In a buyer's market, particularly one filled with older, unimproved homes, buyers can be brutal. They are fearful that any property they buy is going to lose value. The more they see sellers slashing prices, the more they allow good buy after good buy to pass them by.

It's a vicious circle that seems unstoppable. Once it starts, values drop below appraisal, houses sit without selling, foreclosures rise, and buyers won't budge unless you are giving houses away.

It doesn't have to be that way, but few real estate professionals have the imagination or fortitude to do anything but sit by and watch it happen. You, of course, are different. You are willing to do what it takes to sell a home to each and every buyer you have. That's because you understand that selling real estate is about selling, not about homes selling themselves.

It's easy to get spoiled by a seller's market when even the ugliest, most undesirable homes sell, but in a buyer's market, the opposite happens, and good homes sit without moving. With a little help, these properties can be turned into desirable homes that will rise in value and lift the rest of the neighborhood.

When you think about it, if homes sold themselves, why would sellers think they need Realtors? They need Realtors to help them sell their homes for more money. They need Realtors for their creative solutions, particularly when it comes to marketing an outdated, or poorly maintained older home.

And buyers need Realtors just as much - to help them find good buys so they can live in the neighborhoods they want and contribute to the community.

Keep in mind, buyers' markets are particularly rough on older homes. With the appreciation that many areas have seen over the past several years, many buyers resent paying sellers to live "rent-free," especially if they have done little or nothing to improve their homes.

In addition, a bull construction market has created a lot of competition with new homes and communities with housing and lifestyle designs that fit modern household needs better than older homes. With a new home, everything is shiny and new, and nothing will break for years, right?

Many buyers start out looking in older neighborhoods, but they are repulsed by the signs of decay and obsolescence present in homes that need updating. They want the work already done, but as you've learned, they want the updates to be new, but they don't necessarily want to pay a profit to the seller on them.

That's the buyer mindset.

This is the buyer that you can easily lose to builders and new developments further out where buyers can buy more home with a longer commute. This same buyer is exactly the kind of person you need to revitalize the community.

Why? If you can turn that person around, he or she will tell the whole world and bring more people into the community to do the same thing.

The only thing older homes have going for them in a down market is that they are in established neighborhoods near something or someone that some buyers want - jobs, relatives, houses of worship, medical facilities, entertainment, etc.

So, if you have any buyers at all, there' s a strong chance you can sell them something, and help your community get back on its feet at the same time.

But you will have to do some selling....Here's how:

Show the buyer opportunities, not houses

You know your buyer is scared of losing money. You know sellers won't improve homes when they don't have the money. So you're stuck showing older homes. You might as well show the buyer how to be better off financially by buying an unimproved older home and making the improvements themselves.

The best way to do this is to start with a scrapbook of homes with before and after pictures of typical needed updates in your area. You can do this with your own listings. Keep in touch with other Realtors about homes they sell, and ask them whether or not their buyers are going to do improvements. When you see improvements being added to any home, stop and ask the homeowner if you may take a snapshot for your neighborhood file. Ask if you may come back and photograph the finished addition, pool, fence, etc. You're the neighborhood expert! Clip out before/after photos from magazines and keep home improvement books in your office library or on your desk for buyers to see.

You know that most older homes aren't going to have what buyers want, so if you're going to make any sales, it has to be to buyers who are willing to either pay more for updates or do the work themselves. And they will be a lot more willing to do updates if you show them how they can do them profitably and reasonably.

1. Know your inventory - Make it your job to personally visit and take notes on every home that comes on the market in your farm area. That way, you'll know more than the comparables - which homes had what improvements and why they sold for what they sold for.

2. Know good workers/resources - Some of the best contractors around work with insurance companies, and you know that if they can please insurers on cost and quality, they can probably do a good job on estimates and completion for your buyer. In exchange for a steady flow of referrals from you, most contractors would be happy to give a bid to a prospective buyer on updates for a particular home they are considering, if they are at a serious point. Find out who does difficult work like water damage repair, and chances are that's a pretty good contractor.

3. Know the tax rate - Tax appraisal districts can only go by what's in the public records. Whatever your buyer pays for a home will be the starting point for tax increases. Be able to show the buyer the difference in your area of the tax burden on a typical home in their price range. Be able to compare that home with a similar home that has recently sold with major improvements. The difference in tax assessments could be enlightening.

4. Know a little about construction - You can tell at a cursory glance what a home would look like if it were reasonably updated and which updates are feasible. Can better functionality be added by knocking down a wall, or does the home need an addition? Additions, if done well and seamlessly with the rest of the home, can add a lot of value by adding square footage, but keep in mind, they also give the appraisal district leverage to raise property taxes.

5. Know a few MLS tricks - If you put every parameter your buyer wants into a housing search, there would be nothing to show, because their wish list is too long. For example, if a buyer wants a house with a two-garage, and you put that into the search perimeters, you are knocking out up to 25 percent of homes that may not have garages.

   So? This could be a source of distressed inventory where your buyer can get a really good deal. Take this home. The seller has already taken a 10 percent reduction in two months, because of lack of showings. Realtors don't know the house is available even though it is in the MLS, and that's because they search by including garages in their searches! A quick check of comparables shows the house is larger in square footage than comparables, has reasonable updates, and that there's room to add a garage, judging from the virtual tour. This is a pretty nice home for the money!

   No buyer wants a house without a garage, so here's how you sell it to them. If the garage was remodeled into a playroom, for example, the buyer will like that space. If they add a garage, they'll have the playroom plus the garage, and one of the largest square-footage homes around. The number of years they occupy the home will help to earn the cost of the garage back, and then some, because the competition is now homes with older garages.

   If your buyer has a truck or a large SUV, you can use this to your advantage as many so-called two-car garages built in the past, particularly the low ceilinged 50s-70s, won't hold two vehicles if one is this large. If you point that out to your buyer, you might be successful in selling a hard-to-sell home, plus getting a bargain for your buyer. And you might win a grateful seller as your next buyer, too.

   This idea can be used with pools, too. If you know the perfect house, but it doesn't have a pool, does it have a perfect yard? Can a play pool of four to five feet in depth provide more fun for your buyer than a large, outdated kidney-shaped pool with a deep end so cold it could freeze popsicles? Work it, baby, work it....

6. Know buyer psychology - Do buyers really buy exactly the kind of homes they say they want? Haven't you seen a buyer do an about-face because he or she fell in love with a certain feature even though the home didn't have other things they said they wanted? Keep this in mind when you are finding out about your buyers. Having a fireplace in the master isn't as important as split master where a fireplace can be added. So don't take your buyer so literally.

7. Know lending options - Which projects will require a home improvement loan and which can be done with a zero-percent loan from Home Depot? Encourage your buyer to do short-term low interest credit card loans for projects like carpet and inexpensive bath updates. Save the home improvement or equity loans for major remodeling. That way the sooner they want to resell, the more equity they'll have with less home improvement to pay off.

8. Know your own experience - Practice what you preach. If you believe real estate is a solid investment, then you should own some real estate in the area you are serving. Nothing is more reassuring to a buyer than working with a Realtor who is personally committed to the neighborhood where the buyer wants to buy.

Improved homes cost more because somebody else did the work. If your buyer does the work, they'll be able to enjoy the improvements while living in the home, plus reap the rewards of having improved the property at resale time.

Published: June 11, 2004

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