By DAVE CARPENTER The Associated Press updated 6/27/2011 1:46:24 PM ET 2011-06-27
CHICAGO — 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.
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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.
She researched and interviewed four brokers before hiring one, made a YouTube video showcasing the house, and created a hardcover book of comments and photos of the house in all four seasons to display for open house visitors.
Gray used Facebook and word of mouth to advertise, and marketed on close to a dozen websites. And she priced her house competitively with the broker’s guidance after studying the comps herself. The initial listing of $683,000 in late April was far less than the $850,000 she had sought in a failed attempt to sell near the height of the market in 2004.
She even brought in a shaman to cleanse the house of any negative vibes, figuring it couldn’t hurt.
“If you really want to move your house in this kind of a market, you have to do everything,” she says. “It’s a lot of effort, but people shouldn’t leave it all in the hands of their broker.”
Unfortunately, all that work still doesn’t guarantee a sale, particularly when many buyers feel little urgency to act and assume they will get a better deal by waiting.
Lowering the price can be a home seller’s most painful move. It was for Gray, who reluctantly dropped her asking price by 5 percent to $649,230 after eight weeks.
“Selling is really emotional for me because I’ve put a lot into this house. It’s now exactly as I like it,” she says. “I don’t want to give it away at a huge discount. It’s kind of my nest egg.”
Such is the dilemma facing sellers across the country. In a weeklong series The Associated Press will examine the realities of real estate for sellers, buyers and homeowners in an uncertain market in which record-low interest rates aren’t curing what ails the housing market.
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 percent to 10 percent of homes on the market nationwide sell in a given month right now, according to Keim. A typical selling time for a home the last two years has been eight to ten weeks. But that timeframe 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 relisted. 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 relisted 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 month-long, $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, 35, 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.
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.