The home next door is in foreclosure. The neighbors down the street just put their house up for sale at a ridiculous discount. And “For Sale” signs litter lawns all over town.
Welcome to the toughest selling conditions in years.
The bright side of selling a home in a down market is you get to seek your own bargain if you’re going to buy after you’re done. Closing a sale, however, can be teeth-grindingly slow if you don’t do everything right — and maybe even if you do.
Selling your home now is probably the worst time since the late ’70s or early ’80 but if you bought prior to the boom and the collapse, your equity position may still be intact.
We tend to shake our heads at the perceived randomness of it all but we are also optimistic about what the future holds for buyers and sellers alike. Sometimes, we see houses that are in good locations, fully updated and seems perfectly priced that might sit on the market without a nibble.
Social media like Facebook, Twitter and word of mouth have become the trend in advertising properties but we are also seeing Craiglist being utilized to capture buyers but the MLS system and Realtor.com are still the go to place for finding homes..
Selling can be really emotional for sellers since they put a lot of effort into getting it ready for sale and sometimes there is a pricetag that goes along with prepping the home so sellers are reluctant to giving it away at a huge discount. Remember, for most, their home is kind of like their nest egg.
The best tips for selling underscore how the market has changed:
1. PRICE AGGRESSIVELY.
Even if you’re fully aware that prices have plummeted, it can come as a shock when a real estate agent advises you to slap a low-low price on your home.
The reality is that only 4% to 10% of homes on the market nationwide sell in a given month right now. A typical selling time for a home the last two years has been eight to 10 weeks. But that timeframe makes selling sound easier than it is, because it doesn’t factor in all the homes that never sold, or were pulled off the market and later relisted. With that in mind, we recommend that the listing price is at least 1% less than competing homes to
Holding out for a higher price generally doesn’t work well in this market, either. Among homes that took at least four months to sell, nearly half the owners accepted less than 90% of their asking price, according to the National Association of Realtors— many far less.
Days on the market can be a helpful statistic. Available through most multiple listing services, it shows the average time it takes to sell a home. The specific sales data can provide valuable insight. When reviewing comparable homes it will become clear which list prices led to fast sales and which were set too high and prolonged the sale.
But don’t focus on the overall average for a specific location. This can be misleading because it accounts only for homes that sold. Also, homes that were pulled off the market and relisted start the clock back at zero.
Sellers often like to look at the ratio of list price to sales price. Your local ratio gives an idea of the latest price trend and indicates how much a typical seller came down from the list price.
Be wary of using that to justify refusing to lower your price, however. For example, homes sold across the country in April went for an average of 96% of their list price, according to data compiled by Zillow, the real estate listing and information service. But it, too, does not reflect all the homes that failed to sell that month — by far the majority.
2. STAGE LIKE A PRO.
You may not be able to compete with the price of homes in foreclosure, or with short sales — those in which a lender is allowing the seller to list for less than is owed on the mortgage. But you can outshine them when it comes to the condition and appearance of your house.
Staging is no longer optional, it’s like a boot camp that you the seller and us, the listing brokers go through together.
It can be an intense period of planting flowers, painting and depersonalizing the house so buyers can envision themselves living there. Getting rid of clutter and rearranging rooms to highlight the best features also are essential.
What’s new this year is that many sellers are willing to go beyond the basics of staging to make physical upgrades.
We are finding that sellers will do whatever it takes to look better than the house down the street now. One of our clients this year hired a contractor to turn a three-bedroom, one-bathroom home into a four-bedroom, two-bath. The month-long, $15,000 renovation paid big dividends: The house sold for at least $50,000 more than it was expected to otherwise. Extreme, but it paid off in the end.
After learning a valuable lesson about today’s persnickety buyers, one of clients went the extra mile in renovating the kitchen of their condo after having it on the market for 4 months with no decent offers. Our clients recognized that their kitchen looked dated, they spent $1500 on stainless steel appliances and within 30 days, they had an offer and it closed 30 days after.
3. GO ALL-OUT ONLINE.
Sellers used to post photos of their homes online only sparingly to entice buyers to visit. No longer. With about 90% of buyers starting their search online, according to the National Association of Realtors, you can’t just tease and hope.
That whole strategy is thrown out the window, because all listings are online and there are so many that you have to compete for people’s attention. We recommend putting lots of high-resolution photos and as much information as possible online, including citing upgrades and what you love about living in the home. If you don’t show a photo of a key area — kitchen, bathrooms, backyard — prospective buyers may assume there’s something wrong and move on.
It’s important to remember that buyers are going mobile, too. The use of smartphones and apps to review listings has exploded.
Nearly 1.8 million homes are viewed daily on Zillow’s apps alone, and the service says 30% of its weekend traffic and 20% overall come from mobile devices.
4. BE FLEXIBLE WITH BUYERS.
The single biggest change in the real estate market since the Great Recession is tighter financing. Banks once freely dispensed loans for 95% of a home’s value, but a requirement of 20% down is becoming the new normal in many cases. And any perceived imperfection in a credit record can spell denial.
As a seller, you have to be very conscious of how hard it is now to qualify for loans. If you’re about to accept an offer, make sure you inquire about the down payment and are informed about the buyer’s financing status. Consider accepting an all-cash offer, even if it’s not your highest. If your buyer is hitting a roadblock, consider talking with the lender to help structure a deal.
5. DON’T RUSH TO RENT.
The fallback for many homeowners who can’t sell is to rent the property/ But it’s a strategy that carries risk. With so many foreclosed and underwater houses on the market, we think there’s at least a 50-50 chance that any given house will be worth less in a year than it is now.
Not only that, you may be planning to move out of town, so renting would entail being a long-distance landlord.
We think homeowners may need to take a deep breath and treat their house as a sunk cost — money that has been spent and cannot be recovered. “The house today is worth what it’s worth. Gone are the days where people are paying $25 for a $20 bill.
Accepting that advice may bring perspective and help you sell in the worst market in years.
If you are looking to sell or purchase a home, please call Richard or Kirsten at Powell Fine Homes for your private consultation. Richard can be reached at 805-404-1167 and Kirsten can be reached at 818-268-3236.
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