INCENTIVES

People love to receive items for “FREE” and what better way to draw interest to your property than to offer a little extra something special.  What this is depends on the type of clientele that you are trying to attract and the type of property you are marketing.  For example, if you live on or near a golf course, you may offer a complimentary country club membership.  If you are in the type of place (hello Southern California and South Florida), where the sun shines and you have image conscious consumers, you may wish to throw in a convertible or a fancy sports car.  Yes, you will have to weigh the cost of providing these deal sweeteners, but you should also consider that this is what it may take to entice a buyer now and avoid having to make a price reduction (often times for more than the cost of the carrot you dangled.)

ATTRACT A CROWD

You ever go to Venice Beach or any other spot for that matter and there is a crowd huddled around?  This creates excitement and lends itself to people becoming emotionally involved.  So how do you bring that herd mentality to the friendly confines of your home?  Perhaps you have a home with an impressive array of fine art.  There was a home that I had previewed once on my own and as it turns out, the owner is an artist and must have had at least thirty of her pieces of work on the walls.  Don’t you think that if nice invitations were sent out offering some wine and cheese to go along with an art exhibit, it would generate some additional buzz surrounding the home?   A function such as this encourages people to linger, socialize and take an active interest in the property.

PARTY TIME

Who doesn’t love a good party?  Of course, you must make sure that the house lends itself to the type of party you’d like to throw and the underlying theme.  Perhaps you wish to have an outdoor catered event if the backyard is an entertainer’s dream and the views are unparalleled.  Clearly, you want your guests to feel comfortable and be able to imagine living there, or at least having such a great time so as to spread the word to their group of friends, all of which could be potential buyers.

GOING ONCE, GOING TWICE….SOLD!

While this may not be totally outside the box, auctions are still a relatively unknown avenue considered by many sellers.  There are many variables to consider if you elect to go this route, but once again, the impetus behind this is to create buzz and have multiple buyers getting emotionally involved.

GOOD OLD FASHIONED KARMA BABY

When the traditional means of selling your property, or some of the ideas discussed above, aren’t working, it may be time for some of your superstitions, religious, or cultural beliefs to come into play.  For example, in the Chinese culture, it is widely accepted that oranges bring good fortune.   There are those spiritual folks who have buried statues of St. Joseph in the yard to help facilitate a sale.  I’m sure there are plenty other items that represent good luck for you and if you are a believer in karma, then by all means give it a shot.

IN CLOSING

The ultimate goal is to expose your home to the highest amount of qualified buyers.  The means with which you can accomplish this goal are endless and some of them are traditional, while others, such as some of the ideas explored herein, are more outside the box.  A good train of thought when marketing the property to get it sold is “Do Whatever it Takes!”

Many of us are familiar with Homeowner’s Association (HOA) dues, but what exactly do they cover?  Generally speaking, only the exterior of the unit (roofing and walls) as well as the common areas fall under the HOA’s responsibility.  Thus, you most likely are held accountable for the interior structural items such as flooring, cabinets, and fixtures, as well as all your personal belongings.  One way of thinking about it is to compare your condo to a dollhouse (don’t do this with your child’s latest holiday gift) and turn it upside down; essentially whatever falls out are items you’d be responsible for.

So what to do about this?  Well, make sure you read the HOA’s CC&R’s (covenants, conditions, and restrictions) so you know exactly what they cover.  As far as making sure you cover your ass(ets), take an inventory (use a flip video) of your personal belongings and store an extra copy in a location other than your home.  With flip videos, the information can be stored online for easy access anywhere.

What if you are not an owner of the condo, but are renting?   Yes, the property itself is not yours, but you’ll still want to protect yourself through insurance.  When it comes to renters insurance, you will most likely come across three components of coverage:  1) personal liability coverage to protect against lawsuits due to property damage or bodily injury to others…yes, we live in a litigious society 2) personal belongings (in case of theft, vandalism, fire, water damage) 3) living expenses in the event that you are temporarily displaced (happened to me in 2007 with the San Diego fires).  Just like owners, I’d strongly encourage you to videotape your belongings as well.

I realize that many people hate to pay those insurance premiums (there’s a reason some of the tallest buildings in the Big Apple are insurance companies), but you really need to make sure to cover your ass(ets).   Not once in my lifetime have I ever heard someone say they had too much insurance.  On the contrary, think about all the times people wish they would have at more coverage.  Consider this your fair warning!

While I am in the business of buying and selling property, the transaction does not stop at the close of esc row.  If one helps a client either buy or sell what is often their single largest asset, it only makes sense to insure (no pun intended) that they protect that asset.

Remember the days of lenders basically having little, if any, standards and thus allowing just about everyone to get financing? Need money to put a fourth plasma screen in the guest bathroom? Looking for some extra spending money for your weekend getaway to the Bahamas? Not too long ago, getting money was simply a matter of asking for it. Unfortunately, the opening of the spigots contributed to the housing boom and ultimate bubble. There are many who are feeling the pain as a result of what I would consider poor financial decisions (both from the lenders perspective as well as the consumers.) While I truly believe that it should not have ever gotten to the point of giving a loan to someone with poor credit, a lack of income, assets, and an ability to pay back the debt, the fact remains that this happened. It makes total sense that lenders would revamp the way they go about lending money due to all the Nonsense. However, simply putting a noose on already restrictive lending standards to me makes No Common Sense.

How can you explain mortgage rates being near their lowest levels in sixty years, with the average 30 year-fixed-rate loan hitting 4.21% in October 2010, yet mortgage applications are near their lowest levels in a decade? I have a client who is a perfect example of why this is the case. This client has net assets of over a million dollars, a credit score of 800, is willing to put 50% down and simply can’t find anyone to lend a single penny. Granted, this individual is self employed and does not show the type of income (at least 2 years of tax returns) that lenders would like to see (but keep in mind, most self employed individuals take deductions that reduce their taxable income.) To me, this is when COMMON SENSE has to come into play. Property values have retreated significantly and to have another 50% cushion with an individual that has over a million dollars in liquid assets in the bank, why would you not be willing to make a loan?

It was the abundance of nonsense that lead to the housing mess and now the lack of common sense that will prevent a recovery of the housing markets. The economic cycle is something that we all learned in economics and I’d like to think most people recognize that a tightening of credit at the bottom of a cycle is definite barrier to a recovery. When you consider the amount of cash on hand at banks and record levels of cash being held by corporations, there are definitely sources of funds available for would be buyers of property. Unfortunately, many of the private lenders have given way to government entities (Freddie Mac, Fannie Mae, and the Federal Housing Administration) and these entities have substantial losses and are leery about taking on any additional risk.

While I am not Rod Tidwell, I definitely concur with his famous quote from Jerry McGuire, at least when it comes to financing for homes, “Show Me the Money!”. Let’s not repeat the nonsense of years past, but let’s definitely start using some more common sense.

To do List for when you decide to hold open a house:

• Make a professional looking flier ( I recommend Vflyer).  Syndicate it to all the sites that Vflyer is associated with.   It does not automatically syndicate to Craigslist, but we all know that reaches a huge audience, so fortunately Vflyer gives you the HTML code that you can copy and paste to Craigslist for a flier that will stand out above all others
• Print out these fliers and pass out to 50 homes in the neighborhood a day or two before the open house.  Neighbors like to know what their home is worth and are curious to see what other homes in the area are like.  It will ensure traffic during the open house, which always creates a lot more excitement than a Sunday home alone.
• Post the open house on your local association of Realtors website (here in San Diego, that is www.sdar.com).  If you are really ambitious, and since we are striving for maximum exposure, you can also call into the radio on Sunday morning to promote your open house.  Inquire with your local association for more details
• As you all know, it’s all about exposure, so submit an ad in your local paper promoting the open house.  Of course, social media is very prominent, so make sure to put it on facebook, twitter, your company website and any personal website
• Send out a quick email (you can attach the flyer) to your entire database informing them of the open house
• Make sure to have as much information at your disposal as possible, including but limited to the following: How to Buy a Home booklet, buyer net sheets, financing sheets, local area information….remember you are trying to sell the home, so you must be knowledgeable and enthusiastic!

Open House Checklist-The Day of the Open House

• It is game day and you should be fired up to meet all the potential buyers.  Make the home as appealing as possible.  Stage the home by doing all of the following: turn on all the lights, open curtains or blinds, open windows for fresh air, play light music, have a welcome sign (and a sign if you would like them to take off their shoes or sign into a booklet),  something to make them feel at home such as a bowl of candy, cookies, et.al and some cold bottles of water.  Give them every reason to want to linger in the home.  While I realize you are trying to appeal to all five senses, be careful about the smell part.  As much as candles or air freshener may seem pleasant, often times people are allergic or simply do not like certain smells.  Definitely inquire with the owner if you are holding open their home.  I have clients who specifically will not go into a home that has any smells, so don’t give anyone else a reason not to come in
• Once the home is staged as if it were going to be in a magazine, you need to drive traffic to the home.  Of course, all the prep work noted above should bring a steady stream of interested parties.  However, they need to know how to get to the property and in the process of putting up the signs, it will drive others to your place.  Put as many signs up as necessary (somewhere around 15….but be respectful of local laws and ordinances) and in all the key intersections
• Without being overly pushy, try to obtain the parties information so that you may follow up with them.  The odds of someone coming through the open house actually purchasing that home are not necessarily great, but there is valuable information that can be learned from independent parties.  Use that information to price your home accordingly or make the necessary changes to make it more desirable
• At the end of the open house, make sure to return the house to how it was before staging it.  This will most likely mean turning off all the lights, closing blinds and windows, locking doors, cleaning trash, setting the alarm
• Everyone wants feedback.  Be sure to take detailed notes on all the people coming through so that you can pass this information along to the homeowner (and also to serve as a talking point for when you follow up with the potential clients).  Homeowners will appreciate your input and know that you truly care about getting the home sold

Follow Up

• Provided that you were able to capture some information (remember, most people prefer not to be bothered when going through an open house, so be respectful of that.  You will find a particular style that works for you), send them a hand written thank you letter or give them a call

Summary

Holding an open house is all about exposure and giving potential buyers every reason to want to come into your home.  With that being said, if safety allows it, I would encourage you to keep the front door open to give that welcoming feeling.  Let the visitors know that you’d be happy to answer any of their questions and give them the option of checking out the place on their own or having you give them a tour.  Most will opt to browse at their leisure.  While this is fine, you do hope to engage them in conversation and get feedback, so be prepared to have a lot of talking points.  If nothing else, simply ask, “So, would you like to buy the house?”  This is sure to elicit a chuckle or two, lead to a conversation, and perhaps even a sale!

Chad Basinger, REALTOR®, CPA, CFP®

Windermere Exclusive Properties

www.chadbasinger.com

858.997.3704

chad@chadbasinger.com

If Richard Dawson (from the grave) were to survey 100 people the key to having a successful rental unit, unequivocally the top answer would be……..

1. Find a Quality Tenant/Lessee

Yes, it may seem obvious, but how many times has this come back to bite you?  Naturally, you’d like to think that friends, relatives, coworkers, or other members of your network would be the best choice.  However, we often have to expand our search to include people we don’t know through advertising in the paper or online through sites such as Craigslist.  Whether it is someone you know or not, you still must do your due diligence.

Make sure any potential tenant fills out an application form that provides the following: name, employer, salary, previous landlords and references (don’t just make this a formality…actually contact the references!) You’ll also need their Social Security number and signed authorization to check credit reports and criminal history. If you hire an online agency to provide background checks, make sure it is accredited by the Better Business Bureau

You will want to conduct a thorough background check on the potential tenant by:

• Running credit reports. You can conduct your own research through the three big credit reporting agencies — Equifax, Experian or Transunion — as long as you follow the guidelines of the Fair Credit Reporting Act.
• Checking criminal history. Search state and local records online or find an agency.
• Checking references, contacting employers and talking to previous landlords.  Don’t overlook this important step!

2. Protect Your Rights with a Lease

You will want to have a written lease which clearly states each party’s rights and obligations.  Given that laws vary among areas, you will want to make sure that your lease is applicable to where your property resides.  It is strongly encouraged that you have a local lawyer draft and/or review your lease to help avoid legal problems down the road.

While the lease may be tailored to your situation, at a minimum it should include the following:

• Lease term: month to month if you want flexibility, annual for stability.
• Security deposit: one month minimum- also pet policies and related deposits
• Rental due date and late penalties
• Responsibility for repairs
• Routine upkeep, maintenance, and repair responsibilities-make it clear who is responsible
• Names of all tenants and any special rules related to behavior
• HOA matters: 1) dues-who is responsible 2) any special rules that must be followed
• Arrangements for showings, if you plan to put your home on the market while it’s being rented.  This is where you will really want to have a tenant who is tidy!
• Eviction terms, such as not paying the rent or damaging the property

3. Determine How Much Rent to Charge

Your place is only worth what a willing party will pay for it.  Check local newspapers, online resources or neighborhood rental signs for value comparison. Be realistic about rent levels. The rent may be lower than your mortgage payment, but if you want to find a tenant, the rent must be comparable to what’s in the market.  Every month you go without a tenant is cash flow lost.

4. Protect Your Property with Insurance

For your primary residence, you have a homeowner’s policy, which covers the structure, damages and your belongings in the house. As a landlord, you’ll need rental home insurance, also known as fire insurance. This policy covers your home’s structure, legal costs, medical expenses and loss of rental income, if repairs are needed. Since you are not responsible for the tenant’s belongings, you should encourage tenants to buy renters insurance.  Contact your insurer to let them know you will have a rental and to discuss the options which make sense for you.

5. Hire a Management Company

Fees are charged primarily for two services: 1) finding a tenant: includes advertising and background checks and 2) managing the property. Monthly management includes collecting the rent, charging late fees, handling repairs, and dealing with early vacancies and evictions.  The fee charged by the management company may be a percentage of rent or a flat rate.

As far as finding a property manager, you may ask friends or a real estate agent for recommendations.  Either way, you may want to make sure they are part of the National Association of Residential Property Managers. Whomever you decide to go with, make sure you understand fully what services they will provide.

6. Evictions

Hopefully, you have followed the above steps, but this may not be enough to preclude a possible eviction situation.  You’ll need an attorney to evict a tenant. Provided the tenant does not move out willingly, you’ll have to go to court, and the sheriff needs to come out and physically removes the person.

Summary

I’m sure you have all heard of a horror story involving a tenant.  In fact, I just played golf with a friend the other day and he had a lease agreement in which the tenant was to buy the property at the end of the lease.  Lo and behold, the value of the property was not what it was once worth by the time the lease was up, so the tenant took his frustrations out on the property itself and basically destroyed it.  Needless to say, a lawsuit has ensued.  There is no surefire way to guarantee a smooth rental situation, but you can definitely stack the cards in your favor if you follow the steps outlined above.  Do your due diligence up front to prevent headaches on the back end (speaking of back ends….I’ll end by saying to make sure to CYA…Cover Your A..!

This tragedy linking John Gardner, Amber Dubois, and Chelsea King really hit home for me, having grown up playing baseball on the fields next to Chelsea’s disappearance, and graduating from Poway High, as Chelsea was on her way towards doing.  Looking out my window at work at the hundreds of volunteers lining up to help was refreshing, yet a sad reminder of something so heart breaking.  While we can’t change the past, it is critical that we consistently move forward in doing everything possible to keep the public informed about these despicable individuals and their whereabouts.

Megan’s Law affects everyone and is included in the California Residential Purchase Agreement and Joint Escrow Instructions under 6 D and reads as follows:

Notice: Pursuant to Section 290.46 of the Penal Code, information about
specified registered sex offenders is made available to the public via an Internet Web site maintained by the Department of
Justice at www.meganslaw.ca.gov. Depending on an offender’s criminal history, this information will include either the address
at which the offender resides or the community of residence and ZIP Code in which he or she resides. (Neither Seller nor
Brokers are required to check this website. If Buyer wants further information, Broker recommends that Buyer obtain
information from this website during Buyer’s inspection contingency period. Brokers do not have expertise in this area.)

Essentially, it is up to the Buyer to do their due diligence.  Fortunately, today is the beginning of more information being made available so that everyone can make a more informed decision when moving to a new area.  For those of you not moving, but who have children, it would be prudent to check out the site for the updated information.

While I wish that we didn’t even need Megan’s Law, the reality is that there are predators out there.  Let’s all work together to prevent another tragedy from happening.

That begs the question of how much insurance you should have.   If you under insure your home and suffer a devastating loss, then you risk not being able to return to the lifestyle you grew accustomed to. On the flip side, if you over insure, you’re throwing money away every year on unnecessarily high premiums.

In order to best assess your situation, you should review your homeowners insurance policy, talk to your agent, and do your research.

Make sure you compare apples to apples

All homeowners insurance policies are not equal.   As stated earlier, review your policy every year to confirm it meets your needs. The first step is to understand the types of coverage available.

Actual cash value coverage reimburses you for the value of your home based on its current condition.   If your home was built in the eighties, you’d receive only the depreciated value of 20-30 year old windows, cabinets, appliances, and so on.

Most insurers recommend the more comprehensive replacement cost coverage. With it,  you’ll be reimbursed for the amount it will cost to rebuild your home like new with the same kind and quality of materials. Depreciation doesn’t factor into the settlement equation.

To get the full benefit of replacement coverage, you need to purchase enough insurance to cover the total cost to rebuild your home, excluding the value of the land.  Keep in mind that the amount you could sell your home for today isn’t necessarily the same as how much it would cost to rebuild.  Thus, it is replacement cost, not market value that you should pay attention to.

How much does it cost to rebuild?

The main driver is clearly the current construction costs in your area.  When the market is hot, and contractors are in demand, the price/square foot to build is most likely higher than during a down market where contractors are willing to build for less.  If you’ve purchased a newly constructed home in the past year, you have a good idea of the cost to rebuild. The same is true if you’ve refinanced within the past year since an appraisal during that process most likely included three valuations: replacement cost, market value, and actual cash value.

Of course, you can also contact several local home builders and inquire about the average square-foot construction cost in your area.

Don’t forget to increase the amount of coverage if you make any substantial additions to the house.  Your insurance agent should be able to guide you.

Closing thoughts

By no means am I an insurance agent, but I have dealt with homeowner’s insurance as a financial planner and as a real estate agent.  At least 95% of the clients I dealt with as a planner were under insured and the majority of them weren’t even aware of this.  Your home is most likely your most valuable asset, so it is prudent to make sure you are adequately protected, not just today, but on an annual basis.  Don’t wait until it’s too late to review your policy.  Not once have I heard someone say they had too much insurance, but I can definitely attest to hearing far too many people wishing they had more.  Whatever your situation, just make sure that you are prepared for the worst, but as with everything in life, hope for the best.

Chad Basinger, REALTOR®, CPA, CFP®

Windermere Exclusive Properties

www.chadbasinger.com

858.997.3704

chad@chadbasinger.com

• Sever Ties to your Home

• Think along these lines, “This is not my home; it is merely a house – a product to be sold much like anything you’d find in the grocery store
• Mentally “let go” of your emotions and realize this house will no longer be yours
• Envision handing over the keys and appliance warranties to the new owners
• Say goodbye to every room
• Don’t look back; look toward the future

• Do Not Make it about You

Pack away personal photographs and family heirlooms. Buyers have trouble looking past personal belongings, and you don’t want them to be distracted. You want buyers to visualize their own photos on the walls, and they can’t do that if yours are there! You don’t want buyers thinking “I wonder what kind of people live in this home?”  You want them thinking, “I can see myself living here.”

• Get Rid of the Clutter

People collect an amazing quantity of junk, so much so that some may consider hoarding a disease.  For many, it is hard to part with “stuff”, but try to take this approach: if you haven’t used it in over a year, you probably don’t need it.

• If you don’t need it, why not donate it (possible tax deductions) or throw it away?
• Remove all books from bookcases
• Pack up those knickknacks
• Clean off everything on kitchen counters
• Put essentials used daily in a small box that can be stored in a closet when not in use
• Remember this:  You will need to pack anyway, so do it now and get your home sold!

For those of you who can’t do this on your own, there are professional companies to help you organize.  It is much easier for them, as they do not have a personal connection to your “stuff”

• Clean Up Bedroom Closets and Kitchen Cabinets

Buyers are curious and have a tendency to snoop, meaning they will open closets and cabinets. What kind of message are you sending if these places are crammed, or even worse, things fall on the (now former) interested buyer?   Now imagine what a buyer believes about you if everything is organized. It elicits the thought that you take good care of the house.  For guidance, closets should be no more than 30% full.  Without appearing overly obsessive, you may consider the following:

• Alphabetize spice jars
• Neatly stack dishes (not on the counters, of course)
• Turn coffee cup handles facing the same way
• Hang shirts together, buttoned and facing the same direction
• Line up shoes

Bottom line – show that you are neat, organized and ready to have a smooth transaction!

• Rent a Storage Unit

Yes, I realize the first thought is that this will cost you some money to rent a space.  However, the cost of not selling your home will be much greater, so make the investment.  Most homes show better with less furniture. Remove pieces of furniture that block or hamper paths and walkways and put them in storage. Since your bookcases are now empty, store them. Leave just enough furniture in each room to showcase the room’s purpose and plenty of room to move around. You don’t want buyers scratching their heads and saying, “What is this room used for?”  Remember, you want to create the illusion of having more space and putting your items in storage is one way to accomplish this.

• Remove/Replace Favorite Items

If you want to take window coverings, built-in appliances or fixtures with you, remove them now. If a buyer never sees it, the odds of them actually asking for it are slim to none. Once you tell buyers they can’t have an item, they will covet it, and it could be a deal breaker. Also, if you are set on keeping a particular appliance, you may want to consider replacing it.

• Make Minor Repairs

• Replace cracked floor or counter tiles.
• Patch holes in walls.
• Fix leaky faucets.
• Fix doors that don’t close properly and kitchen drawers that jam.
• Consider painting your walls neutral color
• Replace burned-out light bulbs
• Replace worn bedspreads and  make your bed everyday

Remember, the buyer is going to have the property inspected most likely.  You do not want to give the buyer any reason to not want your property.  Avoid repair requests when possible.

• Give your Home that Pristine Image

• Wash/Windex windows inside and out
• Rent a pressure washer and spray down sidewalks and exterior
• Remove any cobwebs
• Re-caulk tubs, showers and sinks
• Polish chrome faucets and mirrors
• Clean out the refrigerator
• Vacuum daily and make sure floors are waxed/polished
• Dust furniture, ceiling fan blades and light fixtures
• Bleach dingy grout
• Replace worn rugs
• Hang up fresh towels
• Bathroom towels look great fastened with ribbon and bows
• Clean and air out any musty smelling areas. You want to appeal to all five senses
• Minimize the pet effect.  Remove food bowls and litter boxes.  Deodorize thoroughly.

• Scrutinize

• Go outside and open your front door. Stand there. Do you want to go inside? Does the house welcome you? Buyers will form their opinion immediately!
• Linger in the doorway of every room and imagine how your house looks to a buyer
• Rearrange furniture until it makes sense
• Make sure window coverings hang level
• How does your place “feel” when they are in your place?  Give them reason to want to make it their home.

• Curb Appeal

Buyers often drive by a property and decide not to go inside.  Give them every reason to want to get out of their car and into your home

• Keep the sidewalks cleared
• Mow the lawn
• Paint the exterior
• Add shiny hardware to the front door
• Plant yellow flowers or group flower pots together. Yellow evokes a buying emotion.
• Trim your bushes
• Make sure visitors can clearly read your house number
• Make sure the front door is appealing and easy to open

• Additional Ideas to Consider When Staging your Home for Sale

• Visit model homes and look through magazines for decorating ideas
• Invite your friends or a REALTOR® over to get an objective opinion

Chad Basinger, REALTOR®, CPA, CFP®

Windermere Exclusive Properties

www.chadbasinger.com

858.997.3704

chad@chadbasinger.com