Real Estate Remains Solid Despite Soft Residential Market

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Tuesday, 28 Nov 2006

Selling in a Slow Market
Posted in Articles

By Brian Yui

SAN DIEGO, CA, October 12, 2006—If you’re thinking of selling your home, you’re probably paying close attention to the market. Now that the real estate buying spree of recent years has slowed, more properties are sitting on the market for months instead of weeks, while their owners continue to make mortgage payments, waiting for a buyer to surface. The cooling market means that buyers can be choosy. If you’re one of those time- and cash-strapped owners, there are several ways to maximize your property’s exposure and appeal to potential buyers.

A Critical Eye

Start with a good look at your property. Put yourself in a buyer’s shoes and be critical of what you see. Do the trees need pruning? Are the window boxes full of half-dead flowers? Have your carpets seen better days? Would a coat of fresh paint turn your home from dull to sparkling? Anything that you can do to make the property look well-loved and well-kept, such as stowing garden tools and kids’ toys, boxing up clutter and knick-knacks, and sprucing up the interior and exterior to maximize space and light will serve you well.

If you have busy wallpaper in bathrooms and kitchens, consider repainting in a warm white or ivory. Replace broken tiles and ancient appliances. Remember that this isn’t a long-term investment, so you’ll want to minimize your costs while reaping the greatest cosmetic gains. Pay attention to details such as squeaky floors, leaky faucets and creaky door hinges. While these may seem like small things, potential buyers may wonder what else is “wrong” with the property. Rearrange furniture to focus attention on selling points, like fireplaces or views. Clean out your closets and pantry to make them appear larger and more appealing. Bring as much light into the home as possible by ensuring that shrubs and trees are trimmed and all light fixtures have high-wattage bulbs. Finally, nothing turns off a buyer more than nose-wrinkling odors—smoke, pet smells, dampness and so on. Clean like there’s no tomorrow and deodorize furniture and carpets.

The Price is Right

Once your home is buyer ready, you can gain a competitive advantage by pricing it ahead of the market. The first two weeks of the listing are the most critical, as this is the time when the listing gets the majority of its exposure. Pricing your home right out of the gate will get it the attention it deserves from potential buyers.

Ask your agent for a list of comparables—the recent sale prices for similar homes in your area. Set your asking price at 5%-10% below the last comparable, particularly if you’re in an area where the market is heading south. If your home is vacant, this may be hard to swallow, but remember that the longer it takes to sell your home, the more money you lose by continuing to pay your mortgage, utilities, homeowners’ dues, etc. Is it really worth carrying the home’s expenses for three or more months to gain what might amount to an extra $5,000? You won’t have to go far to find stubborn sellers from past slow markets who stuck to their high price for a year more, servicing the mortgage and watching as property values took a nose dive. Every seller wants to get the most equity out of their home, but remember that time is money.

After you’ve set an attractive price, you may be tempted to sell the home yourself to avoid paying an agent commission. Think carefully about this, as it will limit your home’s exposure to potential buyers and likely take considerably longer to sell your property. Enlisting the help of an agent will ensure that someone is working on your behalf to market the property. Agents will put your home in the Multiple Listing Service (MLS) to get as much publicity as possible and minimize your chance of potential lawsuits due to the number of legal issues that can and do arise in a home sale.

Buyer Incentives

Consider offering buyer incentives to make your home irresistible. Offer to pay the homeowners’ association fees for a year, or, cover the buyer’s closing costs, which can range from 1% to 3% of the sale price. If you’re able, you might think about seller financing: the buyer makes a large down payment, around 20%, but instead of taking out a mortgage, the buyer makes monthly payments to the seller at a rate about 1% higher than the bank rate on a 30-year fixed mortgage. To incentivize agents, you can offer the buyers’ agents an above-market commission. Typically, agents can expect 2.5%-3%. If you offer 4%, you’ll be surprised how many agents will show your home.

Finally, be willing to negotiate with potential buyers. Offer concessions, such as making minor repairs, throwing in a piece of furniture that the buyer likes, or an allowance for new flooring. In a buyer’s market with slowing sales, you’ll need to be flexible if you want to take the money and run before home prices potentially drop.