Take Advantages Selling In A Crashed Market By Using Creative Tactics
The crash in the real estate in 2008 has appeared to be a big one and the downturn of the last few years seems nothing compared to it. Though this crash is upsetting for sure, in fact crashes are nothing new in real estate market. In the late 1980s, the housing market crash also produced similar tension in the market. That period caused many investors to invent and utilize creative marketing strategies for their survival. Whether you own properties in a down turning market or you want to urgently move your properties from the market, you can apply these strategies to help you not to fall victim to current market conditions.
Looking back at the market crash in the 1980s, the practice to offer the buyers all or a part of the closing expenses became very helpful for many sellers. It proved to be a very successful tactic in many situations though it is not proper for every situation. In some cases, there can be lender imposed limits on seller concessions which can be made. If the buyer purchases the property with a loan from Freddie Mac or Fannie Mae, this is likely to happen.
However, this kind of loan is often very lucrative to some buyers as it allows them to make lower down payments. On the other hand, sellers are often restricted to 3% concessions on the total sales price when buyers make down payments equaling or less than 10%.
Under these circumstances, it may be wise to apply a strategy that is even more creative so as to ensure that your property is sold. One tactic frequently used during the 1980s crash was to increase the price of property. It may seem ridiculous and counter-productive at first glance, it reveals to be a very creative and effective way for you if you dig deeper. It allows you to assist the buyer with the closing costs.
The strategy works as follows: you and your buyer must agree on the price after which you will increase the sale price by a set percentage. During closing, that increased amount will then be given back to your buyer. For instance, a home worth $ 150,000 with a price increase of 3% would amount to an additional $4,500 which would be directly repaid to the buyer so as to assist in paying the closing costs. As a tradeoff, the buyer will gain a loan of $154,500 and will be able to bear the closing costs using only their mortgage.
To ensure that this strategy works, the home needs to be evaluated for a higher price so as to allow the buyer to obtain the required mortgage loan. In addition, the buyer must be completely willing to pay this increased asking price and also accept the subsequent increase in their monthly mortgage payments.
A number of sellers are not really interested in making any concessions whatsoever, as they would rather attempt obtain get the highest amount possible from their asking price. However, in a crashing market, you need to be conscious of the fact that each month the property spends sitting on the market will cost money. This could amount to a significant sum over several months which may even surpass the amount you would have lost by offering a discount early in the process so as to expedite a sale.