It's safe to sell your home again

By standing firm and rejecting low-ball bids, Deanna White sold her Denver-area home for close to list price - a sign the market is healing.

(Money Magazine) -- Given everything they knew about the lackluster housing market, Meghann and Cort Battles didn't expect much when they listed their four-bedroom home in Centennial, a Denver suburb, for sale in January. So they were taken aback by the onslaught of interest.

Meghann, at home on maternity leave with their two sons, juggled 32 showings in the first month. "It's so exhausting trying to find somewhere to go for an hour two or three times a day," she says. The Battles even installed a special front-door handle to text them when buyers enter and exit so that they can return as soon as possible. "It's just crazy," she says.

Wait, isn't the real estate market still supposed to stink after five straight years of falling prices?

Turns out that while analysts debate when the market will hit bottom, for a surprising number of cities the turnaround has already begun. In December, prices rose in 109 of the 384 metro areas tracked by the data firm CoreLogic. Scrub out foreclosures, and that figure climbs to 169.

If you think that recovery means a return to the boom's double-digit price increases, forget about it. "The market won't suddenly snap back," warns CoreLogic economist Sam Khater, who has studied past housing busts.

And for harder-hit areas such as central Florida and the Rustbelt, improving may simply mean things are less bad than they were two years ago.

No matter where you live, though -- or where you want to live next -- the strategies you employ to sell your home must change to reflect the realities of what's now a healing market.

To see how that change might play out, MONEY visited Denver, ranked by CoreLogic as the most improved of the nation's 100 largest markets.

Prices in the Mile High City and its suburbs, which didn't experience the extreme booms or busts of Phoenix or Las Vegas, rose in December. Foreclosures are ebbing. And homes are selling about 19% faster than they were a year ago.

Our tour of this recovering market reveals that the rebound is likely to creep rather than surge ahead. Yet if you know how to price and market your home properly -- which this story will lay out -- you can finally list your home with confidence that it can sell reasonably quickly and close to your asking price.

See if your town is near recovery.

Many economists predict that 2012 will be the last year overall housing prices decline, as the final wave of foreclosures from the slump hits the market. After that, prices should inch up: 2% in 2013, 3% in 2014, according to a consensus of analysts tallied by Moody's Economy.com.

Why? Against a backdrop of low mortgage rates, employment has improved slightly, and home prices have fallen long and hard enough that buyers are beginning to realize that they won't necessarily lose their shirts by purchasing real estate. To see if your neighborhood is on the verge of a rebound, you have to look for the signs.

For instance, is local employment on the upswing?

That's a critical factor for a region to get itself on the path to recovery. The improving jobs picture has led to shrinking housing stock across the country, as enough investors and bargain hunters have come on the scene to unclog the glut of foreclosures that's been blocking a recovery.

Also, "builders are not putting up very many new homes," says Celia Chen, who follows housing for Economy.com.

In Denver the improved job market has led not only to falling inventory but also a boost in buying activity and an uptick in prices. During the lean years Denver, like many other regions, was hit by both falling prices and rising foreclosures, though the suburbs far from the city center -- where construction of new homes exploded -- bore a disproportionate amount of pain.

Today, however, distressed properties make up around 30% of the Denver metro market compared with 45% at the trough, says local real estate analyst Gary Bauer. And the number of homes on the market has fallen to lows not seen since 2000.

Understand the buyer's psychology.

Sellers aren't the only ones who've been affected by the bust. For years buyers were scared to death of overpaying for a home. They're less so now, but they've grown accustomed to thinking that they'll score deals, so they tend to act slowly, and typically start bidding around 10% to 15% below list price.

Denver real estate agent Ron Buss says he sees this all the time with clients such as Aaron Blankenship, who lost 10% when he sold his home in Rochester, N.Y., last year to move to Denver for a new job with Molson Coors.

Blankenship, 37, is biding his time renting as he looks for a new home. "I'm much more risk-conscious," he says. "It's a challenge figuring out how much we really want to spend and how much we really want to be tied to our home."

The cautiousness is not just in people's heads. Lenders are still stingy about approving mortgages, and buyers must be sure that whatever price they offer will pass muster with the appraiser and the bank. "It's been a little better in the last few quarters, but credit will take five years to sort itself out," says Economy.com's Chen.

Still, a growing number of buyers realize that if they wait too long in this market, they may miss out. Charles Roberts, co-owner of a 400-agent brokerage in Denver, points out that his group oversaw 155 closings in February -- the highest number in eight years.

You can hold firm on price if you're patient. The days of having to deal with low-ball offers are coming to an end. Ask Deanna White. The divorced mother of two says she didn't need to sell her home in the Denver suburb of Highlands Ranch; she simply wanted to. White no longer required four bedrooms and three bathrooms, and she didn't enjoy spending the time left after frequent business travel on yard work and household chores.

In July the house next door, smaller than White's, sold for its list price of $337,000 in three weeks. In August a three-bedroom down the street went for $341,700 in five days. So in the fall White, 41, decided to go for it.

"I knew I had a good lot with a view of open range," she says. "I said, 'Here's the deal. We're going to do this, but I'm willing to ride it out because I don't have to move.' "

Her home, listed at $365,000, attracted offers of around $330,000. White didn't bite, though she adjusted her price to $359,000. After a holiday lull, activity exploded. "I had barely put up the Christmas decorations, and I couldn't get into my house," she recalls. White agreed to sell for $354,000. She moves in April into a newly built smaller home nearby.

The higher your price, the more patient you must be. Cheaper homes are affordable to more buyers and appealing to investors, so recoveries usually start there. Two years ago Denver properties above $210,000 were still falling. At the end of 2011 it was homes above $315,000. Also, jumbo mortgages that aren't government-guaranteed -- loans above $417,000 and up to $625,500 in high-cost areas like New York -- not only charge higher rates, they come with tougher underwriting standards, further slowing things down.

Screen your buyers. Working only with buyers pre-approved for a sufficient mortgage has long been standard advice. But with more offers rolling in, a good agent will call loan officers for more information. There's an incentive for borrowers to grant their loan officer permission to talk. "If I'm going to speak with a listing agent to advocate on my borrower's behalf, I clear it with the borrower first," says mortgage consultant Kym Poladsky. "Most borrowers who are competing want you to help get their offer accepted."

Strike the right balance on pricing.

While you don't have to placate low-ballers anymore, you can't shoot for the moon either.

Adele Work and Jennifer Caldwell can attest to that. The couple have lived in their 1910 home in the desirable Washington Park neighborhood near downtown Denver for the past 12 years. They weren't thinking of selling their place, until they happened upon a farm in northern Colorado last August while visiting their son in college.

They wound up buying that property and put their Washington Park "baby" on the market in October for $734,999 -- even though their agent lobbied for a lower price. Sure enough, the buyers' feedback started to come in: "Love the house, but slightly overpriced." So they cut the price tag to $714,000. In February they dropped it again, to $699,000. "If we had priced our house lower to begin with we maybe would have sold it before the end of the year," Caldwell says. Adds Work: "We've let our heart lead us a bit."

Get it right the first time. Set a realistic price from the get-go so your house doesn't look like a throwback to lousy price-slashing times. To do that, think like an appraiser. Analyze comparable sales for price-per-square-foot and see how long competing homes have been on the market.

Scouting active listings is also crucial, says appraiser Matthew George. "You have to know what you're competing against," he says. Arm yourself with a simplified evaluation of your home, called a summary or restricted-use appraisal, before listing ($150 to $200). To find professionals in your area, go to appraisalinstitute.org.

If you think you erred in pricing, act quickly and decisively. Are you getting lots of showings but still no offers after 30 days on the market? Cut the price by at least $10,000, says Justin Knoll, chairman of the Denver Realtors organization. At that point, you can hold firm on price and try to negotiate offers up.

Let your home's value dictate the price. This advice may seem self-evident, but owners may have lost sight of it during the bust. On the one hand, some sellers clung to the false hope of a return to boom prices, so they set prices unrealistically high. Others may have gone too far the other way -- by setting the price on their higher-end home below jumbo loan levels simply to draw more interest. In an improving market, that type of thinking isn't really necessary.

Understand that you're no long competing with gutted foreclosures.

Buyers are tired of looking at worn-down, neglected, distressed properties and often don't have much extra money to do a lot of fixing up. "Clients tell me all the time, 'I'll spend a little more for something that's ready to move into,' " says Knoll. "Sellers need to take advantage of that."

Take care of structural and cosmetic necessities -- but not much more. In lean times, forking over $50,000 on a new kitchen may have seemed like a necessary move to stand out. That's probably the wrong thing to do now, says George, the appraiser. Instead, stick with basics like paint and flooring. And fix things that will come up in inspection. For instance, Kathy and Bruce Frank, of Golden, Colo., recently spent $1,600 to repair a sunken driveway before they put their house on the market.

In their 28 years there, the Franks -- she's a retired elementary school principal; he works at the University of Colorado -- have done a little of this and a lot of that. "Finished the basement, popped the top on the garage and added a master suite, new hardwood floors, moved the laundry room to the top floor, new roof," she says.

When the empty nesters listed their home, they focused on small stuff, like decluttering and packing up their personal stuff. They also brought in a stager to set the kitchen and dining room tables. The Franks' agent, Buss, says the house is shipshape but admits it reflects the longtime owners' tastes. "Blue," he says. "The house is very blue."

Respond quickly to feedback. If an issue arises over and over in buyers' reactions, it needs to be addressed immediately. Buss, for instance, planned on giving the Franks 10 days or 10 showings. If buyers complained about the blue, he was going to have them paint. It turned out not to be necessary. Just three days after listing, the Franks had a full-price offer: $375,000. They're under contract.

Things aren't moving quite as fast back in Centennial, where Meghann Battles sits in her car, e-mailing on her iPad and playing the waiting game. Meghann is waiting for lots of things -- for her 32nd showing to end, for would-be buyers to realize how few homes are for sale in the neighborhood, and for families hoping to move in the summer to start searching. As husband Cort reminds her, though, "It takes only one showing for it not to be a waste of time."

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