October 12, 2006
No Good News Yet
Similar to the plight of Seattle Eric, it seems the timing on completion of my flip couldn’t have been worse. Since officially listing the house almost two weeks ago I have received only two calls from brokers wanting to show my property to their clients, in spite of the fact that I’ve dropped flyers off at almost every local real estate office and e-mailed every real estate agent I could find an address for. I’m advertising that I will pay a full buyer’s broker commission but it doesn’t seem like any of the agents have clients that are interested in my property.
After visiting so many real estate offices, I must say that I’m not terribly surprised with the 
result so far. The mood in almost every office was pretty glum. Many of them felt more like a funeral parlor than a realty and I would not have been surprised to see a casket in the reception area. Several agents I spoke with flat out proclaimed that “there just aren’t any buyers right now.” I had heard rumors of many real estate agents and mortgage brokers getting out of the business because they haven’t been able to make any money and I don’t find that too hard to believe at this point.
I don’t want to be chasing the market downward, so I sucked up my pride and made a $20,000 asking price reduction yesterday. Even though I was already priced very close to the lowest of the three CMAs I got (which was itself $20k lower than the first two), it was obvious that something was deterring people from calling. Lack of marketing certainly wasn’t the problem. I don’t know where else I could have promoted this house without buying television and radio airtime. My marketing strategy included:
- 10,000 postcards given out with customer receipts by cashiers at the local supermarket
- Print advertising in the “For Sale” and “Open House” section of the largest area newspaper
- A dedicated website with its own online marketing campaign to generate traffic, which has been getting 20 – 50 unique visitors per day
- Advertising on a multitude of “For Sale By Owner” websites
- Craigslist ads on both the New Jersey and New York (NJ subgroup) sites
- Signage in the front yard of the property
- Flyers distributed to all the local realtor offices
- Flyers left by the cash register at local businesses where I am friends with the owners (the hardware store, the diner, the convenience store)
- Individual e-mails sent to any area agent I could find an address for (more than 300 people by the time I quit sending them)
- Online advertisements with the local newspapers and the NYTimes
- Word-of-mouth promotion from 10 of my nearest neighbors and two of my contractors
The price reduction seems to have helped generate renewed interest (at least temporarily) as I have already gotten two calls since making the adjustment. I think the property is very aggressively positioned now — especially considering all the amenities. I hope potential buyers agree!
Wow! That is a ton of advertising. Wishing you good vibes and the best of luck with the sale! The house looks phenomenal.
We just signed a listing agreement for a house today with our real estate agent. We were going to try to rehab it, but now we’re going to try to wholesale it; it’ll take more money and time than we planned. The market is awful in some parts of town, but we bought in the right area at the right price and know it will sell quickly.
You’re definitely not alone in the seller’s seat!
Very smart to realize that you do not want to chase the market down after just a couple weeks. Believe me, a LOT of sellers take months and months to figure that one out.
Now that you’ve made the biggest mistake an RE investor can make -buying at the top- I hope you can sell this beautiful place you’ve invested time, money and talent in for not TOO much of a loss, pick yourself up and take what you learned to get back in at the bottom of this cycle. (Be patient! It could take years- usually does.)
Your work is fantastic.
Anne – Thanks for the good-wishes! It’s comforting to know I’m not alone in the seller’s seat…
Karen – Thanks for the complimentary comments about the renovation – you’re much too kind! As to “buying at the top,”, I agree that it probably would have been better/more profitable to take on this project at a different point in the real estate cycle, but I think a smart investor can easily make money regardless of the direction the market is moving. It seems the most significant part of any RE deal is the purchase negotiations, which thankfully went very well for me on my first project. I could probably have sold this property the day after I bought it and made a $5,000 - $15,000 profit without picking up a hammer because I bought it at a below-retail price. I instead chose to shoot for three or four times as much profit by putting some sweat-equity into the house. I would argue that I will likely fail to meet that profit target not because of market forces, but because of my renovation strategy. I will go into more detail about this in my next post, but I’m pretty sure I over-improved this house and spent money in the wrong places.
Even if I break even or lose a little bit on this investment, I still will realize substantial benefit from the tax write-offs I’ve accumulated from starting my own business. This will be particularly helpful as an offset to the Wall Street salary/bonus I earned over the first six months of the year. Perhaps more importantly, I have gained a huge amount experience in the real estate investing universe (on top of a ton of practical home improvement skills). This is all a long-winded way of saying I don’t think investors should sit on the sidelines waiting for the “right” point in the cycle. You can profit in many ways regardless of what is happening in the market.