How to sell foreclosures for a profit?
Rule No. 1. Make a smart buy
Making a smart buy means that you must know your market. Although foreclosures are always marketed as being an inexpensive buy, it pays to research to locality as thoroughly as you can. Get to know the real-estate brokers locally and find out what similar properties actually sell for. The asking price is not always the true value. Values also move around depending on the development of highways, shopping malls and housing projects so it pays to be up-to-date.
Most foreclosures need updating, repair or renovation and are normally priced according to the state of “distress”. Some may have temporary repairs which are not guaranteed and may have to be reworked. It’s up to you to be astute enough to know the minimum you can do to bring the building up to an insurable condition that will appeal to buyers. If you are new to foreclosure investment this will be a steep learning curve but the knowledge will be invaluable for the future.
Rule No. 2. Set a realistic budget
Never work without a budget. It is your only way of knowing whether you are cutting into your profit margin. The more detail you can build into it, the better your control over the whole project will be.
Be realistic about quotations from the trades. If you only go for the cheapest quotes, you may be presented with a nasty surprise at the end of the project when they discover that they can’t finish and demand more to complete.
Be realistic about how much you can do yourself; renovation is hard physical work and two or three pairs of hands can always achieve far more together than they can individually. Be prepared to employ help if only to get the job finished quickly.
Rule No. 3. Be a tough Project Manager
Investment in the foreclosure business is rarely about sitting on a portfolio of property and waiting for the market to improve the value. Unless you are a cash buyer and you will own the property without the encumbrance of a mortgage or loan finance, you will want to turn the property round as quickly as is physically possible to avoid unneeded payments.
This demands that you become an uncompromising Project Manager, organizing the repairs and renovations in a logical way to ensure that the trades can do their work without tripping over one another and producing excuses for delay. Material costs and wastage also need to be managed carefully to avoid your profit being eroded.
Rule No. 4. Don’t become emotionally involved
Unless you intend to live in the property yourself you should avoid lavish touches that you think will sell the property to someone like you. As long as the amenities are to a good standard and fitting and finishing has been carried out carefully, new owners will make their own decisions about personalizing the property. Again you may just be wasting your own profit on classy faucets, hardwood doors and artistic light fittings.
The property should present a blank canvas on which new owners can imagine their own lifestyle.
Rule No. 5. Be a smart seller
Pay attention to the things that will actually get buyers out of their cars and into the house. Sidewalk appeal is worth investing some of your valuable cash on. Make sure there is nothing that will deter potential buyers from considering your property. A tidy yard with attractive pot plants, clean windows and fresh paintwork demonstrate that the inside of the house has been cared for.
Remove all reasons for discounting the price. Water stains on the walls, peeling paint and wallpaper, dripping faucets, faulty electrics and damaged floor coverings are all potential turn-offs.
Present the house with enough furniture to demonstrate how the rooms should be used. Beds in bedrooms, a desk in the study, a table in the dining room seem to be logical but you’d be surprised how many people can’t imagine them if they’re not there.
Do your homework on similar properties in the neighborhood. What do they offer that you don’t? Treat a visit to your own property like a buyer trip and look for faults that your buyers might worry about.
Develop your professional sales technique, highlighting the features of the property and diminishing any drawbacks. Be a tough negotiator; don’t drop your asking price without haggling. After all it’s your profit you’re giving away.