risk and survivability.
Submitted by Jodi Summers on April 23, 2008 - 5:17pm.
This sounds like such a great show.
I have wanted to attend it for several years, but always get caught up in another escrow.
After reading your article, I'm going to make it my objective to get there in 2009.
Jodi Summers
Sotheby's International Realty Santa Monica
jodi@jodisummers.com
http://www.SoCalInvestmentRealEstate.com
http://www.SoCalIndustrialRealEstateBlog.com
http://www.SoCalOfficeRealEstateBlog.com
http://www.SoCalGreenRealEstateBlog.com
htt
Submitted by Jodi Summers on April 23, 2008 - 5:22pm.
Hi!
Very helpful.
Been working with the Warren Buffett dialogue for a while, and have been writing reverse contracts for the sake of simplicity - but
3. Provide financial incentives
4. Locate sellers who will provide an interest-rate buy-down for their buyer
are great new items to add to the arsenal.
Thank you,
Jodi Summers
Sotheby’s International Realty
jodi@jodisummers.com
www.SoCalInvestmentRealEstate.com
www.SoCalIndustrialRealEstateBlog.com
www.SoCalOfficeRealEstateBlog.com
www.SoCalGreenRealEstateBlog.com
www.SantaMonicaLandmarks.com
www.SantaMonicaPropertyBlog.com
**
May your life be like a wildflower, growing freely in the beauty and joy of each day.
—Native American Proverb