Describes a cold housing market and ways to make your house more marketable in a colder markets. Information on marketing accordingly, tips on selling.
Selling your home in a cold housing market can be a challenging and stressful task. For most people, the threat of having to make two house payments is alarming. However, if you can tolerate the short-term cash flow difficulties of making two house payments, then you can buy yourself time to find a buyer without having to price your house too low. A cold housing market is also called a “buyer’s market” because buyers are scarce and they can therefore expect to find bargains on homes. Sellers are challenged to attract these buyers and it can be very tempting to lower the price too quickly in order to broaden the pool of potential buyers.
If you have a real estate agent, they will prepare a list of comparable properties that have recently sold and will recommend a price for your home. The list of comparable properties will also show how long they were on the market before they sold. This will give you an idea of how long you should expect it to take you to sell your home. It’s always better to plan for the worst or at least the most typical case. In a cold market, you should expect that the buyers will not pay the asking price and will offer 10 – 15% less. Make sure that you have given yourself enough leeway so that you can reduce the sales price at least 5% - 10% in order to close the deal.
Obviously in order to sell your house, you have to find a buyer. And if you expect to sell your house at an optimum price in the shortest amount of time, you have to find the RIGHT buyer. The buyer that you are trying to find is one that really values the house and is willing to pay a premium for those things that they value. Value is in the eye of the buyer but you will need to identify what the valuable aspects of your house are and make sure that you emphasize them to the market. As an example, if your house has the nicest yard in the neighborhood, then you should make sure that the yard is immaculate and that pictures of the property show off the yard as a feature. If your house is the largest house in the neighborhood, then you should consider emphasizing the price per square foot as a value point. Think hard about what features your house has that differentiates it from the other houses on the market. The RIGHT buyer will be looking for those features and will value them accordingly.
In a cold market, you can’t afford to leave potential buyers unimpressed. You need to keep your property in tip-top condition so that it is ready to show. Make sure the house looks clean, smells clean and shows off its’ best features at all times. If your house or neighborhood show well at night, you or your agent should invite the potential buyers back early in the evening so they can see its’ special value during that time. If you have surveys, plats, and owners manuals that go with the house, consider packaging those up for the serious potential buyers to view. This shows the buyer that you really cared for the home and that you have most likely maintained it well.
In a cold housing market, the RIGHT buyer may be very difficult to find. You may only be able to attract bargain-hunters who are unwilling (or unable) to pay what your home would be worth in a hot housing market. If you hope to get top dollar, you will have to wait until the right buyer comes along or until the housing market gets better. This could take months or even years. If you must sell your house quickly, you must consider the bargain-hunting buyers as legitimate prospects and you must recognize their primary interests.
Since bargain-hunters are usually motivated most strongly by the price of a home, you should consider things that don’t necessarily have to be sold with the house as potential bargaining points. Things like portable storage sheds, portable hot tubs, above ground pools, swing sets, playscapes, and many other things can be reasonably removed from the home before you sell it. You can deduct the value of these things from the asking price of the home in order to lower the price and attract more buyers. Once the buyer is ready to make an offer, they may ask that those things stay with the house and you can then utilize them as bargaining points in the negotiation. The key is that you have created a way to legitimately lower the asking the price of your home with the potential to up-sell additional features if the buyer wants them. This can encourage bargain-hunting buyers to stretch their spending limit enough to give you a better deal.
Another negotiating point in a cold market is owner financing. This is most practical if your home is paid for or if you have a large amount of equity in the home that you do not need immediately. Owner financing means that you, rather than a bank, would carry the note on the house. The buyer would make payments and interest directly to you. Owner financing is attractive to young buyers with little or no credit history because it is often difficult for them to come up with a large down payment that a bank or mortgage company would require. Owner financing doesn’t come without it’s risk and headaches but it is one way to attract a particular segment of the potential buyers in a cold market.
Lastly, if you aren’t attracting any serious prospects then you should consider lowering the price of your home. Having the lowest priced house in cold housing market is a sure-fire way to attract potential buyers. Buyers typically have a maximum price they are willing to pay for a home. So lowering the price expands the pool of interested buyers immediately. How much you lower it depends on several things:
1. Your ability to make the payment on your home.
2. How much you still owe on your home.
3. How much time, energy or money you have to continue maintaining and showing your home.
If your house is paid for and you aren’t paying for two mortgages, then you can likely afford to lower the price slowly. On the other hand, if your monthly cash flow doesn’t allow you to easily make 2 house payments, then you will need to lower the price more rapidly. A lot of people make the mistake of considering any mortgage payments that they continue to make on their home as lost money. In reality, every payment that you make is adding to your equity in the house which you will get back when you eventually sell it. The only lost money is the interest, insurance, taxes and maintenance that you are paying every month. So keep this in mind when deciding how much you should lower the price of your home.
Selling your home in a cold market can require patience and persistence. It’s hard not to get frustrated. But with a good plan based on realistic expectations, you can successfully market and sell your home without giving up your equity. And with the right marketing and pricing, you can greatly improve your chances of finding the RIGHT buyer.
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