Staging a House the Martha Stewart Way

“Martha Stewart is now under house arrest. So she’ll go to her $40 million 153-acre estate. So she’s going from the big house to an even bigger house.” –  Jay Leno

T.J. Maxx.  Target.  Burlington Coat Factory.  Walmart.  Kirkland’s.  Goodwill.  Did you notice I didn’t mention Kmart?  That’s not because we don’t buy our staging items at Kmart.  It’s just because we don’t have many Kmarts around here.  If we did, I’m certain some of our stuff would come from the Martha Stewart Living line.

And for what it’s worth, I forgive Martha for the whole insider trader thing.  She’s paid her debt to society.  But I still don’t tune into her show – mostly because listening to her talk is about as exciting as watching a car rust.

So why stage a vacant house?  Here are my top three reasons:

1. A high percentage of buyer’s start their search for a home to buy online – a home that is staged looks more, well, homey.
2. Staging items like furniture, pictures and plants give the buyer an idea of how much space they will have in the house for their own stuff.
3. Lived in homes, or homes that looked lived in because they are staged, usually sell faster.

We like to stage the kitchen, master and hall bathroom and master bedroom.  The family room isn’t a bad idea either.  Our budget is around $500.  I’m sure we’d make Martha proud.

For more tips check out this video:

 

But what about the Shadow Inventory?

Tale as old as time, song as old as rhyme, Beauty and the Beast.  That’s a catchy tune.  And my little girls love the movie.   Honestly, I enjoy it too.  Lumiere, the suave French candelabra, cracks me up.  His big solo number, Be Our Guest, is very entertaining.

So imagine my frustration when I found out I couldn’t buy this film after my youngest daughter was born in 2004.  I looked everywhere.  Best Buy.  Walmart.  Amazon.  Barnes and Noble.  Nada.  Zilch.  Nothing.

Fortunately, we had a trip planned to Disneyland.  Problem solved.  I would go directly to the source – Main Street U.S.A., Disneyland, California.  The souvenir shop there had the movie selection prominently displayed behind the cash register.  I could see all of Disney’s big hits:  Aladdin, Cars, The Incredibles, Sleeping Beauty and Cinderella. 

But wait a minute.  Where was Beauty and the Beast?

It’s in the vault she said.  What?  The Disney cast member repeated it again – it’s in the vault.  So I said well go back there and get it!   No sir, you don’t understand.  Disney puts movies in the vault for extended periods of time.  You will have to wait until it’s re-released.  That was 2005.

Disney finally pulled Beauty and the Beast out of the vault – last October.  I gave it to my daughter for her 6^th birthday.  I also paid $24.95, about twice what a normal kid movie would cost.

You see, the folks at Walt Disney are master marketers.  They don’t just make whimsical princess movies and cool adventure attractions like The Pirates of the Caribbean.  They’ve figured out how to create artificial demand.

Disney got a rational guy like me to pay double, and wait five years, for one of their products.  People who don’t even have children or grandchildren yet bought this movie out of fear it would get locked up in the vault for another decade.  Pretty smart.

That’s why I find it a little amusing when I’m in real estate circles and someone asks me about the shadow inventory.  Aren’t you worried about it?  If the banks unleash this shadow inventory on the retail market don’t you think prices will plunge even further?

The answer is no, I’m not worried about it because the banks will not unleash this shadow inventory (if there really is a shadow inventory) on the retail market.

First of all, let me clear up one myth – banks don’t foreclose on a  mass of houses, board them up and then wait to sell them off for months or years on end  (at least not in Arizona).  Many experts define this as shadow inventory.   I’m on the ground here in Phoenix and that does not happen.  Once a bank forecloses they promptly secure it and sell it as an REO. 

The home directly behind mine was foreclosed on last week and it was on the multiple listing service 6 days later.  The banks do this because there is too much liability in home ownership.  If they foreclose on a house and then let it sit they are responsible for property taxes, homeowner association dues, utilities and general maintenance. Even worse, bad things tend to happen in or around abandoned houses.  When bad things happen people sue – not good.

Banks are far more likely to postpone foreclosure proceedings on the current homeowner for months or years at a time.  I bid on house at the auction earlier this week.  Its sale had been postponed 38 times – 1148 days.  This property has been in foreclosure for more than three years.  I bid on two other houses scheduled to go to sale this week – their sales had been postponed 12 and 18 times.  And guess what?  All three of these sales were postponed again.

There is another camp of so-called experts who refer to these homes as our shadow inventory.  But how do we know the owners of these homes won’t eventually bring their loans current, get a loan modification or execute a short sale?  My guess is only a small percentage will actually get foreclosed on and end up on the market as an REO.

Here’s why I’m really not worried about shadow inventory (if there really is such a thing) – artificial demand.  The banks are actually copying the Disney marketing model.  They’re being fairly strategic about what they release and when.  This creates scarcity, which increases demand (albeit artificially).

There is nothing wrong with this.  I’m actually a proponent of it.  It’s good business and probably the smartest thing the banks have done since this crisis began.  It serves us all and makes me want to break out in song – Be Our Guest, Be Our Guest, Be Our Guest…

Using AZ Bidder to Buy Homes at Trustee’s Sales: Winning a Bid

“I wish you were born knowing everything so you could just stay home all day.”

–          My 6 year-old daughter’s reaction when she found out she has to go back to school after spring break ends.

Out of the mouth of babes.  If only us humans could be like Neo, Keanu Reeves’ character in the Matrix.  Imagine how cool it would be if our brains were like a computer and could download a program for piloting a helicopter.  Or how about transferring a jujitsu file into your cranium?  Certainly with this kind of technology we’d all have a little more time to hang out around the house watching TV.

That would make my little kindergartner very happy.  She could watch a marathon of Sponge Bob and the Wild Kratts.

Alas, we’ll never see that happen in our lifetime.

The good news is if you decide to buy a house at a trustee’s sale (auction) in Arizona, specifically Maricopa County, you can know everything AND stay home all day.  That is, of course, if you use the online bidding service AZ Bidder.

Keep in mind that I don’t get paid by AZ Bidder.  I’m just a client and a big fan of their service.  To see why check out the 7-part video series I did last month.  The only flaw in it was I didn’t win the bid on the property I chose to profile.

So without any further delay please click on the video below to see how well the system works when you win a bid on a property.

*For the best resolution I recommend you view this in full screen mode with the 720p HD option selected at the bottom right corner of the video box.

Winning a Bid

If it’s 99% True, Then it’s a Lie

She sat across the desk from a master.  This real estate broker was about to be grilled by one of the best question askers I have ever met.  Mark Saenz sized her up quickly.  With a twinkle in his eye he fired the first shot.  “How’s business?” he asked.

She told us that business was great.  How couldn’t it be?  “I’m finding houses on the multiple listing service for .50 cents on the dollar” she claimed.  “Really,” Mark said.  This unsuspecting Realtor just stepped into his trap.  She shook her head confidently, “Yes, I am.”

Mark told her he would buy every house she could find for .50 cents on the dollar.  This, of course, made the agent very happy.   She was grinning from ear to ear.  “Okay, I found a condo in Phoenix you can buy for $140,000.  It’s worth about $210,000.”  A puzzled look came across Mark’s face.  “I’m no math expert, but that doesn’t sound like .50 cents on the dollar to me” he answered.  The Realtor said, “You’re right, but it’s in turnkey condition, no repairs needed.”

“But you just told me you were finding properties for .50 cents on the dollar” Mark insisted.  He told her if she found any to call him.  Then we wrapped up.

This meeting took place in September.  2008.  Here we are, more than two years later, and poor Mark is still waiting for the Realtor to call.

Mark Saenz taught me a lot about the art of asking questions.  Before I met him I would accept what most people had to say at face value.  I would give them the benefit of the doubt.  Why would they lie to me I thought.  Besides, they said what they said with such authority.  They must be telling the truth.  If there were a few holes in their story I would fill in the blanks myself.  That was the polite thing to do right?

Like me, many people just fill in the blanks – especially when desperate.  Back in 2007, l was a struggling real estate professional.  My net worth went from $8 million to negative $2 million practically overnight.  I would listen to any sales pitch and consider any investing strategy imaginable if it meant I could improve my financial situation.  I wanted to believe these opportunities would work so I didn’t ask too many questions.  It was like I didn’t really want to know the truth.

Fortunately, I learned from Mark that questions are like a shield.  They protect us from the smelly stuff that my daughters always complain about whenever we drive by the dairy farm near our house.

If you’re thinking about paying someone to teach you how to invest in real estate then I advise you ask a lot of questions.  Here are my top three suggestions:

1. How many deals did you do last year?
2. Can you show me HUD settlement statements for those deals?
3. How many properties do you own right now?

If the sales person fidgets, fusses, stutters, stammers, sweats, delays or tries to change the subject then your shield worked.

My business partner Manny Romero likes to say that “if it’s 99% true, then it’s a lie.”  The problem with the real estate business is that many of the investors and educators you hear about or see on TV leave 1% of the story out.  Why?  Because that 1% will make you, and your checkbook, run for the hills.  The truth hurts doesn’t it?