Well, the numbers are in, and it has been an exceptional week! Not a surprising week, given my predictions over the past while. In our office, we have been seeing proof every day of how the market is moving forwards, with more houses selling faster and for more money. In fact, our own personal experience has been that the 2 homes we listed for sale this past week have both sold with multiple offers within the week they were listed! It will be very interesting to see what the mainstream media (MSM) has to say about things.

One area where I will agree with the MSM is in the area of who is fuelling the market; it is definitely being fuelled by first-time buyers.

As I mentioned in our `Your First Home`seminar last week, the current economic climate is like a perfect storm; prices are down, interest rates are at their lowest point in over 60 years, and rents are up. So, in light of the fact that you have to live somewhere, whether you are laid-off or not, it would seem that now is the time to get into the market. Remember, it`s a limited-time opportunity, and when it`s gone, it could be a decade or more before it comes back around.

Here`s the numbers for the past week:

And here`s the latest Annual Summary:

Homeownership is not always easy to achieve for all Canadians, and for many and a lease-to-own strategy might be the answer. Suzanne Sharma digs deep to find how experienced investors can benefit as well

April 22, 2009 – It’s no surprise that a lease-to-own option is a viable solution for renters who want to become owners. It allows buyers with a less than perfect credit score to reach their goal of homeownership faster.

However, investors can also reap the rewards of a lease-to-own arrangement, making it a win-win for both.

“For investors, lease options make their properties more accessible to a wider market of buyers,” says Andy Santoso, president at Strategic Housing Corp., Vancouver. “Sellers also enjoy the benefit of collecting premium rents before selling their properties for a higher price.”

The process to break into this market is comparable to a buy-rent-hold investment. The main difference is how the property is advertised.

Essentials
Simply put, a lease-to-own, rent-to-own or lease-option allows a tenant to rent the property with the option purchase it in the future. The procedure usually takes one to three years on average. During that time the tenant works to improve their credit score, so they can be approved for a mortgage, and saves for a down payment.

Two contracts are involved in this agreement: a lease contract and an option to purchase contract.

“As a tenant, you would pay a non-refundable option fee which gives you the option, without obligation, to purchase the property at any time during the lease term for a fixed price,” says Santoso.

Usually, the owner charges a higher monthly rent but a portion of it is credited towards the purchase price, or is put towards the down payment. If at the end of the lease term the tenant is unwilling or unable to purchase the property, he loses any equity built up in the property.

“For this reason, you should be strongly committed to purchasing the home when entering a lease-to-own agreement,” says Santoso.

The qualifications for renters to enter such an arrangement are similar to the landlord and tenant screening process. A credit check is usually performed and the renter must provide references, proof of income and information on assets and liabilities.

“In some cases, you would just need to provide the option fee, security deposit and first month rent,” notes Santoso.

Pros and cons
The obvious advantage of a lease-to-own is it aids tenants in becoming homeowners sooner, while they accumulate a down payment and restore their credit. Equity is built with each monthly payment, so tenants have a share in the property. Also, a lease-to-own often provides more flexible terms as opposed to conventional financing.

However, this option isn’t for everyone. The most important consideration is that while a lease-to-own is intended to help the tenant attain homeownership, there is no guarantee that they will qualify for financing.

“Ultimately, it is up to the buyer to decide whether the property is something that he or she can afford,” says Santoso. “In most cases, buyers should consider a financial plan which may include credit repair, savings, debt consolidation or an investment strategy.”

Many lease-to-own companies work with their clients to best prepare them to qualify for a loan at the end of the lease term. This is accomplished by advising the tenant about healthy credit habits and allotting a portion of the monthly rent towards the down payment.

Alex Kluge, relationship manager at Home Owner Soon Inc., Toronto, says about 20% of the clients’ monthly rent is designated towards the down payment.

Another consideration is most companies carry only a small inventory of lease-to-own properties, usually about three, and the tenant is asked to select one of these, notes Kluge.

Routing Number VIRGINIA COMMERCE BANK

The tenant is restricted to these homes even if the property isn’t ideally suited for them, so it’s recommended to research the conditions of the option first.

Fix appreciation
Investors can benefit from a lease-to-own as well. Primarily, they profit from a slightly higher monthly cash flow through a premium rate. Furthermore, the fixed price at which the home will be sold allows the investor to enter the deal with confidence, since they know ahead of time what their return will be.

A fixed appreciation model, typically 6% per year, should be utilized, notes Mark Loeffler, investor relations at Home Owner Soon. This is outlined in the option to purchase contract so both parties are aware of what they are agreeing to.

The method to get involved in a lease-to-own is similar to any other investment dealing with tenants in that all references and proof of income should be verified. However, it differs slightly in the way it is advertised because renters must understand the terms of the agreement.

The common concern for investors in a lease-to-own is that it may not guarantee a sale at the end of the term. One possibility to alleviate this issue is to choose the tenant-buyer first and allow them to pick their property. This, of course, should be done within reasonable limits.

“We use a buyer selection program,” says Loeffler. “We approve the candidate first and then help them find the right house. This is good for many reasons as they can choose the exact house they want and stand a better chance of purchasing it at the end of their term. As well, you have a renter from the day you close on the property.”

This system can take anywhere from four to six weeks. Approvals take about 48 hours, provided the applicant has submitted their supporting documentation, says Kluge. Once approved, the client views properties with one of the company realtors, who keep the interests of both parties in mind.

Another positive factor for the investor is that in most cases the tenant will provide a sizable, non-refundable deposit to secure the option to purchase contract, according to Santoso. “This mitigates the risk for the investor, since the tenant-buyer is providing equity profit for the investor if he defaults on his option to purchase.”

Investors who are wary of single-handedly entering a lease-to-own agreement may get involved through a third party company. This type of investment comes with a lease-to-own agreement signed between the company and the investor. The investor is able to purchase a property by assignment, and doesn’t require a joint-venture agreement because the investor still retains 100 per cent ownership.

The company will then sub-lease the property to a pre-qualified tenant and provide the investor with the option deposit and monthly rental income throughout the term, usually 24 or 36 months, or until the option to purchase is exercised by the tenant, says Santoso.

From the January 2009 issue of Canadian Real Estate

April 22, 2009 – Homebuyers have a new resource to help guide them through the home buying process, thanks to an online planner introduced by Genworth Financial Canada.

MyHomePlanner.ca is designed to educate Canadian homebuyers about homeownership choices.

“Buying a home is the single most important investment they will make in their lifetimes,” says Peter Vukanovich, president of Genworth Financial Canada. “Homebuyers don’t have to go it alone. The Home Planner calendar helps homebuyers plan their journey and become homeowners with confidence, knowing they haven’t missed a single step along the way.”

Homebuyers can register at MyHomePlanner.ca to create their own roadmap to navigate through the various stages of the home buying process, complete with automatic email reminders for each task prior to closing day.

Free resources of My Home Planner include: a personalization feature that populates your calendar with standard and customized home buying tasks leading up to closing day; ability to save your own home planner to your computer and print it for easy reference; and interactive tools such as ‘What can I afford?’ and ‘Rent versus buy’ calculators.

If you’ve ever seen a presentation by Australia’s Ian Grace, “Mr. Advertising”, these notes will mean more than if you haven’t. Either way, there’s stuff you can learn from them. Enjoy.

3 parts to transaction:
1 – Win the listing

2 – Advertising Campaign $$ – how much and who pays

Why do the ads in different locations look so different – email, internet, print, feature sheets, etc.? If they were all the same, they would build on each other and thus be much more powerful.

People need to see the same image/ad at least 3 times before they will react to it, often more. As you see it more and more, you read more into it and notice more and react to it more.

Reach and frequency is what advertising is all about.

Look at tv – how many times is that same ad on? And then you’re listening to the radio, and you’ll hear the ad for the same product, sand it is the audio from the tv ad, and hearing it makes your brain pull up the image from the tv ad. And then, you see an ad in the paper, and it is also the same picture as the tv ad, with the same verbiage, which again recalls the tv ad. They all build on each other. Which makes for a much powerful impression.

Think of all the different venues we have to market a property, and then imagine the branding power if they all work in harmony; the same ads. Compare that to different ads in each venue. Which will be more effective?

The spending on advertising across all industries is around 2%. Do we, as real estate agents, spend 2% on advertising our listings? That’s 2% of sale price.

In areas where the agent pays for the ads, they are, 99% of the time, as small as they can get away with. Contrast that to places where the seller pays for it, and they tend to be bigger, fancier, and much more effective ads.

Why get seller advertising contribution?

– Builds your profile
– Save more money
– Win more listings
– Achieve a better end NET result for the seller.

The last one is the ONLY reason to do it; if you don’t do it for that reason, don’t do it.

Get an ad/article run telling sellers to expect to pay for ads (look for article from queensland realtor association) in this turned market. Also find REM articles by Iam Grace.

3 – Sell for the best possible price. That means best possible end NET result.

[Re commission cutting - think of it as your salary. If someone asks you to give back part of your salary, would you? Then why give back part of your commission-based salary? When people sell based on cutting their commission, it is because they have nothing else to offer - there is no other reason for them to reduce their fee.]

“Mr and mrs seller, if the only thing that is important to you is the lowest commission, then let’s just say a polite good night right now. However, what concerns me is that you might well be underselling your house by thinking that way. Why not let me show you a system that will get you the highest possible price, and see if that makes more sense to you?”

THE ONLY WAY TO ACHIEVE THE HIGHEST PRICE:

Reach as many of the RIGHT buyers who will SEE THE MOST VALE in the property

Reach them enough times for them to react

REMEMBER – people need to see the same ad/image 3 times or more, on average, before they will react.

[Why else would newspapers have discount programs for multiple insertions of the same ad?]

Run different ads for same property if it is going to appeal to multiple buyer groups. Ideally, you’ll run the ads simultaneously, so that all groups are interested at the same time.

When we run an ad that tries to appeal to multiple buyer groups in same ad, we can’t talk to either of them – ie ‘Perfect for first-time buyers or investors’

An effectively targeted ad campaign with the same ad will reach them.

It can take great copywriters hours or even days, to write the great campaigns; why do we as realtors think we can whip it out in the last 5 minutes before deadline.

If we aren’t enthusiastic about writing ads, how can we possibly expect to do a good job of it?

Good advertising gets rid of the people you don’t want to speak to!

Good advertising lowers the number of people who have to view your ad before it sells.

Sellers should pay for advertising so that it is not underpromoted and they will nett more money.

Use big photo sign boards for each listing – show the inside of the property. You stand out. The signboard will then become a part of your effective advertising campaign, whereas a for sale sign isn’t because it only advises that the property is available.
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What effective advertising is all about:

HOODOO

WHO to talk to and how to talk to them

DO. – what they will be able to DO as a result of their purchase.

Ads have to talk TO SOMEONE not ABOUT SOMETHING.

WHERE to talk to them – your media mix.

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Don’t be afraid to have people, pets, etc in the picture – humanizes it.

We don’t sell houses; we are selling ‘living there’ in our advertising. We just want them to bring ‘their home’ and put it in that particular house.

http://netlab.com – virtual tour interactive with pop-up photos.

When you’re writing an ad / web description, pretend that you are selling the place over the phone, remembering HOODOO, with no pictures or internet – just the words you are using. REMEMBER HOODOO!!

If you are going to take a photograph, don’t compromise – if you need sunny day, wait for a sunny day.

Stop using pic of front of the house in ads, web, etc. – use pictures of what you are selling.

Photo and headline must work together in the ad. If they don’t, they won’t get past them and the ad will not do its intended job.

Only 20% of people read past the headline of any ad, so it doesn’t matter how clever everything else is if they don’t get past the headline & photo.

Should the headline match the photo, or should the photo match the headline? The photo should match the headline!!

When we use all the superlatives in our ads, its like we’re trying to make the house things that its not. Just talk as if you’re talking to a friend and describing it.

Think about what you want to tell them AND THEN take the pictures to it. The photos must match both the headline and the body text – every benefit you talk about, have a photo to match it.

Think of a time when you’ve pulled up to a house with buyers and they haven’t wanted to even look at it based on the look of the front of a house. Now think that your ads that feature the front of the house may easily be turning people away in the same fashion. However, if you show them the interesting point of the house first, they will come and see it to see how that part of it looks in reality.

Our brains filter and throw away so many advertising images every single day, BUT if we see the same ad over and over, we recognize it and at least think twice. That’s one more reason to run same advertising in different media.

Use the same ad for signboard, internet, flyer, newspaper, etc. So that the ads are not automatically filtered by people without their even noticing it.

So, on the signboard, don’t put a picture of the front of the house (because the signboard is sitting outside the house) but put a picture of something that is a selling point.

Be the first to use a picture signboard in your area.

They need to be able to read intro sentence(s) of ad and think “I’d love to live there and be able to do that”

Use people in photos when they sell the benefit you are referring to and when it fits.

Use people and photos to match the picture that prospective buyers already have in their mind.

When you have some success using this new approach, run a follow up ad to let people know that the approach works.

Always think about the target buyer group, the ones you want to hit; don’t worry about the ones you miss, because they weren’t targetting them anyway!!!

Write your ads with emotion – that’s how we buy things, and we justify our purchases with logic.

People only buy things if they can see a picture of what it will do for them AND a picture of them enjoying it.

Even in a classisifed ad, you can paint a picture of what people can do once they’ve bought it.

A ‘campaign’ uses the same message across the different media. Your headline, photo and message have to match across the media.

Change the way you think – in ads, put the words ‘offers over’ in front of the list price, so it woulfor d read something like ‘For Sale Offers Over $xxxxxx’ when xxxxxx is the list price.

Why not put the address and OH time at the bottom of the ad, and the headline at the top, because people don’t care about address etc. If the aren’t interested in the property and they won’t know if they’re interested until they’ve read the ad.

We are too logical in our writing, which stymies our creativity.

We trytoo hard to be clever.

TARGET YOUR MARKET!

– Geographically – you will then know where to advertise and you’ll also know how to talk to them.

– Demographic – will know how to talk to them, based on the demographics

– Psychographic – if you know their expectations and aspirations, you know how to talk to them.

WHEN YOU START TARGETTING YOUR ADS, THEY WILL START JUMPING OUT OF THE PAGE AT YOUR TARGET READERS.

THREE MUSTS!:

1 – get the right information – invest time

2 – grandmother

3 – schedule your ad writing time.

To come up with things to say about a house, do a ‘brain dump’ and write down everything that comes to mind and then choose the things that tell us WHO we can write our ad to. Because we’re not selling the house, we’re selling living here!

Ie – Big Backyard = ‘peace of mind for kids and pets’ comes from fully-fenced yard. Couple of trees leads to lazy sunday afternoons relaxing in the hammock sipping a cold beverage. Etc.

Headlines have to have a benefit, or implied benefit, have news, and create curiosity.

Instead of pic of front of house, have pic taken through kitchen window showing yard, preferrably kids playing in ti, and use headline ‘you’ll love to watch the kids playing in the yard while you cook dinner’

LISTING PRESENTATION

“No matter what anyone may tell you, the only way to achieve the best possible price for you, is to reach as many of the people out there who will see the most value in your property.”

” It is possible to reach them, but only with an effectively targeted media mix advertising campaign.

“Should you be happy to list your property with me, please allow me to show you the system we work with, to ensure we gather all the right kind of information – to establish who these people are who will see the most value in your property, that we must attract, to give you the best possible results. Then, I’ll let you be the judge.”

Then, you fill out a ‘very important seller information sheet’ with them – why did you buy, what do you like most, what will you miss, etc. Then fill out ‘why will someone buy your home?’ sheet.