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Better Sale Price for your home using Non-Traditional methods?
Using a lease with option or the vendor leaving some money in the deal for a while has long been proclaimed by its advocates as a method of quickly selling your home at full market value. So let’s take a look at the pro’s & con’s of both methods, assuming others sales factors being equal like the quick house tart up was done & the coffee was put on to brew for all home inspections.
The traditional real estate sale goes something like this:
You shop for an agent & usually select the one who promises you the best achievable price. He ties you up on an exclusive sales contract & you are now locked into 90 days of sale price degradation conditioning. Your $500k house is put on the market at $550k...after 6 weeks its back to $500k...& by the 12 week with your spirits in tatters you will listen to the market talking to you at $480k.
The purchaser fluffs around trying to get their bank finance approved you have got a lawyer involved & if lucky 2 weeks later the contract exchanges, you wait another 10 days or so to see if purchaser cools off then 42 days later you are supposed to have the hot cash in your hand, but no the bank hasn’t completed its paperwork yet so it’s another 14 days waiting, wandering, wondering will I see my cash. Usually at this stage you walk away with your cash, albeit less than $470k to feed into the next property.
You get a professional appraisal so you know your house is worth $500k. You set a price at $525k.[About 5% above valuation] You now need to get some marketing done.You can do it yourself or you can pay a specialist marketing company a few thousand up front or about 3 X’s a few thousand[about equivalent to an agents commission] on result. Your choice.
Essentially marketing needs to consist of a house sign, a web presence,& other reaches into the face of potential customers. The sort of stuff that a real estate agent would do except maybe the color local rags. Specialty marketer s may use other methods to advantage.
Now for the big difference; the purchaser who now has magically multiplied by a factor of 5 as this house is suddenly within reach of 10 x’s as many people. [How many people do you think have $20k for a deposit as opposed to $100k]. Now knowing that “Houses for Sale” by Traditional methods out number Non-Traditional “House for Sale” by a factor of 1000 to 1 then putting these two factors together of 5:1 and 1000:1 it is easy to see that there is a heap more competition for that house so that the asking price of $525k is quickly & easily achieved.
The Next big difference;the purchaser needs to move in within 7 days at his rental lease is expiring & you sure as hell want to get away for a holiday so you pull out a bit of paper work give him a 6 month option for $20K & attach a lease for $900/wk [the $900 will more than cover your mortgage repayments the 20k will pay for your holiday]
As the Vendor you are leaving 20% in the deal for 2 years so it is a walk in the park for the purchaser to get an 80% low doc & the weekly rent is a big incentive for him to finance & settle quick.
Ok so what’s the scrub on the wash up? Traditional Sale + got hard cash in hand of less than $470k Less cash then market value , had to wait up to 6 months for it Non-Traditional Sale + quick sale $20k cash in hand 7 days + $420k hard cash in hand in 3 months + $85k equity in property Wait 24 months to receive final $85k
Depending on your personal situation with your finances you can decide whether to use a traditional sale approach or a non-traditional one. Particularly if you want a fast house sell .
2
How to Sell a House
When you consider the cost of selling a house is typically 10 – 20% of the asking price using traditional sale methods it is immediately apparent that care should be given to this process.
Selling costs are typically made up of a cash buyer’s discount 5-10% Cost of money to hold till settlement 2-5% , agents commission 2-3%, home holding costs of insurances maintanence etc 1%.
It is no wonder people trying to figure out how to sell a house consider a private sale in an attempt to abort these costs. There is some merit in this approach but you may be able to do better than a traditional private sale.
Here are some factors to consider in how to sell your house for a good price;
1. How desperate you are to sell it. The time frame you need to sell in
Do you need to sell your house by next week as the bank is foreclosing or if in 12 months time you havn’t sold it then no matter as you’ll just delay that holiday a bit. This is an indicator of how motivated you are to sell.
2. How hot the market is ie booming, recovering, flat, falling.
Speed of a sale is in direct proportion to the existing market. In a boom any bit of rubbish will sell in a flash for top dollar, and in a falling market the only thing that will sell is a dead set bargain
3. Level of desireability of the home ie it’s location (view, facilities near by) House construction type, Appearance internal & external(architectural features,quality of finishes, appliances, etc)
Desireability level varies from the bull doze, undesireable, renovator, acceptable to some people, me to homes, desireable to most people, to craved by all. [all these free reports given away by agents on”what to fix up to sell your home” are just telling people to get their homes from “acceptable to some” to “me-to” level of desireability].
4. Number of potential buyers exposed to your home
The more people exposed to your home & your sale terms obviously the greater probability it is that some buyer will like your offering. Local newspapers have been effective in this regard for some number of years now as they keep putting the advertisement under the local community nose each week, week in & week out. With computer technology this method is loosing it’s effectiveness as savvy buyers these days prefer to use internet technology to spend alot less time viewing more homes which suit their buying criteria. As there are a number of ways to maximize this marketing component it is worth giving serious consideration to.
5. The terms you are willing to sell the house on.
This can vary from 10% deposit 90% cash in 28 days, to some cash now and some cash later, to pay my mortgage now & give me my equity in cash later. The terms a vendor is willing to offer will significantly vary the achieved profit from the sale.
6. The length of time your home is on the market.
The longer the house is on the market the the greater the number of potential buyers your advertising has to reach, however another negative factor of scepticism comes in to play and that is “If this house hasn’t sold in this time period what is wrong with it?”This one is a balancing act & will vary according to local.
7. Your surrounding environment.
People like to live in certain locals for reasons of affordability, proximity of services, proximity to life style, social class. ethnic origins, religious beliefs. These factors are of varying importance for individuals. Identifying these is useful for targeting marketing.
8. The perceived affordability/benefit of buying as opposed to renting.
When the attention on the nation is on interest rate rises & it’s guessing game of ramifications buyer enthusiasm is certainly dampened for large sections of the populations [especially low to middle income bracket]. If your home is one of the “me to”houses then this talk will certainly lower the competition and hence achieveable price now.
Your particular house will be affected by all these factors to varying degree. Your job is to decide how best to process these to maximize your sale price.
When you personally consider “How to sell a House” you may also wish to think about a personalized solution that a professional real estate buyer can afford you, Price is just one factor, the stress of beat down offers, forced to move at a specific contracted time not when you are ready are important factors which you will appreciate if you have sold real estate before.