The real estate market is cooling. Buyers have more leverage than in the past couple of years and sellers are more panicked because of all the uncertainty. We are seeing increases in inventory, longer listing periods, reduced demand, and price cuts unlike anything we saw last year or six months ago. These factors suggest the market is transitioning away from being a seller’s market. Current market conditions present challenges for sellers who need to sell a property on a short timeline. In this article, we will outline strategies and considerations for homeowners who need to sell quickly.
- Price the property correctly.
Price is the most important consideration when selling a home. Pricing a home too high can leave it sitting on the market for a long time. The longer a property sits on the market, the more challenging it may be to sell. If the real estate market continues slowing down, the home’s reasonable value may decline while it is sitting. Carefully analyze all of the recently sold comparable homes in your area within the last three months. It is important that the comparables are recent because the market is quickly changing. A home sold six months ago may not sell for the same price today. Take the time that is necessary to honestly compare your home to nearby homes that sold recently. For example, if one of those recently sold homes has recessed lights, granite counters, high end cabinet pulls, and a modernly tiled shower surround and your home only has one of those features but not the others, you need to adjust your sale price accordingly. Being honest with yourself here is particularly important if your goal is to sell your home quickly.
- Assess the condition of the property and make repairs.
Examine the condition of your property. Most people are shopping for a clean, well-maintained property. More importantly, to be marketable to a typical retail buyer a property needs to be move-in ready and have no major problems. Sellers should keep in mind that it is very challenging if not impossible for buyers to get conventional or FHA financing for distressed homes. If you know that your home has major electrical problems, leaky pipes, or major problems with the bathroom or kitchen, you should repair those problems before entering a contract with a buyer who intends to finance the home with a conventional mortgage. Delaying repairs will only delay the closing and could jeopardize the sale. While some lenders offer rehab loans, sales involving that type of financing may take longer to close and have a higher risk of falling apart than conventional financing or cash purchases. It is important to be honest with yourself about how much deferred maintenance your home has and what sort of repairs it needs before signing a purchase agreement with a buyer who has a financing contingency. Waiting 30 days only to fall out of contract due to the buyer’s failure to secure financing may be problematic in a cooling real estate market as the seller risks having the market value of the property further decline during the escrow process. Homeowners who need to sell their property quickly should make all necessary repairs before entering a contract with a buyer who intends to secure conventional or FHA financing for the property.
- Sell the property “as is” for cash.
If a seller has a property they want to sell that has problems of the type that would prevent a buyer from obtaining traditional financing to purchase the home (like inoperable furnaces and air conditioners, broken appliances, inoperable plumbing) repairing these items such that buyers can obtain conventional financing would significantly increase the size of the pool of potential buyers and the speed of the sale.
But what if a seller does not have the time or funds to repair a property? The fastest way to sell a property in poor condition is to put it on the market for a price low enough for a buyer renovate it and make a profit. This strategy will quickly attract investors and buyers who will pay cash. For property owners who need to sell quickly, selling to an investor who will buy your house for cash is a good option because the sale does not depend on a lender. When typical lenders are not involved in a sale, the seller does not have worry about making repairs or renovations and the deal cannot fall apart because of a lender’s requirements. Cash deals usually close much faster than deals involving conventional lenders.
There are several ways to connect with an investor who will buy your house for cash. The most common way is to list your property with a realtor. The realtor will typically note on the listing that the property is being sold “as is” and mention that only cash offers or hard money offers are acceptable. While working with a realtor can give your property a lot of exposure, realtor commissions eat away around 5% to 6% of the sale price of your home. For example, if you list your property for $100,000, you will pay $5,000 to $6,000 to the realtors involved. Some brokerages will also charge the seller $250 to $350 for brokerage services. Sellers can avoid paying realtor commissions by selling directly to a cash buyer, without listing with a realtor.
We cannot predict the future of the real estate market, but many signs seem to suggest that sales will continue slowing down in the near in the term. Anyone who needs to sell their house quickly should price their property based on the last three months of sales comps and repair all big-ticket items to make the property marketable to everyday buyers. Sellers who are unable to make repairs can sell quickly to investors who will buy the property for cash and close faster than buyers who rely on conventional financing. Sellers can save money on realtor commissions by selling directly to investors, without involving realtors.