Selling Your Home in a Down Market
by
Broderick Perkins
Tips for selling your home when the real estate market is down.
Selling your home when the real estate market is down poses special challenges. You face lower prices, lots of inventory, and buyers who have a tougher time qualifying for a loan. These conditions require you to use marketing techniques above and beyond what's typically necessary when home sales are booming.
Get Help From a Professional
When the market is down, it may not be a good time to go the FSBO (for sale by owner) route. It's better to use a licensed real estate agent or broker who has experience in the market you face. He or she can help you design a marketing effort tailored for tough times.
Get Your Home Ready
It's also not a good time to scrimp on your marketing plan. Your job is to make your home a standout among a larger than normal inventory of homes for sale by anxious homeowners.
Start by cleaning house. If you can't or don't want to do the job, hire service workers to give your home a thorough cleaning and to remove clutter. Hire professional house cleaners, carpet and rug cleaners, fence repairers, handy men or women, window washers, and organizers. Don't forget the garage, attic, and basement. Replace stained carpets, drapes, throws, quilts, and comforters.
Improve but don't overdo it. Home improvements completed before a sale should only include changes that give your home a more contemporary feel. For example, consider:
- installing new major kitchen appliances, but only to replace outdated, inefficient models
- painting your home in neutral colors
- getting new floor and window coverings, and
- replacing or repairing a leaky roof.
However, avoid kitchen and bath remodeling jobs, or major renovations and additions. Giving the buyer a cash incentive for later improvements is often more attractive to buyers in a down market than making improvements that may not fit a buyer's lifestyle. The bottom line: Try to strike a balance between the needs of cash-tight buyers who want the home to be move-in ready, and those who will have money to make their own improvements.
Improve your home’s your curb appeal. Curb appeal is the first impression your home conveys to prospective buyers. It should arouse in home shoppers an emotional desire to own the home and entice them to cross the threshold.
In a buyer's market, simple cosmetic makeovers don’t cut it. Instead, invest in minor home improvements or an exterior staging job to increase the curb appeal. In addition, remove clutter, tidy up the grounds, wash the windows, repair fences, fix driveway cracks, hire a landscaper, and consider painting the exterior of your home. Make it sparkle like a model home.
Stage your home. An empty home with a clean slate may sell well in hot markets when people buy floorplans and a roof over their heads, site unseen. But when sales are down, if your curb appeal gets looky-loos in the door, you want to help them visualize your home as their own. You can do this through the modern marketing technique called "staging." Professional stagers will do any number of things to sell your home more quickly and at a higher price, including redecorating, renting new furniture to show off the home, painting, and landscaping.
You can save money on staging if you've got new or spotless, well-cared for furnishings and accessories, and provided you remove photos, posters, and other personal effects that take away from a neutral setting. But even then, you may still benefit from a professional who arranges it all for the best effect, maybe adding some artwork or furniture here and there. (For more tips on getting your home ready for a sale, see Preparing Your House for Sale.)
Marketing Your Home
For maximum marketing exposure, advertise in traditional newspaper classifieds and other print ads, use conventional "For Sale" signage packed with fliers, and conduct a regular open house Saturday and Sunday.
Use online advertising. Post your listing on Craigslist.com and be sure your multiple listing service’s (MLS) listing is getting picked up by the National Association of Realtors at www.realtor.com and the growing number of competing listing portals, including www.dothomes.com, www.trulia.com, www.Redfin.com, www.Zillow.com, and the like. Your real estate agent or broker can do this. Or, if you are selling on your own, you can contact the listing portals directly to try to get your listing posted.
Invest in virtual staging. Take a step beyond your MLS presentation and consider a website, Web page (such as www.postlets.com or www.vflyer.com), or blog that offers digital images, videos, and a virtual tour of the home to create a 24-hour open house. You can also provide information about the neighborhood, points of interest, schools, crime, commuting, and jobs in the area. When you sell the home, you can give the Web site or blog to the new owner.
Pricing Your Home in a Down Market
Pricing your home in a down market can be tricky. Start by getting an appraisal by a licensed appraiser, called a "comparable market analysis." A comparable market analysis considers the price of other homes that are as much like yours as possible -- location, age, architecture, square footage, floor plan, number of rooms, building materials, lot size, set back, the works. The more homes your appraiser uses in the analysis, the better.
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Obtain as many comparables as possible from the inventory of recently closed sales, a task best suited for a real estate agent who has access to the MLS. Sales information from public records may be dated and not reflect the current market. Even with the most recent sales information, you may have to price your home a tad below what the comparables indicate to avoid chasing the market down. (In a market with steadily and sometimes quickly sliding home prices, if a seller prices the home at or above recent comparables, the seller may have to repeatedly lower the price in order to be competitive. This is called “chasing the market down.”)
Explore Seller Financing
In a down market, financing is often tight for buyers. Even creditworthy borrowers get rejected because of rigid underwriting. In order to facilitate a sale, consider financing the deal yourself -- called “seller financing.” By financing the sale, you may sell your home sooner and enjoy a financial return for the effort.
How does seller financing work? With seller financing, the seller acts as the lender, but rather than actually loaning cash, he or she extends credit against the purchase price of the home. The buyer signs a promissory note and trust deed in the seller's name. If there's an outstanding mortgage, the lender must agree to the deal. There are numerous variations, including equity sharing, lease options, financing only a second mortgage, and more.
You'll need to check with a real estate attorney or other professional proficient in seller financing contracts to learn more and to determine if you can handle the risk. (To learn more about seller financing, read Nolo's article Seller Financing in Home Sales.)
Consider an Auction
Auctions are not only for foreclosures. Selling your home by auction can attract pre-qualified buyers ready to buy and, if successful, can reduce the carrying costs associated with a home languishing on the MLS for months. Because an auction is designed to set off a bidding war on the spot, the final price could exceed that of a negotiated sale.
Again, professional help is key. You need a recognized auction house and a real estate agent, attorney, or other professional to assist you in deciding if an auction would work for you, what type of auction to have, and to hold your hand throughout the auction process.
If You are Desperate: Consider a Short Sale
If you are desperate to sell your home because you can no longer afford the mortgage, and perhaps have already missed payments, consider a short sale rather than foreclosure. In a short sale, you sell the home for less than you owe to the lender and the lender agrees to forgive the outstanding balance on the mortgage. (To learn more about short sales and other options for avoiding foreclosure, see How to Stop Foreclosure.)
Even if you use an agent or broker to sell your home, it pays to educate yourself about the process, especially in a tough market. To learn everything you need to know about selling a home in California, get For Sale by Owner in California, by California real estate broker, George Devine (Nolo).
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