How to sell a house in a buyer's market

I originally posted this article on our company website back in July 2007. 

This article has much of the same content, but I have updated a little bit to October 2008 market conditions (which are not a whole lot different than July 2007). The main thing to keep in mind when listing your property is that you need it to stand out from the vast ocean full of other similar competing properties for sale in your area. These are general suggestions for helping to sell your property:

    

1. Price it right - below market value. We typically recommend 5-10% under the other active listings nearby. For condominiums, townhouses, properties in outlying areas, and properties in areas where you are competing directly with the builders, we typically recommend 10-15% under the other active listings nearby. You do have to look at the recently Sold properties too. While the active listings indicate what your competition is pricing their property at, the Solds indicate what buyers are actually willing to pay for a property.

Unfortunately, price is the main thing. Once the property's price goes over the median value for your area, the percentage of buyers that want or can even afford your house goes way down. There are ways to buy down the interest rate by paying points to the lender. Most cities and counties have down payment assistance and bond programs which can help lower the monthly payment also.

When pricing consider the bracket it is in and the psychological impact it has. For instance a price of $299,900 looks extremely better to a buyer than a price of $305,000. This lower price also puts the property into a lower price bracket on sites like Realtor.com and FloridaLivingNetwork.com. Proper pricing should greatly increase the MLS & internet viewings and ultimately the showings of your property.

Also if your property listing has had few phone calls and fewer showings, you need to do something to enhance the property's value. We recommend re-evaluating the listing at minimum every 3 weeks.  The most effective enhancement is lowering the price.  If you are reluctant to drop the price, then consider offering some sort of additional term or incentive to buyers and Realtors as listed below in this article. If you are not constantly updating the price, terms, and incentives of the listing, it will quickly grow stale and get lost in that "vast ocean" of other listings as I mentioned at the beginning of this article. 

Buyers are looking for deals right now.  If your property's price and terms are not a deal and you are not willing to make them a deal for the buyer, then you need to take a reality check and pull your property off the market for a while until market conditions improve. If you are a home seller right now, you need to ask yourself, "Why would a buyer want to purchase my home at the price and terms I am offering as opposed to all the other homes currently available?"

2. Offer incentives to buyers and Realtors - closing costs and concessions to buyers, bonuses and higher commissions to Realtors. This is what many of the builders are doing to move out their inventory. We have seen everything from plasma televisions, Rolex watches, Bahamas vacation packages, a Mini Cooper car, store or mall gift certificates, and the obvious monetary incentives like paying property taxes, condo or HOA dues, home warranties, or mortgage payments for a given amount of months. Of course any concessions have to be disclosed to all parties in the transaction including the lender.

3. Offer creative terms like seller financing or lease purchase (rent-to-own), if you can. Even offering to hold a 2nd mortgage or take a trade of something for a down payment (car, boat, land, stocks, etc.) can help to attract buyers. If need be to cash out, the seller financed note/mortgage can be sold to a note buyer at the closing for a discount.

If you absolutely get stuck and cannot sell, you can try and re-negotiate your loan with your lender by doing a forbearance agreement, mortgage modification, or a short sale. A seller might consider selling "subject to" their existing mortgage and allow the new buyer to continue making the mortgage payments while not paying off the loan until some time in the future - this option must be carefully considered because the seller's liability and credit are still affected until the loan gets paid off in full. You can also try and rent out your property to a tenant until the market rebounds, however the rental market is also soft right now so this option can often be a struggle as well.

4. Make sure the property shows great. The most important things are curb appeal (most people make up their mind of whether they have any interest within a few seconds of seeing the house from the street), kitchen and baths preferably upgraded (the most important rooms), bonus/sizzle features to be a pleasant surprise to the prospective buyers (crown molding, Jacuzzi tubs, stainless steel appliances, etc.). Also make sure the house is clean and tidy so as not to distract or turn off the buyers once they get inside. Builders and homeowners are also "staging" their properties with furniture, pictures, knickknacks, and decorations to make a house look lived in as opposed to sitting vacant.  If you ever visited a model home in a new community, just think of how the builder had the home staged and decorated.

Selling a property as a fixer-upper or handyman special can often be a big mistake unless you are planning to sell it at a wholesale price of 20% or more off of retail. Most people have no imagination and cannot see beyond even cosmetic repairs. Jobs that might truly cost only $2,000 can seem like $10,000 to a first-time home buyer. On top of that the house may not pass a conventional or FHA lender's inspection or a 4-point insurance inspection and thus the amount of buyers available are limited.  FHA and VA loans seem to be the vast majority of loans being taken out by first-time home buyers right now, so your home must meet their minimum condition standards to even qualify for the loan. 

Selling a property "as is" even if it needs minimal repair can still be intimidating to a buyer. As is properties seem to be stigmatized in the minds of many buyers, and thus they expect a big price adjustment to compensate. The whole idea of "as is" can often spook buyers from making an offer just because they are afraid there might be all sorts of hidden defects.  If you want to offer a home for sale "as is", we strongly suggest indicating some sort of flexibility so that if the buyer does discover repair issues when they do an inspection that it does not kill the deal altogether.

5. Make sure the house is easy to show. If buyers and Realtors have to jump through a lot of hoops and schedule appointments at inconvenient hours to see inside the house, then they might just skip over your house and move on to the next house that is vacant with a lockbox on it. If you are using voice mail or an answering machine for people to leave messages, please return your calls promptly. One of the biggest complaints we hear from buyers and Realtors are that sellers take hours or even days to return a phone call. Not returning messages quickly is a great way to lose a showing - a showing that might have resulted in a sale of your property.

6. Advertise heavily and target it toward the type of person that would most likely buy the property (i.e. young couple, retired person, people working at specific employers, people with children in specific schools, investor, etc.). You cannot violate any fair housing laws in your advertising, but you can definitely try to market your property to the type of person that you think would most likely want to live in your property. Besides the traditional MLS, Realtor.com, a For Sale sign, and an ad in the newspaper, there are other targeted ideas. Specific newsletters and magazines in the community, various internet sites like Craigslist and Zillow, a virtual/video tour (buyers want to see lots of photos and videos), postcards to the neighborhood, canvassing the neighborhood with flyers, directional signs, open houses, real estate auctions, and advertising at specific employers or churches are some ideas to ponder. You need to think of the type of advertising that would reach a buyer interested in buying a house like yours. Target marketing is an art and not a science, so it is often a wise thing to hire a skilled Realtor to assist you even if you have to pay a commission in doing so. 

Our hope is that by using these ideas, your home will sell quickly and for the best price. We will be happy to help anyone evaluate their property and come up with a proper price and a marketing plan to get their home sold.  Give myself or my lead Realtor, Sylvia Carraway, a call today for a free consultation on selling your property.

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(Copyright © 2008. Sand Dollar Realty Group, Inc. All rights reserved.)

Rob Arnold - Your full service and investor friendly Realtor in Orlando and Central Florida.

ABR, CPL, CRB, CSP, GRI, Managing real estate broker, Licensed mortgage broker, Notary Public

407-389-7318 / 1-877-389-7318    www.SDRhouses.com/   www.WeBuyHousesFlorida.com/

Learn to invest in Central Florida real estate and Orlando real estate. We sell properties, list properties, and we buy houses cash throughout the Central Florida & metro Orlando area.  Short sale, foreclosure, and bank owned REO properties are available.

I also provide flat fee MLS listings, For Sale By Owner, and menu-based services in most parts of Central & South Florida, the Space Coast, and the Treasure Coast including Orlando, Winter Park, Maitland, Ocoee, Winter Garden, Apopka, Altamonte Springs, Casselberry, Longwood, Winter Springs, Oviedo, Lake Mary, Sanford, Deltona, Debary, Deland, Mount Dora, Eustis, Clermont, Kissimmee, Winter Haven, Lakeland, Tampa, Sarasota, Bradenton, Miami-Dade, Fort Lauderdale, West Palm Beach, Port Saint Lucie, Melbourne, Daytona Beach, Ocala, Gainesville, Volusia, Brevard, and more.

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