Don't despair: You can still sell your home in a down market
The best tips to help you sell your house.
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.
"We're in a price war and a beauty contest," says Tony Vehon, broker and owner of Weichert Realtors/Lake Realty in Gold Canyon, Ariz. "Every home has to be priced right and look perfect. After that, a special incentive might drive traffic, especially if you offer something that grabs attention."
Sales of previously occupied homes continue to sag after hitting a 13-year low last year. Even real-estate professionals can be flummoxed by this market.
"Realtors sometimes shake our heads at the perceived randomness of it all," says Katie Severance, a broker for ReMax in Upper Montclair, N.J.
A house that's in a good location, fully updated and seems perfectly priced might sit on the market without a nibble.
Such is the dilemma facing sellers across the country. Indeed, the best tips for selling underscore how the market has changed:
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 percent of homes on the market nationwide sell in a given month right now, according to Loren Keim, professor of real estate at Lehigh University.
A typical selling time for a home the last two years has been eight to 10 weeks. But that time frame 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 re-listed. With that in mind, Keim says you need to ask for at least 1 percent less than competing homes.
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 percent of their asking price, according to the National Association of Realtors — many far less.
Two local market statistics can be helpful.
The most important may be days on the market. 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 re-listed start the clock back at zero.
Another useful stat is the ratio of list price to sales price. It shows that, for example, homes sold in April went for 69 percent of their list price in Santa Barbara, Calif., 87 percent in Raleigh, N.C., and 96 percent in Milwaukee, according to data compiled by Zillow, the real-estate listing and information service.
Your local ratio also does not reflect unsold homes. But it gives an idea of the latest price trend and how much a typical seller is willing to come down from the list price.
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," Severance says. "It's like a boot camp that the seller and listing agent 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.
"They'll do whatever it takes to look better than the house down the street now," Severance says.
One of her clients this year hired a contractor to turn a three-bedroom, one-bathroom home into a four-bedroom, two-bath. The monthlong, $15,000 renovation paid big dividends: The house sold for at least $50,000 more than it was expected to otherwise.
After learning a valuable lesson about today's persnickety buyer, Michael Ayalon went the extra mile in renovating the kitchen of his house in East Meadow, N.Y.
Recognizing that their '70s-era kitchen looked dated, he and his wife, Jennifer, first spent $2,000 on stainless-steel appliances before putting the three-bedroom home on the market in April for $399,000.
After 15 showings, he says, they realized that "nobody could get past the fact that a project was waiting for them in the kitchen." So it was do-it-yourself time for Michael, a website designer. They pulled the house off the market for two weeks while he installed a new floor, ceiling, cabinets and granite countertops. Then they put it back on the market in late June at the same price. They hope to justify the additional $10,000 investment with a quick sale.
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 percent 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," says Amy Bohutinsky, chief marketing officer of Zillow.
Agents 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 percent of its weekend traffic and 20 percent overall come from mobile devices.
So, make sure your listing agent markets your home in as many places as possible — from AOL Real Estate to Zillow — with a special emphasis on sites that work well for mobile access.
The single biggest change in the real-estate market since the Great Recession is tighter financing, according to John Vogel Jr., real-estate professor at Dartmouth's Tuck School of Business. Banks once freely dispensed loans for 95 percent of a home's value, but a requirement of 20 percent 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," Vogel says.
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.
Don't be afraid to speak directly to the prospective buyers. If they say they're leery about committing to a home in this environment, you can help make the case. Be ready to show them any recent local statistics indicating that owning is better financially than renting, as is the case in many areas.
And if you don't accept an initial offer, share information to encourage a counteroffer and be ready to bridge the gap to close the sale.
Martha Thorn, a sales agent with The Thorn Collection at Coldwell Banker Residential Brokerage near Tampa, Fla., says sellers in her area have offered personal watercraft along with a property, and one offered a custom-made fishing cart to buyers.
"The house was a $4.9 million mansion on a bluff overlooking the water, and the homeowner had someone make an electric cart" for transporting equipment, Thorn says.
Not all incentives are for high-end property. Thorn says one seller included season tickets to the Tampa Bay Buccaneers' football games on a home priced at less than $200,000.
"The buyers were thrilled with the tickets," says Thorn, but "the most important thing is always the price."
Besides having a home priced to sell and perfectly staged, cash is usually the most effective seller incentive, says Linda O'Koniewski, broker/owner of Re/Max Heritage in Melrose, Mass.
"An offer to pay condo fees for a year or so will definitely create some buzz, and at least get a buyer to take a second look at a property," O'Koniewski says.
Organ Tolu, broker for Century 21 Realty Alliance in San Francisco, says offering a bonus, such as an additional 1 or 2 percent commission, will encourage real-estate agents to show a property, which can help it stand out in a crowded market.
"Another option is for the sellers to offer their own financing," Tolu says. "Sometimes someone who is retiring and has a lot of equity in their home will be willing to offer financing because they get a decent return on their money."
Thorn says the most effective incentives bring traffic to the home, even if the incentive is given to a charity rather than directly to the buyer.
"We've organized charity events at a home that's on the market, with the sellers donating money to the local charity," Thorn says. "The event gets people into the home, which increases the chance that someone will see it and want to buy it."
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, Vogel says 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.
Vogel says 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," he says.
Accepting that advice may bring perspective and help you sell in the worst market in years.
The Associated Press
is included in this report.