What is the three-step method for selling a home in a depressed real estate market?

  

simple answers
Real Estate Intervention Assignment
Group Number: _______________
Real estate expert Mike Aubrey is a strategist! His objective is always to sell the house. He
believes that ineffective sellers need a reality check or to realistically assess their situations.
The purpose of this assignment is to identify/apply strategic concepts discussed in this class
within the shows context. The assigned episode is no longer available online, so it is
summarized below. (If you are interested in viewing current episodes, click on the following
link: http://www.hgtv.com/hgtv176/videos/index.html .)
The following scenario is based on the Real Estate Intervention episode Movin On Up, aired
November 12, 2009 (Season 2, Number 6):
Meet Michael and Karen Austin. They live in Baltimore, Maryland. The Austins purchased
their home (a two-bedroom bungalow) in 2005 at the height of the real estate market. The
original owners listed the home for $114,000. Due to a bidding war, the Austins paid a $7,000
premium, or they purchased the home for $121,000. Their plan was to buy, renovate, sell, and
double their investment! The market was unbelievable, and others had successfully
implemented this strategy in the past.
Currently, it is 2009, and two things have happened: The real estate market is depressed, and
the Austins have outgrown the property due to two unplanned pregnancies. Now the Austins
have two small childrenEthan and Caleb. They are desperate to move and find a larger home
in an area with a better school district for the children. They listed the bungalow for $155,000
because of home improvements and the outstanding loan on the home. They currently owe
$147,000 on the property. Home improvements or upgrades include an upgraded kitchen with
granite countertops, custom cabinets, and stainless steel appliances. Additionally, the Austins
have finished the basement and added crown molding and recessed lighting to the home. The
Austins thought their home would be ideal for first-time or single homebuyers as well as senior
citizens downsizing. The property includes a large back yard, perfect for entertaining or
gardening. However, the home has been on the market for months, and the Austins have not
received any offers.
Mike Aubrey is trying to help the homeowners sell their home in a depressed real estate
market. Mike uses a three-step method. First, he tours the home to evaluate it. Second, he
obtains information from recent homebuyers in the area. Third, he takes the sellers (i.e.,
Austins) to view other homes (i.e., comparables) selling in the area. During his tour of the
Austins home, he noted it was small (less than 1200 square feet), painted boldly in some areas
(e.g., red in the kitchen and faux painting in the bathroom), cluttered, unfinished upstairs, and
overpriced. (Larger homes with three bedrooms were selling for less nearby.) Additionally,
the home did not present well. The colors and decor would only appeal to a small group, and it
is important to appeal to as broad a base as possible when selling real estate. Mikes assistant,
Sabrina Soto, interviewed a recent homebuyer (Judith Godsey) in the area regarding the criteria
for her purchase. She was an older woman, and she said that she did not purchase a home in
the Austins neighborhood because the homes were small and the neighborhood was too busy.
The Austins viewed other homes in the area and found other sellers were offering much more
for less money. Mike discussed his findings with the Austins. He indicated their home was
overpriced and that they had unrealistic expectations. He told them that they needed to
consider market factors, such as the weak economy and the demand for larger homes. (Sales
are more robust for homes with three bedrooms.) Although Mike was unable to find direct
comparables (because the Austins had priced themselves out of their market), he found a twobedroom home without upgrades for $90,000, a three-bedroom home without upgrades (except
for the windows) for $139,000, and a three-bedroom home with upgrades for $169,000. Based
on an analysis of the market, Mike indicated the Austins had three options: (1) Drop the price
to $139,000 to strategically position the home and sell it. (2) Rent the home. (3) Stay in the
home and wait for the market to improve. (A higher price would cause them to compete with
three-bedroom homes.) If they chose to stay in the market and sell, they also needed to stage or
present the home more effectively.
The Austins rejected the proposed price reduction because of their outstanding loan and the
effort they had put into the house to make the upgrades. Mike assured them that the sales price
of the home had nothing to do with the amount they owed the bank! They were also surprised
to learn that sweat equity did not always translate into sales dollars. The Austins were
frustrated by the thought of having to bring $8,000 + closing costs to the table to sell their
home. They decided to consider the alternatives.
After studying the market more (and verifying two-bedroom homes sold for $89,000 to
$120,000), the Austins decided to pursue the rental option; they placed their home in a
government program that offers rental assistance to low-income individualsSection 8. The
government offers additional assistance to Section 8 renters who desire home ownership. The
Austins hope the tenant will purchase the home after the one-year trial period through the
governments assistance program for first-time homebuyers.
1. Discuss Aubreys method. Why does he use comparables? Why are buyers interviewed?
2. Discuss the 4 Ps of marketing (Price, Product, Place, Promotion) within the context of the
show.
3. Develop a SWOT Matrix for the Movin On Up sellers.
Strengths
PERSONAL SWOT MATRIX
Movin On Up
Weaknesses
1
1
2
3
4
5
2
3
4
5
1
1
2
2
1
1
2
2
Opportunities
1
2
3
4
5
Threats
1
2
3
4
5
4. Per Stephen Covey, effective people/managers begin with the end in mind; that is, exit
strategies should be kept in mind when starting/developing a business (executing a businesslevel strategy). How would the homeowners have benefited from a defined exit strategy?
5. Your objective is to sell your KSA (knowledge, skills, and abilities) to achieve and maintain
a desired lifestyle. Compare and contrast the process of selling a property to selling your
KSA. What lesson(s) have you learned?

Objectives:

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1. To apply strategic concepts discussed in the Real Estate Intervention class within the given scenario.
2. To analyze Mike Aubrey’s three-step method of evaluating and selling a house in a depressed real estate market.
3. To identify and understand the flaws in the Austins’ home-selling strategy and devise a new selling plan.

Learning Outcomes:

1. Students will be able to evaluate a property’s potential for sale in a depressed real estate market.
2. Students will be able to conduct research to obtain information on recent homebuyers in the area.
3. Students will be able to identify key features and upgrades that make a property appealing to a broad range of potential buyers.
4. Students will be able to develop a new selling plan for a property based on the three-step method employed by Mike Aubrey.
5. Students will be able to identify and understand potential obstacles for a property sale in a depressed real estate market and devise strategies to overcome them.

Solution 1: Reposition the Property

One possible solution is to reposition the property to attract a larger pool of potential buyers. This can be achieved by making a few changes that will make the property more appealing to prospective buyers. First, the house can be painted in more neutral colors to appeal to a broader base of people. The bold colors in the kitchen and faux painting in the bathroom can be repainted in neutral tones. Furthermore, the cluttered look can be eliminated by decluttering and organizing the space. The unfinished upstairs can also be completed, giving the property an additional room. Finally, the property can be priced to reflect its market value and comparable properties in the area.

Solution 2: Target the Right Audience

Another possible solution is to target the right audience for the property. In this case, the Austins can focus on marketing their home to young families with children in a similar age group as Ethan and Caleb. They can do this by highlighting the added features in the home that are appealing to families, such as the large backyard and the proximity to schools. They can also stage the home to appeal to families, creating a welcoming and child-friendly environment. Additionally, they can focus on marketing the home online, using social media and other online channels to reach a broader audience. By targeting the right audience, the Austins can increase the chances of selling their home in a depressed real estate market.

Suggested Resources/Books:
1. “Real Estate Investing For Dummies” by Eric Tyson and Robert S. Griswold
2. “The Millionaire Real Estate Investor” by Gary Keller
3. “The Book on Rental Property Investing” by Brandon Turner
4. “Flip: How to Find, Fix, and Sell Houses for Profit” by Rick Villani and Clay Davis
5. “Real Estate Salespeople, Beware!: Protect Your Clients and Increase Your Success on Every Deal” by Mario Jannatpour

Similar Asked Questions:
1. How can I effectively sell my home in a depressed real estate market?
2. What are some strategies for appealing to a broader base when selling real estate?
3. What should I do if my home has been on the market for months and I haven’t received any offers?
4. How can I realistically assess my situation as a seller in the real estate market?
5. What upgrades or renovations can increase the value of my home when selling?

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