Selling a Home in an REO Market

As anyone trying to sell their home right now can attest, the current real estate market is unprecedented in its complexity. This spells bad news for homeowners who need to sell, since at no other time have homeowners had to compete with the number of bank owned properties that infest today's market. By their sheer numbers REOs (real estate owned) define the prices of the homes that surround them. Any gains that had been made in the drunken free-for-all of property appreciation of '05 and '06 have been lost and even deeper losses may have been realized.

The good news for the equity owners who intend to compete with foreclosure sales is that many of these bank owned homes have been vacated by people who knew that they would lose the home and so maintenance stopped long before the for sale sign went up. In some cases people who owned the homes didn't know that home maintenance is a necessity, like changing the oil on your car, to avoid more costly repairs in the future. In worst case scenarios the homes have been laid to waste by folks enraged by their sense of loss and at their perceived greed of the banks they feel that they feel set them up to lose. Purchasing REO properties takes special skill and patience because of the legal hoops involved, which make it an unattractive prospect for many buyers.

At any rate, the banks are in no position to own property much less to prepare a home for market and so they rely on the expertise of qualified real estate professionals to sell it. As with the banks realtors do not want to sink their own money into the necessary repairs and preparations that an equity seller would. As a matter of course, the price is set by the bank based on a combination of BPOs (broker price opinions) provided by multiple realtors. In some cases even deeper cuts are made into the perceived market value to compensate for the lack of charm and as an incentive for the buyer to overlook the unknown. Price can have a hypnotic effect on a prospective buyer and the banks know it.

Not every buyer can take on the huge task of remodeling and unknown expenses tied to purchasing an REO. That's where the wow factor comes in as a key element to competing with bank owned properties. Establish a fair price with the help of a real estate professional (or look at recent comparable sales in your area on a website like Zillow) and then one up the competition with the presentation. A home that is well priced, clean, neatly furnished, and well maintained usually shows well. But a home where that extra step has been taken to add that certain je ne sais quoi is the home that has the edge.

Je ne sais quoi translates from French to English as "I know not what". In America we might call it that "certain something". It is the combined effect of an attention to detail that provides an edge to an equity home seller. As a potential buyer tours such a home, there isn't any one detail he or she can point to that is the tell tale element that gives a room that certain something. It is a combination of all things. A homeowner who wants to minimize the impact of the reduced values on the sale of their home must have a superior product. But how can a seller achieve this look?

Trying to prepare or stage a home for sale takes a critical eye. A critical view of the surroundings means that there is no emotion while taking an inventory of the premises. Look at it like a decorator would. If emotions prevail ask friends and family for help, and be prepared for constructive criticism, do not take anything personally. The home becomes an asset when the for sale goes up.

The first thing a prospective buyer sees is the front elevation and landscaping. The home's exterior should be clean, paint in good to excellent condition, windows gleaming. Trim and shape trees and shrubs. Add color with pots of seasonal flowers and keep them watered or replace any dead or dying plants with new ones. Thoroughly wash walkways and driveways. Step back and with a critical eye determine if it would pass the professional decorator test. Do the interior window coverings add to the overall appeal of the home? From the front view are they uniform? If the answer is no to the previous questions, make them uniform and appealing or take them out and live without window coverings during the marketing period.

Window coverings can have an affect on the overall feeling of spaciousness in a room, so leave them open while marketing. A charming exterior sets the stage for what is to come and windows are the frame for a glimpse of the interior. Moving from outside to inside take a personal inventory of the furnishings in each room. The furnishings should compliment the surroundings in color, scale, and placement. The upholstery should be clean, if there are stains take this opportunity to purchase new furniture. If new isn't an option buy slipcovers. The color palette should be neutral with a splash of color thrown in with throw pillows and art. For great wall color, check out Canvas Natural by Ralph Lauren. The amount of furniture in a room can change the perceived size of a room and in home sales, size matters. Therefore store excess furniture or put it on Craigslist, just get it out of the show home.

Streamlining may be difficult in the staging process, but pack up personal items and store them. If the garage cannot accommodate the moving boxes without looking cluttered, then rent a storage unit. A couple of family photos displayed tastefully complement the décor, walls full of family photos look cluttered. Knicknacks have no place in a staged home as they only detract from showcasing. Having a multitude of small collectibles displayed means more to clean, and sparkling clean is absolutely essential to the wow factor.

As stated earlier, the windows should gleam both outside and in, floors should shine, carpets look perpetually vacuumed. Again be critical, if the carpets are in good to excellent condition, keep them that way, if not, have them professionally cleaned or give the prospective buyer a credit for new carpet. Mention to everyone who views the home that the credit is a part of the sale price. Use the same critical eye for paint, hardware, light and plumbing fixtures. Updating fixtures, hardware, and paint produce dramatic effects at minimal costs. These minimal embellishments can be purchased at Home Depot or Lowes and installed in a day or two.

Now that the house looks perfect, keep it that way. For every showing, light candles (always be present when candles are burning) or bake cookies. Anthropologie has some of my favorite candles because they are in attractive containers and smell like heaven. Smell figures in heavily on a deep psychological level and this is another area that can separate the equity seller from a bank owned home. REOs can be musty from long vacancies, leaks, and mechanical issues. Never underestimate the power of the sense of smell.

Of course none of the above will help with selling if all emotion isn't removed from the equation. Owner/sellers have the advantage of being accessible where banks do not. This can be used by the equity seller if emotions are removed. Encourage people to make offers. Never state that a certain price is fixed, even if you feel that it is. If someone comes in with a low offer, don't be insulted, just counter with another price, but do so without emotion. With negotiations started, a seller may be able to get close to the asking price because the buyer who makes an offer has already started to move in emotionally. They want your property. With this in mind, the least emotional party wins the negotiation game.