Buyer Closes – Recaptured Equity Revisited
On July 20, 2011,we sent out a Cup o’ Joe which outlines the recaptured equity theory. The theory shows how a buyer that finds a home today at a purchase price that’s the same as it would have been in 2002, has the opportunity to realize a 55% increase in price once the market recovers.
The theory rests on the fact that for decades average appreciation in most real estate markets was approximately 5% per year. By taking the price of the property in 2002 and multiplying it by 5% per year, you could determine what the value could be in 2011 if the market were healthy. By comparing this number to the actual discounted purchase price that buyers are paying today in a depressed market, we can determine how much the buyer is saving.
As part of the Cup o’ Joe, we sent an attachment with a $100,000 purchase price example. This spreadsheet is attached again today. Many agents did not realize they could manipulate the spreadsheet. Here’s the approach you should use with every buyer you talk to.
Step 1: Download the attached spreadsheet to your desktop.
Step 2: Identify the purchase price that each buyer is willing to pay.
Step 3: Open the spreadsheet, which is now on your desktop, and at the top of the spreadsheet click on the first box that has the $100,000 in it.
Step 4: Replace the $100,000 with the purchase price a buyer is willing to pay.
Step 5: The spreadsheet will re-calculate the amount of extra appreciation over the standard 5% per year the buyer could realize once the market is healthy.
Step 6: Call the buyer and offer to email the revised attachment with their purchase price to them. Let them know you would like to discuss this theory with them.
Step 7: Once you have reviewed the concept suggest they print out the attachment and keep it as a reminder of how beneficial it is to buy at the bottom of the market.
Step 8: You may want to remind them of the rapid recovery in the stock market and auto industry. You can compare this recovery to what should happen with real estate prices.
The recaptured equity theory is a very powerful tool to create urgency and motivate buyers to buy now. You should input the purchase price into the spreadsheet for every single buyer you have and direct mail or email the spreadsheet to them. It may take some work but it will be very effective. Remember, life is measured in inches, not miles. It’s sharing points over a period of time with buyers that prompts them to buy more quickly.