How to Get the Most Profit When Selling Your Investment Property
All too often I receive inquiries from a potential seller that wants to “get the highest price” for their property, but does not want to list it, or market the property. This seems counter intuitive, especially to the basic law of economics… supply and demand. Although there is not much an average seller can do to affect the supply line, they can create demand by using a good agent.
I started my career working in real estate auctions in the late 80’s through the mid 90’s. During that time, I was surprised at first when properties we took to auction (a method that was deemed as a “fire sale”) consistently sold for higher prices than neighboring properties, and in many cases sold at higher prices than what they were previously listed before going to auction. For the life of me, I couldn’t figure out what was going on.
As I thought more about the auctions, the knowledge that I had gained during my economics classes in college came to mind. The supply chain didn’t change, but by marketing the property and creating a pent-up demand the chances for a sale greatly increased.
We’ve seen this over and over the last few years in this current “sellers” market. Almost to the point where we now receive as many calls from investors saying they only want to look at “off market” deals, believing they’ll get a better price without other competing investors. So, is the answer that simple? If seller wants the highest price, do they just need to make sure the property is seen by as many possible interested investors?
Not exactly, to ensure the greatest exposure for the property, and therefore the best likelihood for the highest price, a seller should make sure the agent they use to represent them does ALL of the following, not just market to their own buyers. After all, even if that agent has a buyer it doesn’t mean that the agent’s particular buyer will pay the highest price. A good agent will create a marketing plan to provide maximum exposure for the property. This plan should include:
1) Placing it in Multiple Listing Services (CoStar, LoopNet, A.I.R, the Local MLS, etc..)
2) Contacting every owner of similar properties within the surrounding few blocks to see if other landlords are interested in acquiring additional investments in the area.
3) Sending out email flyers to their buyers’ lists, local brokers, and property owners.
4) Making direct contact with every client that has purchased an investment property within the last two years.
5) Making direct contact with every broker that has represented a buyer that purchased an investment property in the last two years.
This may sound like a lot of work , but a good agent will go above and beyond.
Please do realize though that no experienced real estate agent is going to do any of the above if they are not ensured a representation commission. So to ensure maximum exposure, and thus maximum returns, make sure you draft up and enter into a fair listing agreement that details out what the agent will do for you and what type of compensation they can expect from a sale.
Source: Multifamily Insiders
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