Real Estate - My Experience with a sell

I recently helped one of my neighbors sell his house. He is a high ranking officer in Indian Army & was posted to North India around 9 months back. He wanted to sell his house in Pune & requested me to handle the deal on his behalf. I was skeptical about my ability to provide enough time & attention. At the same time his expectations were quite high as compared to what I thought could have been the price for a quick sell. He expected around 9 to 10 million rupees from this sell. I checked with many experts in the field before accepting this task. Among various people I spoke to the builder who has built that property as well as nearby real estate brokers. Everyone seemed to suggest that the house would get sold in the vicinity of 7 million. Everyone thought that my neighbor’s expectations were quite high & probably unattainable!

This data worried me as well made me little excited. Worried because I did not want to ruin the relationship with the neighbor by denying extending help & excited because I thought selling the house at 9 million would be quite challenging task. The excitement rose even more after I considered this fact – as an average real estate investor, I have had few good experiences about buying a property however I have never dealt with a sell transaction of this size. This transaction provided with an excellent opportunity to get the first hand experience without assuming the financial risk! I started considering this as my chance of testing my negotiation skills for a fair sized deal. As I mentioned in one of the earlier articles, I strongly believe in realization of gains rather than sitting on notional profits. However the nature of investments in real estate does not normally present opportunities of cashing out for an average/ small-time investor. This transaction would prove to be a learning experience for me. So ultimately I accepted the challenge & started working towards the goal. I got so much involved in this transaction that I quickly forgot that I was trying to help my neighbor! There was an ulterior motive for me too. That was to have an influence in choosing my new neighbor!

After circulating 2 advertisements in one of the popular newspapers, I started getting a few phone calls for enquiries. I was encouraged by this fact. However very quickly I realized that many of the calls were from real estate brokers & not from the direct buyers. Most of the brokers wanted to update their own databases with information about this property. A very few had any live requirements from any of their existing clients. I quickly changed the wordings of the next circulation of the advertisement to target the direct buyers. Slowly the number of inquiries dried down to a trickle. However whatever few inquiries came in were from direct investors/ buyers. I felt like I was back in business!

The first serious inquiry proceeded to the second level – site visit. The person was a businessman & wanted to purchase the house for himself. He liked the property & we quickly moved to the next level – site visit by his family. On the same night we discussed the financial details of the transaction when I experienced the first big disappointment in the deal! He offered 6 million for the house as his final price! Obviously I was dejected to say the least. Suddenly the faces of those who said that that property was worth 7 million flashed in my mind. However I was still convinced that the property was worth much more. In any case this offer gave me the floor price for the deal. I viewed this as the positive side of the offer.

I spoke to the neighbor on phone that night & we had a long chat. He was saying something like putting the sell on hold for some time. However I urged him to have patience & continue. We finally decided to continue for another 15 days. It had been 2 months already since I accepted this task. I was feeling the pressure.

I changed the newspaper, the layout & wordings of the advertisement. Either due to these changes or due to sheer luck, the next week was very busy with at least 4 serious inquiries. All from direct buyers with decent backgrounds. And this time the offers ranged from 7 million to 9 million!! Of course I had also made significant changes to my sales pitch too. Both of us were quite encouraged. We felt that we were very close to our target price & hence he flew down to Pune for final negotiations with the shortlisted buyers & to finalize the deal. We spent another week & managed to sell the property for 10 million!

Needless to say I found a few surprised faces once this deal was known to people. However more important for me were the learnings that I gained from this transaction. Some of the significant ones are:

1) Choice of media based on class of buyers was important. At first I chose a newspaper with highest circulation in Pune. However when I changed over to the one that is read by cosmopolitan crowd, the response went up exponentially.
2) Choice of words & layout is very important. More than the layout, words are more impactful. Use of fluffy or glorifying descriptions of the property hardly works. It is best to leave the language simple & factual.
3) Even though I avoided real estate brokers, on the hind sight I think involving 1-2 brokers with good reputation & client base could have been a quicker way of selling the property. However there are a few aspects of dealing with brokers too. More about it in some future article. I also have discovered that one should not at all hesitate paying a few extra thousands on brokerage rather than bargaining with the brokers.
4) Another very important fact is that in real estate sell, patience is of utmost relevance. We were on the verge of bailing out or selling out at lower price. However persistence helped.
5) Real estate sell is a different ball game. There are many peculiarities of this market. For starters, this market is not very well organized or regulated. Price movements are largely determined by cartels of builders. There is hardly any official data published on real prices. There is no transparent data available about how many deals were struck by end-users v/s investors etc. So your approach for deal making in this market needs to be totally different.

Anyways, after some time, I got another serious inquiry for the same property & the buyer was willing to pay 11 million! However since the deal was over, I politely declined the offer. I have kept the contact details of this buyer, just in case my new neighbor cries foul in future! :-)

I still get phone calls from a few interested parties. Some of them have asked me to keep an eye on any such similar deal in the neighborhood! I think I might be staring at an option for a second career. :-)