AUCTION: The Scarlet “A” Of The Real Estate Industry? Not Anymore.

June 23, 2010

Historically, real estate auctions left a negative stigma. A mark permanently emblazoned on the lapel of a project for all to see.

The public reaction: “Oh look, they’re jumping ship, they must have screwed up, big time.” It looked bad, because usually it WAS bad.

Those days are long over. In our current market, auctions have new meaning. It’s not always a last ditch effort – it can be an aggressive first strike. An auction doesn’t always mean trouble.

An auction means you have a plan. You’re trying to establish value and kick-start and/or monetize your project. It can take place at any time during the life of a project and it doesn’t mean you’re throwing in the towel.

The Grand Opening…Auction? A grand opening auction establishes momentum for projects that could otherwise have been D.O.A. And when sales centers come up against ominous silence, mid-project auctions can work wonders.

Case in point, Vetro: A Chicago South Loop/Printers Row condo development. The market was falling and nobody knew how far. Buyer paralysis set in. To revive sales, they aggressively established market values with a one-day auction.

They sold $11 Million worth of real estate in one hour. With 248 people bidding on homes, there was no doubt where the bottom was, and plenty of people wanted in.

The new prices became the benchmark for future sales. It removed unknowns and restored buyers’ confidence that they were paying fair market value or better.

After that they sold ten homes a month at Vetro. After six months they were SOLD OUT. In this case, the auction wasn’t a last ditch effort. It was a first ditch effort. Sure, they lost some revenue when they dropped prices, but they made it up in volume and a quicker sell-out.

Auctions are powerful stuff. Dropping 35-40% from last asking price turns buyer apathy into urgency within the space of five minutes. Applied correctly, auctions defibrillate your project and give you a new lease on life in the face of any number of challenges.

For instance, if a project is not meeting pre-sale requirements of 31% to qualify for FHA financing, an auction can quickly bring the project to pre-sale level.

Here’s another: if you’re facing the choice of retiring debt or closing up shop, an auction can unload a year of inventory in one day. The velocity makes up for the price adjustments and you live another day. It’s smart business.

Some people will always be reluctant to go to auction, even when it’s the best move. Denial, wishful thinking and unrealistic expectations are facts of life in residential real estate, even at the top levels.

That’s why it’s important to choose a partner willing and able to help you execute advanced moves like auctions, with the kind of timing and effectiveness that will help you overcome today’s unique challenges. (You know where to find us.)

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The Upside Of Upkeep: How Struggling Banks Can Survive Foreclosures

March 23, 2010

More homeowners are seeking the refuge of foreclosure, breathing a sigh of relief and saying good riddance as they toss their banks the keys and leave behind empty houses.

It’s almost as if the new American refrain of domestic tranquility has become “foreclosure sweet foreclosure.” I wouldn’t be surprised to find a needlework portrait of that phrase hanging on somebody’s apartment wall.

Meanwhile, banks are struggling to unload these abandoned homes – a process that can take months in this market.

During those long months the homes DETERIORATE from lack of upkeep and drop further in value, adding further to the bank’s loss. No wonder so many banks are in the weeds.

But smart banks are getting creative. Recently, a VP of a five-billion-dollar bank (let’s call him Joe T.) told the Garrison Insider that banks should feel right at home with the foreclosure situation. Literally.

According to Joe, banks should be temporarily offering foreclosed homes to their employees. The idea is to let employees become caretakers – a move that can help preserve the VALUE of a home long enough to find a buyer. (Why didn’t I think of that?!)

Keep in mind the average write-down on a foreclosure is 35%. (On a 100K, the closeout take will be 65K, or even less.) “Some of the 35% often INCLUDES the loss from lack of upkeep when the house sits empty,” says Joe.

If caretakers living in the foreclosed home can keep it in good shape and reduce the average write-downs by even a few percentage points, it can mean significant long-term savings for banks struggling to stay afloat.

The brilliance of this simple idea extends to preserving the value of the neighborhood at large, and could also result in some pretty happy bank employees. Everybody wins.

So banks, give it a try. Discovering the upside of upkeep is yet another way to keep up in this market!

Looking for more ways to keep up? Contact us.

GB


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How To Spark A 200% Increase In Online Registrations.

February 15, 2010

Presenting a new update on, well, new updates. A recent study indicates that swapping out old pictures of residential offerings with newer ones can be an effective way to stimulate new interest. (Most real estate marketers know this in theory, but it’s not always put into practice.)

LakeBluffCondos.com had been featuring the same pictures – both interior and exterior – for two years. The site’s color scheme had been changed in an attempt to give the project a fresher feel, but it wasn’t enough to improve the low registration count.

Finally, action was taken, the website was given a complete overhaul with a new layout, and most importantly, new photos. Registrations soared.

Constant updates have constant upside. In real estate, the story is always changing. Prices and trends change. The weather changes, the atmosphere changes, the competition changes.

A living, breathing site reflects these changes and tells a more relevant story about a given product. At the very least, start with the product – package it as today’s product, not something from two years ago.

Start with seasonal updates. Don’t show snow on the ground in summer. Let viewers regard the project, and the team marketing it, as vibrant and current.

Exploit your updates by spreading the word via Twitter, email and your blog. Call it out loud and clear on your home page. Write a press release. Give everyone an exciting new reason to take another look.

Budget is no excuse. Take new pictures with your phone if you have to. Today, the importance of immediacy trumps the importance of gloss. It’s a Facebook world.

Give your website the facelift it needs. It’s one of the simplest ways to give your sales board the lift it needs.

– Garrison Insider

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Top Five Ways To Make Your Lender Your Partner:

February 8, 2010

This year, the builders left standing won’t necessarily be the ones able to build the best homes – but the ones able to build the best case.

The case, that is, for partnership…with their banks. As a developer you’ll be best served if you enter into 2010 with a new mindset regarding bankers: bankers of 2010 are not just your lenders. They’re your partners.

Work with them. Bankers are looking for ways to cut their losses. If you have a compelling idea, they’ll listen. Give them rational reasons to be receptive to your plans. Consider these five ideas:

1. Take a higher interest rate on loan renewal, but have some of it accrue. Recently I’ve seen more than a few banks accept these terms. Banks, more than anything, want to have a performing loan. Accruing interest and collecting some interest is better than nothing.

2. Defer points and refinancing charges to the back end of the deal. Again, many banks will welcome this as an acceptable alternative to NOTHING. Put it on the table, see what they say. You have nothing to lose.

3. Add new capital to the deal. Banks love new capital. Do whatever it takes to find an investor by offering to pay 20-25% returns. That’s high, but sometimes you have to be willing to pay returns in order to get returns. If it keeps you in the room, it’s worth it.

4. Use your history to prove your future. Don’t overstate your pro forma. Banks respond to sober truth and facts, today more than ever. Be ready to back up your claims with plenty of objective justification. Modest expectations based on solid evidence are far more attractive to banks than grandiose speculations based on gut feeling.

5. $plit profits. An offer to spread the wealth is the ultimate form of making your bank your partner. Your lender is looking for a reason to be in the deal. If all else fails, splitting profits might be the ticket. If it buys your project another lease on life, it’s worth it.

It’s a fact: banks are literally becoming developer’s partners. Perhaps it’s happened before over the years, but not to the large degree that I’m seeing it today. Keep this “partnership,” concept firmly in mind, and let it set the tone for your dealings with lenders going forward.

Good luck, and let us know if you have any questions – or if you can share any brilliant new ideas about partnering with lenders that have worked for you.

GB

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