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. “It’s probably the worst time you could find to sell a house since the late ‘70s or early ‘80s,” says Loren Keim, professor of real estate at Lehigh University. 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. Meredith Gray is leaving nothing to chance in selling her four-bedroom colonial in Norwalk, Conn. A freelance fashion stylist and writer, Gray, 53 has taken every action she could think of to get an offer for the house she and her ex-husband bought 17 years ago.
Price Aggressively
Prices have plummeted. Only 4 percent to 10 percent of homes on the market nationwide sell in a given month right now, says Loren Keim, professor of real estate at Lehigh University. A typical selling time for a home the past 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. Days on the market can be a helpful statistic, The specific sales data can provide valuable insight. 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 to zero. Sellers often like to look at the Ratio of list price to sales price. Your local ratio indicates how much a typical seller came down from the list price. Be wary of using that to justify refusing to lower your price, however. It, too, does not reflect all the homes that failed to sell that month.
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,” says Katie Severance, a broker for ReMax in Upper Montclair, N.J. “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 month-long, $15,000 renovation paid big dividends: The house sold for at least $50,000 more than it was expected to otherwise.
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 smart phones 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 comes 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.
Be Flexible With Buyers
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.
Don’t Rush To Rent
The fallback for many homeowners who can’t sell is to rent the property. That’s the case with Gray, who wants to be out by winter. 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.
Dave Carpenter
When making any sort of repair to the property, you must inform the landlord and provide them with documentation of all expenses (receipts, service bills, etc) if you wish to deduct the costs from your monthly rent. The law limits the time you have to wait before making the repair, the kinds of problems you are allowed to fix, and the amount of money you are allowed to spend so it’s always best to avoid this option is possible.