What do you do to get your money’s worth and more for your real estate property, especially when you’re in a hot seller’s market? Our Resident Expert JD Esajian, one of the owners of CT Homes, LLC, is back on the show to talk about real estate appraisals. What is it? Why is it important? How can you improve the value of your property? JD answers these questions and more, sitting opposite Jeff Rutkowski to break down incredible appraisal strategies that will help you in your renovation process and marketing strategy. He spills the secrets to making a house a home, positioning your listing right with not only the perfect pictures but also taking into consideration psychology and emotion, telling a story with your property, and communicating with the appraiser. Join JD as he gives more great insight that you cannot get anywhere!
Listen to the podcast here:
Real Estate Appraisal Strategies To Get Your Money’s Worth With JD Esajian
We have our resident expert here with us, Mr. JD Esajian. We are going to get into some high-level conversation that you are not going to want to miss. Let’s kick it off with our word of the week. Our word of the week is real estate appraisal. What is it? Why is it necessary? JD is going to be breaking down some incredible appraisal strategies, especially as it pertains to the hot seller’s market that we are in. Very simply, a real estate appraisal is a valuation of real estate. Are there any types of real estate, whether it is a residential home, a piece of land or a commercial building?
Typically, these are done by licensed appraisers that will go to school to obtain a license and to learn how to accurately appraise real estate. They are most commonly used by banks and lenders. When you go to purchase a home, whether it’s for yourself as a primary residence or as an investor, the bank will not loan money on that piece of property unless the property appraises for sufficient value to support the debt that they are going to loan on the property.
It’s something that is in play differently in the market nowadays, with many buyers out there now paying well above appraised value. We are going to get into all of that. That is the simple definition. That is our word of the week, the real estate appraisal. Mr. JD Esajian, welcome back. It’s always good to have you here.
We were joking a little bit before the show, but we almost feel like we should be charging for this episode. We are getting into some pretty exciting stuff. To summarize it for you, what it comes down to now if you like renovating properties, putting them on the market, and selling them in record time, prices or amount of money. You want to pay attention because that is what this episode is about.
If you like making more money, this is a show for you. If you don’t, on your transactions, now is when you can turn the volume down.
For those of you that don’t like to make more money, you can tune in to a different show, watch some YouTube or talk about something stupid. We are talking about real estate. Real estate is exciting. Real estate is fun. We are talking about ways that have helped you and me to create some incredible wealth, to set up our families here for the future, and it is a great way. That’s what we are getting into. What will be a little unique about this show is JD actually has a case study. He has a property you are negotiating offers on.
We will be accepting an offer once we get done with the show. I have to confirm we’ve got the contract and the counteroffer signed, which will be $125,000 above our original estimated sales price. Part of that is what the market has done as you know, but a bigger part of that is what we have done in the market to make that sales cycle and emotion that someone experienced with the property at the highest level. That’s what we are going to talk about.
Those of you that are reading, we are going to do our best to describe the pictures. You are going to get an extreme benefit, but I definitely would encourage you if you can jump over to the FortuneBuilders Facebook page to see some of these images because what they have done is stunning. Those of you that may be reading for the first time, I described JD as our resident expert. He’s one of the owners of CT Homes, LLC, a residential redevelopment company here in CA. They started in New Haven, Connecticut.
Now, it’s about 1,500 residential deals under their belt, 25 to 39 deals going on in their office at any given time with about fifteen people employed. They take care of that. This is fresh. We are not talking about something we did years ago. Let’s get into it. When you are renovating a property, we say in real estate, we make our money when we buy.
We have talked a lot about that on the show. That’s why we train and we study, dial-in after-repair value, how to estimate repairs, all of that. We realize that money and that profit when we sell. There are many different strategies used along the way to realize that profit, and it’s equally as poor. You could buy right and you could give away a lot.
Leave a lot of money on the table if you don’t do things throughout ownership, and definitely when you get done with the property to sell it to find that perfect buyer. Price is one component of that buyer, but other things go into defining that perfect buyer.
That’s where we are getting into, how to make sure when we estimate this amount of money is coming out of the deal that we ensure that that’s coming plus some more. You are unique in the fact that you own your own real estate brokerage as well.
I personally list a lot of the CT Homes and properties that we finish and sell. We also have agents that we work with outside of our brokerage. An example that we are going to look at is one of those. What we are talking about will apply to both scenarios, whether you are doing it yourself or you are helping in a lot of ways, guiding the agent to do some of the things that we are going to talk about because they may not and probably won’t be automatically doing those.
Think of it through that lens. Maybe you have your own brokers. You will be listing and doing these things yourself, your office or the other category of people will be, “These are the things that you are holding your agent accountable to doing throughout the process.” You are nearing the completion on a rehab. First of all, before we get into this, you have always taught. I remember sitting in one of your classes years ago. The moment you take ownership of a property, you are thinking, “How do I market this thing?” Quickly, you take ownership of the property. You are about to start the renovation. What are some quick tips that you are doing signs on the property things like that?
Obviously, sign on the property. That’s the easiest thing to do. You should take advantage of that, whether it has a ton of traffic in front or it isn’t the issue. The issue is to get a marketing piece out of a for sale sign, a banner from day one when you own it. The other thing is we started doing things on social media to market that property.
We capture the home after it’s renovated, but if you don’t capture it right, you’re not going to get the most money for the home.
A renovation project becomes a pretty good example for someone to go in and film short little videos throughout to post on YouTube, Instagram, TikTok, all these social media platforms to create and get your sphere of influence to know about the property. We are not even talking about paid advertising. We are talking about free advertising. We do that throughout. When you go check on the project, you do a quick video of something unique there. You make it fun, and then you post it on social media so that’s something that we do.
In the back office of Mastery, our coaching program, we have a variety of different tools that allow us to outbound market and get information. We are using a banner on our for sale sign, things of that nature that we do. We are always doing something. We are going to networking events. The other important thing, and this is related to sales, but it’s also as much market knowledge as we recomp our property every single week, especially in a dynamic market like we are in now.
Markets change all the time. We know that, but if you are looking at your comps every week, then you are more in tune with what that property’s value is doing well or not good. The other thing it does, this is why it comes into the sales part is if you have a pending company, bought the property, a property that was going to be sold soon, and you buy your home. When that property or that comp sells, it’s your most relevant comparable for your property.
If you call the agent and find out the interest that they had, and they had a ton of showings and offers, you might back yourself into a buyer for your property through that. Let’s say they had ten offers. They only sold the property to one buyer. You may find a buyer for your property through those other nine offers that were submitted.
Not only are you getting your market knowledge and understanding what the true value of your property is in real-time, but you are broadcasting your property, and you are finding potential other buyers for that. Those are some things that we do. There are a lot more, but those are some of the big ones that we do during the project.
Think about that. From the moment you take ownership, you are thinking of that property as a marketing piece, not just for that property. We were just in Orlando not too long ago, teaching market strategies. One of the tried and true strategies that have been around a long time and are still very effective is bandit signs. A lot of times, you will get pushed back. They are not allowed. They are illegal. I’m not going to get into all of that.
Any restriction that a market normally has on the bandit sign is it’s on public property. When you take ownership of a piece of property, that is yours. Use that as a marketing campaign to further your business and help sell that house. We are renovating the property now. You are nearing completion. You are getting to the point where you are going to list this yourself or have an agent that may bring to you the deal. Give the audience a couple of strategies or some tips that you are focusing on.
Number one, we are using the MLS, the Multiple Listing Services. There’s nothing that we do on selling a home that should eliminate that even if you already find a buyer because it lets other people know about your property. You can network with other agents. We are listing it on the MLS. We are also being very diligent and detailed in how we finish the property in terms of punch list, making sure we are taking professional photos and starting to think about crafting.
I use the word crafting because there’s art and science to selling a home, the proper listing on the MLS. As an example, on the property that we talked about, we are just negotiating. We have the home that we bought. Kevin is on our acquisitions team, otherwise known as Beefcakes, one of the best nicknames in the biz. As an acquisition strategy, just quickly, this was a property that was inherited by the family members, brother and sister. It was condemned by the city.
Unfortunately, someone was living in the home. It was one of the daughters that inherited the property. What happened is they decided they were going to try to do a couple of things to sell the home, and then that didn’t work out, so they put a new roof on. I want you to imagine what a big pile of rat feces would smell like. I have seen rat poop in other homes, but I haven’t seen the quantity in this particular house.
I can’t say exactly what they were doing with that, but this is after we had already cleaned out some stuff in the home. To give you an idea of what the home looked like, there’s an example of the laundry area. They had a problem on their hands. It was off-market, so it never made it to the MLS. We analyzed it and purchased the home for $825,000. It’s what we bought the home for. That may seem like a lot of money for a fixer depending on where you are from. This neighborhood is a starter home.
This neighborhood is coastal, which is near where we are doing this episode but this will give you an idea of what we bought here. It’s a fixer. It’s physical distress of the property but the seller is distress as well. One of the heirs was living there. We were able to help them out and that situation closed quickly on their timeframe, which was quickly, and we now own the home. That’s what it looked like when we bought the home but because we are talking about sales, let me show you what it looks like now.
Staging makes the house a home. People don’t buy nice, empty, renovated houses. They buy homes.
We have talked about renovations before, and there are a lot that goes into renovating a home properly, whether it’s sizzle features or picking the right scope of work, not over-improving the home. To the chairs in the front porch, do you want to sit there and have a glass of lemonade or whatever your beverage of choice is? When you asked me about what we do as we are getting ready to sell a home, we take the right photos. It’s an obvious statement when you look at these photos but using your iPhone 13, which has a great camera, isn’t the same as what we are doing here.
We are taking twilight photos. We are going at a different time of the day towards the end of the day when the lighting is better, and you are going to see the impact of that as you get into the backyard. Look at that photo. Look at the sun, caressing, careening over the fence right there gently. I don’t even know if that makes sense but you get the careening, caressing and gently setting.
I know everyone doesn’t live or work on homes in California but that’s not the point. The point is lighting is different and better at certain times of the day. We take twilight photos, and this is obviously all before we even list the property but this is what we do. We capture the home after it’s renovated. That’s fine but if you don’t capture it right, you are not going to get the most money for the home.
I love how you never skimp out on the backyard landscaping. It’s something I see so many investors do, the beautiful front yard, and there would be wood chips in the backyard.
Outdoor space is some of the most valuable spaces of any property, no matter where you live and what time of the year it is. You are from Connecticut and we had started in Connecticut. You don’t have year-round access to the outdoors there. Nevertheless, if you do something outside at any time of the year, people will appreciate that. Obviously, in San Diego and other markets like it, you can be outside year-round.
You are right. People underutilize the outdoor space. This yard is bigger but at the end of the day, if it was smaller, we would still do some unique things. This picture is cool to look at. This house has a two-car detached garage and we have kept it that way. What we did also is we put in a slider in the side of the garage. We put a patio there so that it could be used as a garage, which it is or we have stated it as a hangout room where they could actually extend the living space of the house if they wanted to.
We have turned it into a multi-purpose space. Can you see yourself sitting and swinging there with one of your daughters or both of your daughters on those chairs, hanging out? That’s the start of a great listing and sales cycle. Nothing you are going to do marketing-wise when you sell a home, negotiating-wise or to select the perfect buyer. It’s going to be maximized unless you take great photos.
We have pre-marketing campaigns that we use to try to sell properties before they are completed. I remember you and I did a deal together years ago. We made that happen, but it’s almost like in nowadays market, you almost don’t want to do that. You want to put it out on MLS with these types of pictures and get that feeding frenzy driving up the price.
In the seller’s market, I agree with you. You want to get it out there. You want as many people to see it as possible but what we are talking about, even when the market changes, we will still maximize the emotional impact that someone experiences with your home and ultimately the price that you get because of that.
That’s straight out of a magazine. What are you paying to look at this too? You’ve got a little lemonade glasses.
The other thing that goes into a great listing and a finished home is staging. Staging makes the house a home. People don’t buy nice, empty, renovated houses. They buy homes. Staging, to me, makes a house, an actual home, where someone can see themselves standing under that pergola. That pergola is cool, and it looked great without that stuff there, but when you put a couple of swings from it, what you, I, and others are seeing or feeling themselves there. If someone can see themselves in that home when they are looking at it on their phone, primarily for the first time, they are likely going to be in that home very soon.
What’s your strategy on the order of pictures? Are you posting them as you are walking through the house? Typically, when you see the exterior front of the house, it ends with the backyard and everything in between. Is there anything you are doing strategically?
There’s a whole system that we put into play with that. I teach a lot at some of our online classes and live events, and I will give you some highlights here. When you send a photographer to take photos, they are going to take a lot of photos. You are going to have a lot of pictures of the house. That’s great but there’s a strategy. Do you put all the photos or do you give just enough of the home so that someone can envision themselves in there but then have to actually get there to see the rest of the home? That’s what we do.
Every MLS allows a certain amount of photos as a max. Here in San Diego, we can do something like 80 photos now, which is ridiculous in my opinion. We do somewhere between 20 to 30 photos. I don’t like to give every angle of the kitchen for the reasons I mentioned. I want someone to see, “That kitchen is cool but I’ve got to see more, so I’m going to go to the house.” We organize them in a way that someone will likely experience the home when they go there in person.
The reason is I want the home to feel familiar when they go there for the first time. The way that we do that, and the way that I have found to do that, is using a system where we use just the right amount of photos in the order that someone is going to experience the home. When they are in this dining area, if you position the listing right, they are going to feel like they have already been there when they get into that house. There’s psychology, emotion, the lighting. All these things matter. There’s nothing neutral in a listing and your sales cycle. You are enhancing it, de-enhancing it or not enhancing it.
That’s how we get ourselves ready to put the property on the MLS, the Multiple Listing Services. We select the perfect amount of photos. We present them in a way that someone will likely go through the home like what they are going to see first, the second, etc. We are starting from the outside in the front. We are working a way through the front door. Everyone is going to go through the home a little different, but what’s the natural path that someone may walk through the home?
Facts tell. Stories sell.
What are you paying a photographer for something like this?
Depending on the size of the house and how much there is to capture, it’s going to be anywhere between $400 to maybe $1,000 on the high side, and potentially more if the house is very big, and there are a lot of lands or something like that but somewhere between that $500 to $1,000 range. Here’s another little tip. They should capture it and give you photos in high res and a low res version.
The reason is this is a small detail but it saves a lot of time as most MLS has taken a long time to upload high res photos, so we use the low res on the MLS, we use the high res on our website and social media. That’s approximately the cost for these photos. What they also do is they send them to us in a link on an actual webpage that we can put in the listing, website, etc.
That’s a perfect segue into what I want to talk about here. In this context we are talking about, in this case, a realtor who brought you this deal. They had a chance to relist it. You gave it to them but you are not sitting back just depending on what they are doing and on the MLS. There’s other marketing that they are going to do, your marketing on your website and social media. Talk about that overall marketing strategy, whether you are listing yourself or not.
What I like to do when we are listing it with another agent that isn’t us or isn’t in our office is we sit down and we collaborate. We hear their marketing plan. We go over our marketing plan and we weave them together so that they are a part of the process. Part of that is professional photos and the things that we have talked about like staging. What we do with our photos besides the MLS is what you mentioned. We pushed them out on our social media platforms. We put them on our website. We pushed them out to any agents that we may know that could have buyers.
We use these tools together with our agent. In this case, a woman that we work a lot with named Tammy in our local market is listing this. Tammy puts the listing together with our feedback and guidance around photos. The other really important thing is the description, which is a common thing that gets looked at on a listing. How does that get written? Do you put everything new? Flooring, paint, landscaping, or do you tell a story? We tell a story. Are you selling a newly landscaped backyard? Are you selling a private backyard oasis?
That’s so huge. Most people do that. It’s new floors, roof, HVAC, all of this stuff. This is something that you want to remember. I remember my coach taught me these years ago and it applies here. Facts tell. Stories sell. What type of story was told on this property right here?
This is what someone is going to feel when they go into the home, this private backyard oasis. A custom spotlight retreat that’s a newly renovated bathroom, but it’s also a custom spotlight retreat. Unwind at the end of a busy day in your custom spotlight retreat. Spend time creating memories with family and friends in your private backyard oasis. I can go all day, but this is the story that we are telling of this house. When we are writing the description, we are writing it from their point of view. It’s not a house, the house or CT Homes house. It’s their house, so when they are reading it, they are reading it from that place.
It draws up emotion like you described backyard oasis versus brand new sod, fencing or whatever it is. That’s brilliant.
That’s how we blend the photos with the description, which is the start of a great listing, the amount and the order of the photos, the way the description is written. We can talk about pricing strategy. It’s important, too. The house is going to be worth something based on what the market is telling us. Do you list it at that number? Do you list it in a range if you can or below that to try to be the most competitive price on paper to get more people in there?
I’m actually noticing the market is by far still a very hot seller’s market, but I’m seeing a little bit more price reductions than normal because you will see some sellers listing properties and just swinging for the fence like, “Let me just go for $1 million higher than what it’s worth.” You see a lot of people that are intentionally priced lower, get a bidding war. What’s the strategy?
Now, this is what we did here. We liked the idea of listing it a bit lower than what the house is actually worth. For the reason I mentioned, it’s now on paper. It’s going to be more attractive for people to go look at it. Smart agents, sometimes we have to help them become smart agents who understand the value of the home. What do I mean by that? An agent that knows the market will educate our clients on what homes are worth and also educate them on what they need to do to get a home in this market, pay at or above what the home is worth.
When that isn’t the case, we may have to educate that agent in terms of the value by showing them comps or relaying to them what the actual value of the home is. Not because we said it but because that’s what the market is dictating. To answer your question at the end of all that, I like a little bit below, depending on what the house is worth, for example, this actual property that we are selling.
When we bought it, we had the after repair value, the sales price at $1.050 million. I felt it was between $1.050 million and $1.1 million, depending on what a few comparables did during our ownership but those helped us. We were leaning towards $1.1 million when we finished the home. A little bit more than we spent in the backyard, based on those comps that sold during our ownership.
Still, in that scenario, you’ve got a $1.1 million house. That’s a good mark to decide. Do you price it at $1.1 million? Do you come in below that? We actually listed at just under $1.1 million. We are going to be accepting an offer at $1.175 million. The market is strong in terms of being a seller’s market and that helps. We haven’t even talked about everything yet but what we have talked about to this point helps us get more people in the home. We have listed this, and it’s only been on the market for a few days. We are approaching two dozen showings. As we sit here, we may have more in my inbox, we have four offers that are at or above our list price.
Several days on the open market approaching 24 showings, multiple offer situation, minimum, now you are accepting $75,000.
We create a ton of emotion in the photos. I already took a shower, but I want to take another shower in that bathroom now because it’s a spotlight retreat. The finishes, tiles, all those things matter.
The mirrors are phenomenal. They are cool.
They have this extra button that lights up. You can get really close, look at the pores of your skin, and all this different stuff.
It’s the high level of stuff we are getting into now. Speaking of high-level stuff, as you are reading this, many of you are in real estate, many of you have a desire one day to get into it. We offer free classes here at FortuneBuilders every single week. There’s a link to FortuneBuildersShow.com. Go to that URL and sign up for free training with one of the top trainers in our company to teach you how to get started. The great thing about starting a real estate business that I found is, there’s not a whole lot that goes into starting one up if you think about it.
It’s not like we need a brick-and-mortar store and order all of these supplies and equipment. It doesn’t take much to get started, but education is vital. If you know that’s for you, now or anytime throughout the show or in any future episodes, I strongly encourage getting to that training. It’s free, phenomenal, and it will help keep you safe in investing. Let’s get back to it here. We are $75,000 over the asking price. You are leaning towards accepting that one offer, but what are you doing as these offers come into posture yourself, negotiate, and squeeze as much juice out of those lemons as possible?
It’s easier in a seller’s market when you have a lot of interest and offers. Let’s just call that what it is. No matter what the market is doing, how you negotiate, whether it’s via text or on the phone, I personally like to do it voice to voice. Over the phone, not every agent likes to do it that way. There’s a whole rhythm and way that you can text negotiate versus in-person.
Does that bother you?
It bothers me too, but then we just shift our mindset towards the text negotiation. I try to encourage them via text to call me, but if they still don’t, then I don’t force that issue but we can still negotiate via text. As an example, let’s say you don’t have offers yet. A common question you are going to get, whether you have offers or not is, “Do you have offers?” It’s one thing. This is in negotiation or communication where if you don’t have offers yet, you could say, “No, I don’t have offers.” You could phrase it differently and say, “Yes, we are expecting offers,” and still be honest in your statement.
As a seller, you are always expecting offers, whether you have him yet or not. If we have offers, then I personally like to share that we do because it’s truthful, and if you do it properly, it doesn’t create discouragement. It creates urgency. If an agent asked, “Do we have offers?” If I’ve got a call from an agent, I would say, “Yes, we actually have four offers.”
If they didn’t ask, I would tell them because normally the last is, “Where are they at?” I have tried it in many ways. You want to give respectfully and professionally as much information as you can to the agent so that if their client wants the home, they can put the best offer forward. I tell the agent that. I will tell, “I appreciate the question. We like to find the best buyer for our homes at CT Homes, and because of that, I want to give you as much information as I can, so if your clients want the home, they can put their best offer in front of us. We do have four offers. They are all at and above the list price. If your clients are serious, I can give you a little sharper target to come in at.”
The start of a great listing is in how we blend the photos with the description.
By asking those questions, it helps me understand how serious they are. I like to give them as much information as we can. I don’t like the strategy of playing every offer against each other. That’s not what I’m talking about. That’s not professional. I don’t think that’s the right way, in my opinion, and experience. If you have a client that has been looking for a home for a while and wants this house, I want to arm you with what I can so that they can put the best offer forward. I also want to understand how long they have been looking, how serious they are or how much they are familiar with the market.
It’s good on many different levels, the long-term relationship with the agent and reputation of the company, things along those lines. Agents do appreciate that.
We get told that too. They appreciate the fact that when we pick up the phone, we counter all of our offers, even though the offer may be significantly lower than what the other offers are. We treat everyone fairly, which is the right way to do business, and give people what we can so that they can go back to their clients and do their best job of representing that buyer.
Our word of the week was real estate appraisal. In this example, you are $75,000 above the high end of your ARV. It may or may not have appraised or will appraise for what they are offering, but how are you posturing that reality just to get ahead of that?
It’s not uncommon in the market. We are now in the market environment for sellers to remove contingencies, as you know. In this particular case, in the offer that we are likely accepting here in a bit, they have removed their appraisal contingency. That’s in and of itself doesn’t mean anything unless you understand the buyer is serious about what that means. The reason is if they remove their appraisal contingency, but they have other contingencies in the contract like a loan, which they are, they can still not have that be a reality.
They can still back out of the contract if it doesn’t appraise. What we don’t want is someone to put that in there and not be serious about it. Before we accept this offer, and we are doing this now, we will ask the other agent. As you said, an appraisal is an opinion of value. Some people don’t get that opinion. When we ask the agent, in this case, it was exactly what we will do. If the opinion of value from the appraiser is not where your client has written the offer, what’s their ability, their intent in terms of that scenario, making up that difference?
What we want to hear is they understand, they have money, here’s the proof of funds, and they will bring the difference. What we don’t want to hear is, “If it doesn’t appraise, they can’t get the loan, so they will have to cancel.” Those are two different extremes but we are asking questions to find out if they are serious about their removal of the appraisal contingency.
If that isn’t the case and they have an appraisal contingency in there, it doesn’t mean we don’t accept the offer but then we have some things that we want to make sure we do and some systems we put in place to help make sure that the property comes in at the highest value possible. What that looks like is we have what we call an appraisal package. We either send it to the appraiser or what I like to do is actually open up the house for the appraiser, whenever that schedule when we get to that point. That information is, first off, all the work we did to the home.
If the appraiser doesn’t know the extent of the work that was done, then they don’t have all the information they need to bring that home and add value. We also bring comparables. We bring comparables to that or send them to the appraiser that help support the value in that neighborhood. If we don’t have those appraisals or those numbers to support that high of a value, then we are at a little bit of a disadvantage. That’s the intent in how we handle that as we bring the proper comps and information to the appraisal to support that value.
It reminds me of back in the day, ‘06, ‘07, ‘08, when you are meeting the REO appraiser out there and just telling them how bad and horrible the property is. We are doing the opposite here. The reality is, the appraiser is going to walk in and see a finished product, but they are not going to understand all the work and everything in the house that was enhanced, that is now brand new, so you are selling the appraiser on that new price.
This particular property is right on the upper end. It will likely appraise for that price that we are going to go into contract debt. If you are very clear that the contract that someone has written or the offer that you are accepting is far and above, beyond what someone will appraise it for, then you need to have a real conversation with that buyer and that buyer’s agent to make sure that we are all on the same page and that they definitely are committed to bringing, and that those funds are paying that price regardless of it appraises or not, which we already talked about.
Are you looking for, let’s say in this case, $1.1 million, $1.7 million? Maybe they are putting $200,000 down. If you are going into this, if you have a feeling that may or may not appraise, are you looking for a certain amount of proof of funds above and beyond that initial deposit?
If that’s the case, we are always looking for their financial ability to bring that needed difference in the case that happens and also, having a verbal understanding and conversation that they are willing to do that. We want to make sure that they have the number of funds somewhere, proof of funds, stocks or whatever it may be to bring that difference if we strongly feel that the comps aren’t there to support the price that they are willing to pay.
To those of you reading, if you don’t own your own brokerage, these are things that you are overseeing and making sure that your realtor is going to do. Any good realtor should be doing these things. To me, one of the highlights of what you said is you are updating ARV weekly. That’s something that you should be expecting from your agent throughout the duration of this project when it comes to market.
When we are accepting buyers, having an idea, “Is this thing going to appraise for what the offer is? Are my buyers capable? Are they set up to do that?” Another thing that’s amazing about your operation is the vast majority of your listings either close on time or close early. Nothing happens for no reason. You have another whole system and strategy you use there, and that would be a whole show if we just talked about that. A couple of quick tips on how do you ensure your listings close on time or even better than that, early.
The best way I can describe it in one word, I will give a little more detail after this momentum. You want the momentum of the transaction like now, where we sit on this particular property when we go into escrow, it’s game time. Now, it’s ready to move everyone in the same direction. All the oars are rowing in the same direction to get to closing, and it’s the speed of the transaction. A big part of that is us as the seller, meaning the buyer’s ability to perform on their timeframe or faster is going to be dependent on what we do as the seller.
For example, one of the first things that happen after escrow is opened or the attorneys get all the paperwork is the seller has to provide disclosures. That’s a very common thing. If you take days or weeks, then that’s going to delay the buyer’s ability to close. At this phase now, where we are at looking at this property, we already have disclosures done and ready. As soon as we open escrow, we are sending over the information, that as a seller, we are required to provide to the buyer.
Every state, at minimum, you are going to have a standard property, like via lead-based paint, mold and disclosure type of deal.
We already have that in this case. Termite is a very common thing that we deal with here in California and other markets. We already have the termite paperwork ready. When we open escrow, all that paperwork is going to go over so that they can review it faster and remove that contingency faster. We are trying to tick off little milestones towards the finish line of the transaction, which is the closing. We are getting them documents fast to disclosure, so they can remove that contingency.
We are making sure that someone gets the appraisal ordered fast, whether it’s probably the lender, but we are not just waiting to hear that. We are outbound and being proactive to make sure it’s getting done. We are getting all those things checked off quickly so that we can ask them to check off their contingencies faster. Each of those little milestones is little check marks that make someone a bit more committed and moving us towards that final contingency, which at that point, their deposit money is in effect contractually non-refundable.
That’s the big milestone that we are getting to. Once we have that full contingency, they’ve got everything checked off, and then we start asking if they can close earlier. One of the ways that we help motivate the buyers to do that is we have a per diem in our counteroffer, that if they close early, the seller, which is us in this conversation, will credit the buyer an amount per day. On the other side of that too, if they don’t close on time, they get to credit us. We are all incentivized financially to get to the closing table faster.
For example, on this home, the offer that we are likely accepting here is a 21-day close. That’s what they wrote. The way we are going to get 21 days is what we just talked about, but the way that we are going to close this in 18 days or 17 days, which we probably will, is by incentivizing them financially as well. They could potentially have $500, $600, $700, $800 back in their pocket to buy a housewarming gift for themselves. Those are some of the things that we do to get everyone to the closing table faster.
That’s brilliant because there’s a cost of holding.
The way that we come with those numbers lots of times, it’s our average daily holding cost. If we can justify if we close early and we save money, let’s go ahead and pass a portion of that along. In this case, we have $200 per diem. Our holding costs are more than $200 a day. Nevertheless, it’s an incentive, and it’s an amount of money that gets everyone excited about that.
Let’s wrap it up with this. We touched on this when we talked about your CT Homes Certified Program. You are going to go above and beyond for whoever these buyers are. We call it the secret service that you are going to do. What are the new buyers going to get?
Secret services, just to recap, are knowing something about the buyers that are unique to them. This particular couple have been looking in this neighborhood for a long time, and they have friends that live two doors down. This is an actual scenario of these buyers that we are talking about. We know a lot about them. They submitted a letter with some of this information to put themselves at the top of the list. What we will do with this couple is we will go to their home inspection.
We will get to know them better. We will find out what they like and don’t like and what their interests are. With that information, we will buy a custom gift for them. Maybe they love a particular restaurant in this neighborhood because they have been looking there for a while. We will find that out at the inspection that we go to, and we will get them a gift card for that restaurant. On top of that, I will handwrite a thank you card that I will send to them the day after closing, with a $100 Home Depot gift card. That’s beyond the restaurant card, as an example.
We have a home manual that we will leave at the house, which is a binder of the information about their house, pink colors, manufacturer warranties, appliance specs, all the things that went into the home. Rather than just jamming it into a drawer next to the fridge, we organize it. We will have their reports in there all tabbed up in little tabs, with a picture of their house on the front of this binder. It will be sitting on the countertop in the kitchen. One of the additional drawers will be nice and neatly organized, their garage door remotes and all of their keys.
When they walk into the home for the first time, they will have all those things organized nicely and neatly for them. A couple of days after they closed, they are going to get a very cool custom box with a very nice bottle of champagne. On the bottle of champagne is engraved their property address, the CT Homes logo at the top, and it has a custom opener so that when they are sitting on their front porch, and enjoying their first sunset in the new home, they can have a glass of champagne. If they don’t drink, they can just have it as memorabilia of their new purchase. Believe it or not, it’s not everything we do, but those are some of the top things that we do to over-deliver for our buyers and customers.
Anybody that bought a home recently, they are feeling ripped off now. If you are reading this, you like to make more money and make money quickly, this is how you do it, people. This is one of those episodes where I would go back and reread this. I would take notes. I would make these basically standard operating procedures in your business. You are benefiting from over 1,500 deals of experience. It’s not like they just started this stuff yesterday. They have tested and measured from the beginning to the end. I appreciate you sharing this.
This gets me excited to share this information because these are the things that leave lasting memories. There’s going to be a family that moves into this home and has some of the most impactful memories of their life. Are you, as a seller reading, going to be a big part of that or are you just going to be an afterthought?
That makes everybody always talks about the story of how they bought their home. You are not going to be mentioned at all or you are going to be mentioned in a very negative way.
Maybe you are going to get a call from their friend because they want to buy a house from you, and this couple may go online and leave a great Google review for us. At their house warming party, they may tell all their friends how amazing it was to buy a home. All of a sudden, you get a call and their friend wants to buy a house. These things magnify over time. The reputation takes a long time to build and a very short time to wipe out.
That’s why we call you the resident expert, JD. I appreciate your time. I appreciate you being on the show. For everybody reading, I recommend following us on Facebook, Fortune Builders page, pretty much all of the stuff. Even CT Homes, LLC, all of the stuff that JD and his team are putting out weekly. You can see exactly how they are marketing it.
If you want to learn and have more training from us, we would be honored to teach you and share. FortuneBuildersShow.com is the place where you want to start to do that. Typically, every Thursday, I do a Facebook Live where I jump on and answer some questions from this episode or anything else. We want to try to bring answers, help you, and provide as much value as we possibly can. We will see you again same time, same place on Fortune Builders Real Estate Investing show. Take care.