The prospect of selling your home can be daunting, even in a good market. Lots of inventory, dropping prices and low interest rates are turning 2007 into a buyer’s market posing special challenges to homeowners looking to sell.
The market is “shifting” meaning it is in a transition from a seller’s market to a buyer’s market. The good news is there is still time to capitalize on the increased home values that have built up over the last several years. Home sales are slowing and prices are stagnating but the market hasn’t tanked.
The bad news is that buyers know they are gaining leverage. They are choosier and ready to take advantage of the changing tides after years of sellers having the upper hand.
Get to Know the Locals
Whether selling on your own or working with a realtor, get to know the local real estate market. Talk to neighbors, check online resources and read the real estate section of the local newspaper. This will help you as you choose a listing agent and it will give you confidence to make the right decisions.
In a buyer’s market, it’s important for sellers to consider all the factors that led to a closing sale price. Was it a foreclosure or family to family transaction? Consider apples to apples comparisons, not apples to oranges. If your neighbor’s have a view, central air, alarm system and garage and your home has none of these amenities, it’s not a good comparison even if both homes have two bedrooms and two baths.
Also, keep in mind to look at closing prices, not asking prices. Closing prices are hard facts; asking prices are theoretical and won’t give you a realistic idea of what homes are getting for selling price. Remember that the market is changing so the more recent your information the better. There is a tremendous difference between January 2006 and January 2007 in real estate terms.
Get a Good Team
Regardless of if you represent yourself or hire a realtor to sell your home it is a good idea to get a professional home inspector before putting your house on the market. Home inspectors are impartial and work on a fee-per-services basis, not commission.
Usually, buyers sign a purchase offer that is contingent on the home passing inspection. Identifying problems before buyers are in the picture gives you the chance to remedy and present a flawless product. Taking time to make even small repairs gives your home an edge over the competition.
A home inspection can vary in price depending on the size of the home, the location and optional services like radon testing. In general, home inspectors charge around $100 per hour so the larger the house and the more extensive the inspection, the more it will cost. It is a worthwhile investment that could save time, money and headaches later.
Many people choose to sell their homes without the help of a real estate professional. This is always an option and works if you are willing to take on the research, marketing, public relations and legal legwork. This is not always a wise decision in a buyer’s market.
If you decide to hire a realtor, hire a good one. The salesman who estimates the highest sale price for your home is not necessarily the best choice. You’ll want a professional who give you the good news and the bad news and helps you set a realistic asking price, marketing strategy and offers advice for improving your home’s appeal.
The smiling guy who tells you your home is beautiful and is in a hurry to set a price and get it on the market is not doing you any service. The one who tells you your home is beautiful, does a thorough walk through with you, points out things you need to repair and takes their time to do a thorough market analysis is the one that will get results.
Interview at least two potential listing agents and get a written overall plan from each including asking price, comparative home sales and custom marketing plan. Take time to understand and review the strategies. Ask questions and have the realtor explain the information thoroughly before signing on. Most importantly, price to sell.
Accept the Market
The changing market will dictate your home sale. It’s not karma or any failure on your part if your home sells for less than you expected so don’t take it personally. The best thing you can do as you sell your home is accept the market for what it is and do the best you can within its limits.
The real estate market is a fluctuating, and sometimes fickle, dynamic system that is out of your control. If you are selling in 2007, you can’t expect the same financial results that others experienced in 2006 or 2005. Nor can you expect the same amount of ease; it is going to be more difficult to sell as 2007 progresses.
Just because your old neighbor had a bid war on his house last year doesn’t mean that buyer’s will act the same way this year. Accept the market and realize that now it’s the seller’s turn to be flexible and do a little bending when it comes to sale terms.
Sale terms aren’t just the price. Closing dates, move-in dates, storage, appliances, window treatments, points and fees all need some flexibility. If you’re moving across country for a job next month don’t lose a potential buyer over a refrigerator that can be easily replaced. These are deal makers, don’t squabble.
Appeal to Picky Buyers
The list of selling musts becomes critical when buyers know they have the upper hand. Curb appeal, cleanliness and updating outdated finishes are crucial in a buyer’s market.
It might be helpful to attend a few open houses in the neighborhood to get a feel for sell-ready properties. Spend an afternoon walking through properties on your own or ask your realtor to take you through examples on appointment. Spending time helping a serious seller get prepared for an open house is easier than trying to sell a home that needs work.
Any little flaw that can be eliminated must be taken care of before the first buyer drives up. If your front yard needs maintenance – do it. If the walkway lamp post tilts to one side – straighten it. If the front door sticks – get it unstuck. You may have been tolerant of these imperfections but 2007 buyers will not.
The same goes for the inside of your home. If you have wires hanging where a chandelier is supposed to be it’s time to get to a lighting store. While your there get replacements for ugly, outdated fixtures. Lighting is one of the least expensive and best ways to amp up the interior ambience.
Get the carpets cleaned professionally or rent an industrial machine. Treat the scuffs in the hardwood floors. Fix the leaky faucet and get the water stains out. Touch up the paint throughout or brighten the walls with new light, neutral tones. Fix, replace, update, polish and clean. With one or two weekends of dedicated attention, you can eliminate immediate buyer turn-offs.
Every Potential Buyer, Every Credible Offer
The important thing to remember in a buyer’s market is to consider every potential buyer and every credible offer. If your cousin casually mentions a friend looking to buy in the area follow up or have your realtor follow up. It’s important to take every lead seriously. If you are working with a realtor, be sure that this is their outlook as well.
Don’t assume that an endless well of buyers exists. If you are presented with a credible offer give it your attention. Buyers will be less patient, less anxious and more willing to walk away in this market and there will not always be a better offer on the way.
Go over every offer and balance the pros and cons. Find ways to negotiate that create win-win situations – trade offs you can live with that won’t scare off the buyer. If you are creative and flexible you can come out with a good deal for everyone.
If a purchase offer is below your comfort level, offer to pay the buyer’s discount points or loan origination fee. Mortgage points are equal to 1% of the loan so on a $100,000 mortgage one point would equal $1000.
Why is this appealing? It will help the buyer get a lower interest rate. Each discount point paid on a 30-year loan lowers the interest rate 0.125 percent. The buyer gets a better rate, lower mortgage payment and can take an income tax deduction on the points. You get your selling price, minus the small point investment.
Even if the buyer turns it down, it is a way to relay your willingness to make a deal come together and might lead to some other solutions. Other ways to sweeten the deal could be offering to buy a home warranty that covers HVAC, plumbing and appliance repairs for a limited time. The cost for home warrantees varies but averages around $400.
Have a list of your bargaining points and talk to your realtor for more ideas. Remember that anything that makes your deal stand apart from the competition is a good thing, as long as it’s not burdensome for you. If you are selling a condo, you could throw in the association fees for a certain time period, like 3 months. Or offer to pay your lawn service through the first summer as the new owner gets settled.
It’s important to remember that these “extras” are less costly than carrying two mortgages and could strike a chord with a cash strapped buyer.
Just be sure to set your limits and don’t offer anything you can’t supply as these items will be part of the legal sale contract. Even though buyers are getting scarcer, don’t hesitate to say no if something doesn’t sit well in your gut. The idea is to work with the buyers you have to make a good deal.
One important note in a buyer’s market: be cautious about accepting purchase offers that are contingent upon the buyer selling their home first. If your buyer can’t buy until they’ve sold their home you could be in for a long wait. Just like you, your buyer could find the real estate market a little challenging in 2007. And you’ll be unable to sell if another buyer comes along because your home will be under contract.
One way to get around the downside of this scenario is to include a contingency-release clause in the purchase agreement. This way if another buyer appears, the first buyer is given right of first refusal but must decide within a few days not months.
The 2007 real estate market is getting better for buyers but sellers are still in the game. Use these tips and advice to make the most of the market at hand. Get informed, get prepared, step up and make the most of it.