Selling Your Home in a Slow Market
Bubble or not, demand is softening. That means you'll have to work extra smart to get the price you want
(MONEY Magazine) – The halcyon days of home selling are over. No longer can you simply stick a FOR SALE sign on your front lawn and wait to collect your check. Signs of a softening market began to appear in July, when existing-home sales fell 2.9%, followed by a 2.7% drop in August. Says Barbara Kohut, a realtor in the Chicago suburbs: "Houses that would have sold in less than two days last year now stay on the market for 60 days." With demand dropping, forecasters predict that home prices should grow just 3% over the next 12 months—a far cry from the 9.4% average gain of the past year.
To get top dollar in this market, you need to make your house stand out from the crowd. So stop thinking like a proud homeowner and start acting like a marketing manager trying to move the merchandise off a crowded supermarket shelf. The steps you have to take, after all, aren't that much different.
Price it right The single biggest mistake sellers make in a sluggish market is to overprice their home, says Cleveland agent Tim Prida. Asking for the moon may work in a period where bidding wars and multiple offers are the norm, but good values are what nab deals when demand slows.
To get a realistic sense of what your home is worth now, check out sales in your neighborhood over the past six months. You can typically find this information online at your local county assessor's site, but you'll need a good real estate agent to put the numbers in context. Your broker should not only be familiar with conditions in your neighborhood but also with prices for properties that are most comparable to yours. What matters here is the number of bedrooms, bathrooms, and the square footage, as well as other features that may be in particular demand in your area, such as great views or proximity to transportation.
You might even consider underpricing your home by 5% to 10% to create buzz, suggests New York realtor Barbara Corcoran. Often this strategy can lead to multiple bids. And once buyers start competing, their emotions can push the sale price higher than the home's fair value. She notes, "Nothing turns a buyer on like the idea of a bargain."
Once you've set an irresistible price, make sure the word gets out. At a minimum, your broker should place your home on the local Multiple Listing Service, a database of properties for sale, and advertise in the local newspaper or via direct mail. Since not all properties on the MLS show up online, it's also imperative to list your home on the realtor's website—some 70% of home buyers now search the Net for prospects. You'll get the most traffic if your broker's site is easy to navigate (just one or two clicks to get to your listing) and has multiple still shots of the interior and exterior of the house.
Give your house a makeover "Preparing your house for sale is like preparing for a blind date," says Linda Mighdoll, author of Get Ready, Get Set, Sell! "You have to make a good first impression."
To show your home to its best advantage, concentrate on sprucing up the rooms that buyers care about most: the kitchen and bathrooms. This is a cost of selling, not an investment, so limit yourself to relatively inexpensive cosmetic jobs like slapping on a fresh coat of paint, replacing broken tiles and updating appliances. A modernized kitchen, realtors note, can sell a whole house.
Neutral, light colors sell too. So paint that purple bedroom a warm ivory, and get rid of the gold shag carpeting from the 1970s. Up the wattage on your lightbulbs to brighten rooms. Boost your curb appeal by trimming overgrown shrubs. To make the best impression without spending a lot of money or time, paint the front door.
Before your first showing, clean the house like you've never cleaned before. Organize your furniture to draw attention to the nicest features of your home, such as hardwood floors or a fireplace, and pull back the curtains if you have a great view. You might even seek a professional stager's help in showing off your abode (see "Don't Sweat It," page 113). While these steps help sell homes in any market, they move from optional to essential when prices soften.
Offer incentives To make a sale in a slow market, you may also have to sweeten the deal. Small gestures can often tip the scales. If you're planning on redecorating when you move into your next digs, for example, consider throwing in your curtains or dining room set. More sellers are also offering a home warranty. Sold through agents or directly through providers like American Home Shield for $400 or so, these contracts cover the cost to replace or repair major appliances that break within a year of a sale.
If you need to move quickly, up the ante. One increasingly common strategy is for sellers to cover their buyers' closing costs, typically 3% to 6% of the sale price. Seller financing is also gaining popularity. In a typical arrangement, the buyer makes a big down payment, generally 20%. But instead of taking out a bank mortgage, the purchaser borrows the remainder directly from the seller, who gets paid monthly, at a rate around 1% higher than banks charge on 30-year fixed mortgages.
Of course, you should consider this option only if you don't need a big lump sum from the sale, might benefit from a monthly payment and have thoroughly checked out the buyer's credit history, so you're confident that he or she can make good on the deal. If so, seller financing may not only get you out of your current home but also provide an income for you in your next one.