Katherine Tarbox is a former senior editor with REALTOR® Magazine. Previously, she was editorial director for Washington Life. She is the author of the international bestselling book A Girl’s Life (Dutton, 2000) and has made hundreds of media appearances including The Today Show, The Oprah Winfrey Show, and CNN.
Creating Buyer Urgency
The McMonigle Group launches a nationwide program that aims to close in 90 days or less.
November 1, 2009
Anxious sellers want to know: What are you going to do to sell their home quickly?
Some real estate practitioners and builders have tried incentives, such as free vacations, homeowners’ association dues waived, and even cars. But such offers typically do little to create buyer urgency. That comes down to price, says Michele Kader, a sales associate with the McMonigle Group of Coldwell Banker Residential/NRT in Newport Beach, Calif.
Kader’s company found a way to use price to turn a buyer’s market into a seller’s market. The company, which closed $485 million in sales last year, launched the "90-Day Certain Sale" in March. The program uses an online bidding process, combined with aggressive pricing strategy to sell selected listings quickly. Each week the price is dropped 3 percent for all properties.
The site has features familiar to eBay users: Buyers can bid on properties 24 hours a day, seven days a week, or can "Buy It Now" for the current list price. The online auction format enables buyers from around the country to participate in the process. As they do, they develop an emotional attachment to the properties and become competitive with others, says John McMonigle, founder of the McMonigle Group.
"Properties exposed to the market longer than 90 days tend to sell for less than they might be worth otherwise," Kader says. "Homes can easily become stale and lose momentum after this time frame."
In July, the McMonigle Group launched a nationwide version of the program, dropping the word "certain" from its name "for legal and marketing reasons"—though the Web address hasn’t changed—and eliminating the guarantee that properties would close in 90 days.
How the Original Program Worked
When the program launched in March, Kader contacted her 14 clients; 80 percent agreed to participate in the program. She even picked up two more listings by advertising the offer.
The program’s goal was to find a buyer within 60 days; the final 30 days were reserved for the escrow period. During the first 60 days, McMonigle associates marketed properties through a variety of traditional means, including advertising, open houses, and broker preview events. Prospective buyers were directed to the Web site to be qualified and to bid.
"On each property, I had at least 20 bids," Kader says. Competitive bidding sometimes took the price beyond what was expected. "I had a vacant lot sell for 14 percent above the asking price," she says.
If the property had no successful bids at the end of the 60 days, sellers had three options: Continue in the program with a new marketing push, sell to one of the investors who work with the McMonigle Group, or place the house in a curbside auction. In the initial phase of the program, 16 sales closed.
While the program naturally lends itself to sellers needing to unload properties quickly, participants have mostly been trade-up buyers who feel there are great deals to be had. "My sellers understand that they could lose money on the sale, but will make it up when they buy," says Kader.
Danny Cordova, who sold his Irvine, Calif., home through the program, didn’t think he’d have much luck in moving the property quickly." Given the current market conditions, we were prepared to be in it for the long haul," he says. "I had multiple all-cash offers in a little more than 30 days."
Taking It National
That initial success convinced McMonigle to try giving the program a wider berth. He’s marketing the program to real estate pros around the country (regardless of affiliation). Users pay a one-time set-up fee of $69.95, a listing fee of $17.95 for each property, and 10 percent of the commission.
The program still aims to sell homes in 90 days, but McMonigle doesn’t have the nationwide network of investors to guarantee the sale. So under the new program, if there’s no bid for at least the predetermined minimum reserve price, sellers have the option to withdraw after 90 days or continue to drop the price by 3 percent each week.
Other aspects of the original program remain, however. Buyers register at the site and, before they can bid, have to be prequalified for financing through McMonigle’s approved lender, First Capital. Buyers don’t have to get financing through First Capital; that would be a violation of the federal Real Estate Settlement Procedures Act. It’s merely a way to single out "serious buyers," explains Kader.
McMonigle and his team are confident that, even without the guarantee, the branding and auction format will generate urgency. Slowly the map on the 90-Day Sale site is being dotted with properties from Aspen, Colo., to Honolulu. And 13 sales closed in the first three months since the site’s expansion.