Most often people assume that a real estate agent typically just solicits potential clients to buy, sell or rent properties. But their responsibility is much more! In order to crack good and profitable deals, they should know how to evaluate properties, such that they can gain the customer’s trust instantly. Trust is the only factor through which real estate agents can climb the ladder of success. So, keep the following points of evaluation in mind so that you reach a lucrative position rather than bankruptcy.
1) Location: Geographic location plays a huge role in real estate, as if a property is in a good location, then it sells on its own. If you are stuck with a property that might be unique, but does not appeal location wise, then you might have a hard time selling it.
2) Connectivity: Everyone loves a safe neighbourhood with a convenient access point. Ideally, people expect a centrally located area where the airport, mall and schools are nearby. So you will hit a jackpot if you manage to tap the right connectivity links to sell for your estate. Before anyone looks at numbers, they need to consider and be impressed with what is being offered.
3) Know your numbers: These days the client is very technologically hyper and is self‐ prepared to deal with transactions. Most often it happens that the client will try to outsmart you. So, when you are talking numbers to the client, you need to be absolutely sure and know the following factors.
Mortgage Payment – This basically involves ratio comparison of monthly income and debt obligations. The debt to income ratio for a standard owner occupied house should be a minimum 36%. For house payment, up to 33% and 45% for an investment property. Also, as a mortgage broker you need to have a thorough understanding of home loans as the customer expects to get the hassle free best deal possible.
Down Payment – The agent should be clear with the down payment amount associated with a certain property.
Always remember – the 1% rule – Investor mortgages typically require a down payment of 25% to 30% or sometimes even more. So you need to fix a price based on property value in terms of rent, area and credit sources. The 1% Rule states that the property’s gross monthly income must be at 1% of the property’s purchase price. This unspoken rule ensures cash flows. If you find any property which doesn’t comply with the rule, just cross it off the list. There’s no need to waste any time on such properties, because in today’s market it is very easy to locate properties that do meet the 1% Rule.
4) Follow the current market conditions: As a broker, it is important to do your market research, to understand how to relate the stock market happenings and current economy with the price of the property. These variables should be kept in mind while studying the market:
- The average square meter cost of the properties that are similar to your own in the area
- The average time that your property will sit on the market and how to make your property sell faster
- The sales prices in your locality and how to increase the value of your property
- The ratios of the listed prices and the final prices sold in comparison
- The total residential or commercial properties in your area that has been sold in the past year
5) Your commission: Before you sign any paperwork or agreement, make sure to finalise your commission. Familiarize yourself with common commission amounts. Keep in mind that the commission is already added into the final sale price. Evaluate the property’s gross sale price and add taxes to the commission amount. Formula= Commission ÷ 100 × Property Value.