Homeowners
How to Get the Best Sale Prices - Part I
By
Jan 6, 2006, 16:00

Much of investment real estate is approached from the buyer's perspective: how to get property and how to hold it rather than how to sell it. But selling is an integral part of the investment game. In the worst case, selling under stress may be necessary if a deal doesn't work out. In the best case, selling is part of the plan, the time when you'll pocket most of your profit. Either way, every property you own is a potential sale candidate.

As a buyer you looked for certain qualities when you purchased property. You wanted property in the path of future growth (location), real estate that needed basic repairs and upgrading (condition), and a cost that allowed you to capture additional value (price).

It follows that as a seller you'll also be interested in location, condition, and price--albeit from a different perspective. The property that was in the path of future growth is now, hopefully, in the midst of today's hot market. You've anticipated where demand was
headed, and now you have an opportunity to profit.

You benefited from the property's poor condition, but now the peeling paint and old appliances are gone. You've fixed up, painted, landscaped, improved, and cleaned up, so the property you offer for sale is in pristine, move-in or rent-out condition.

Because of the property's original condition and limited demand, you were able to get a price that was below the prevailing cost for like
properties when you bought. If neighborhood prices are up generally and your property is now valued at or above like real estate in the same area, you've benefited from your work as well as generally rising values.

To have a successful sale, however, you need more than an attractive property. Financing must be available to get maximum values. If mortgage interest is pegged at 18 percent, your property can be cleaner than a surgeon's knife and you'll still have trouble selling. And if the local economy is depressed, people are out of work, and terms are closing, demand will be down and so will your ability to collect premium prices.

As investors we naturally want the largest profit from our labor, capital, and entrepreneurial effort. Some investors argue that greater profits can be obtained by selling ourselves as a "Fsbo" or "For Sale By Owner" in brokerage jargon.

But self-selling means marketing costs may be lowered, not eliminated. Self-selling implies that the investor will show the property, advertise it, hold open houses if appropriate, locate financing for the buyer, negotiate, and perform all the functions normally handled by a broker.

If we sell through the brokerage community, we'll pay a fee for services. In return, we'll gain access to the organized real estate marketing system, an efficient, effective method of retailing properties to a large number of prospective purchasers. We'll benefit from the system's seller orientation, proportional commissions, and cooperation. Seller/broker relationships are created with a "listing agreement," an employment contract that gives a broker authority to sell property at a particular price, under certain conditions, and for a given length of time.