Great Article on Trulia
In today's market, you have to price aggressively if you expect to attract multiple offers.
With no federal tax credit to entice buyers, today's home sellers have to get even more serious about making a deal.
That means pricing aggressively - low enough to compete with foreclosures in some markets. It's a conversation that stings, said Summer Greene, a real-estate agent for a Better Homes and Gardens Real Estate brokerage office in Fort Lauderdale, Fla.
"It's like telling them that their children are ugly," she said.
Many people with homes on the market already are slashing prices to catch buyers' attention. Twenty-four percent of listings on the market as of July 1 had gone through at least one price reduction - that's a 9% increase from the previous month, according to the most recent data from Trulia.com, a real-estate listings website.
Price cuts are more prevalent in some markets than others, and the average size of the cut varies, too. In Minneapolis, for example, 40% of the listings had at least one reduction and the average reduction was 9% of the listing price. In Las Vegas, 12% of the homes had price cuts, but the reductions averaged 15% off the listing price.
Reducing their price is one way sellers are trying to weather the "tax-credit hangover" now affecting the country, said Tara Nelson, consumer educator for Trulia.com. Slashing the price is the one thing a seller can do these days to attract attention.
"There's just not a whole lot of incentive right now for buyers to urgently buy," Nelson said. Mortgage rates have been relatively low for a while, so buyers aren't concerned they'll miss that window, and inventory has been creeping up since April, she said. To be eligible for the homebuyer tax credit, buyers needed to have a contract on a house by April 30.
The Mortgage Bankers Association said the volume of mortgage applications to purchase a home during the week ending July 9 was its lowest since December 1996 - despite mortgage rates that are near record lows.
Wait it out
If clients don't "really, really have to sell," Greene said she often advises them to hold off. "If they can wait it out, we're counseling them to do so, unless they have a lot of equity in the house," she said.
"If it's worth 3% to 5% to wait and they don't have a compelling reason to move," the best choice could be to batten down the hatches until next year, she said.
For some sellers at or near a negative equity situation - owing more on their home than it's worth - it's possible that modest appreciation could mean the difference between a traditional sale and a short sale, which would damage the seller's credit rating. In a short sale, the lender agrees to accept less for the property than the borrower owes on the mortgage.
But for any home seller, the decision of when to sell depends largely on the local market.
"There are markets still declining - in Florida, for example - and some that are already growing - in California, for example," said Mark Fleming, chief economist for CoreLogic, in an e-mail.
Home-price appreciation stabilized while the tax credit was in effect, but tepid labor-market and income growth will cause prices to moderate and possibly decline for the rest of 2010, Fleming said in a recent press release.
Nationwide, prices should continue to fall until early next year, with a bottom expected in the spring, according to Moody's Analytics. From the first quarter of 2010 to the first quarter of 2011, prices are expected to drop 5%, said Celia Chen, senior director of housing economics for Moody's Analytics.
Weak price appreciation should follow, she said. From the end of 2010 to the end of 2011, homes are expected to appreciate less than 1%; from the end of 2011 to the end of 2012, they'll appreciate by about 4%, she said. Foreclosures and short sales are expected to put pressure on home prices for the next couple of years, keeping them from rising as quickly as they otherwise might.
What's your home worth? "It's not going to make that much difference if you wait a year to sell a house," at least from a price perspective, Chen said, since you might not be able to sell for that much more than in today's market.
But what could change in a year is demand for homes and your ability to find a buyer - and to do so more quickly. There may be more house hunters then who will chip away at the large amount of inventory, she said.
"The main constraints are weakness in the job market and the demand for homes," Chen said. "We expect (the job market) to improve over the next year. As it gains traction, we will see more job growth, and that will benefit housing demand."
Cutting your losses
If you're sick of the waiting game and wanted to move yesterday, price your home right from the beginning. If it's low enough, it should attract multiple bidders and you might even get more than you're asking for, Greene said.
"I do what the banks are doing with foreclosures right now: Price aggressively and get multiple offers," Greene said.
Don't be afraid to reduce the price if you're not getting any nibbles. If the home hasn't been shown a lot or is on the market longer than average - or if you're getting feedback that your home is overpriced - think about cutting the price. If and when you cut, make it count, Nelson said.
"Small, penny-ante, minimal reductions - $1,000 here, $2,000 there - unless that is a large percentage of your asking price, they almost signal unreasonableness," Nelson said. Unless it's a sizable drop, potential buyers might sit and wait for the next drop, she said.
Also, if a price reduction brings your asking price within a certain search parameter - say, from above $250,000 to just below $250,000 - that can help, she said. "That does actually open up new audiences for a home ... if you can cut it below the next search parameter cutoff," Nelson said.
And remember: If you're selling a home to buy a new one, you'll likely get a good price on that new abode, because the person you're buying that home from likely will be going through the same wrenching, price-dropping experience you are.
Comments(1)