Selling Your Home In A Down Market
When Doreen Cardin first put her house on the market, she was hopeful that the house would find a buyer right away. Cardin’s husband, a mechanic, was unable to work. The loss of an income had proven tough for the young couple, who live 20 miles north of Seattle. They needed the money.
So they first spent some cash fixing up their three-bedroom, 1,600-square-foot house, with a new coat of paint, carpeting in the family room and flooring in the bathroom. They hired a local real estate agent and put the house on the market for $300,000.
That was five months ago.
There have been a couple of offers since then, but those both fell through. The Cardins have now hired a new realtor, slashed the price down to $279,000 and even thrown in a $5,000 buyer’s bonus. Doreen Cardin blames the lack of real interest in her house now on the cold weather, which discourages people from visiting open houses, she says, and also a more general sense of financial unease in her community, as people face new challenges like higher gas prices.
The couple recently moved into her parents’ home. They’re starting to consider whether they should rent their house, at least for now.
“Getting some of the mortgage paid is better than not getting any of it paid at all,” she says.
There hasn’t been much good news out of the U.S. residential real estate market for a long time. This week wasn’t any different. The National Association of Realtors said that sales of existing single-family homes and condominiums fell by 1.2% in October. The median price of a home sold dropped to $207,800, a decline of 5.1% from a year ago. That’s the biggest year-over-year price drop since data collection began in 1968.
In the West, where the Cardins live, the median price of $318,200 for an existing home was down 6.9% from October 2006.
Despite deepening housing problems, plenty of people still need to sell their homes right now. Offloading a property in a down market presents unique challenges and problems, but real estate agents do offer up some smart tricks of the trade for frustrated sellers. There are simple strategies that can help move a house, even during a real estate bust.
The first step for the seller, experts say, is to hire a competent, first-rate agent.
“Some sellers feel they are saving money by not hiring an agent and thus not having to pay commission,” says Courtney Charney, a realtor with Alain Pinel Realtors in Northern California. “However, agents offer valuable advice and insight as well as marketing savvy that will serve you well in selling your home.”
Charney adds that prospective buyers are drawn to homes that are professionally marketed and appear to offer a fair market value.
“A sign on the lawn that reads ‘For Sale By Owner’ is not sending the message you want,” she says.
Ideally, the agent should have worked through a down market in the past so that she understands the challenges posed by such a business environment. Also, if possible, it is best if the agent specializes in the seller’s neighborhood so that he or she has expertise in the area.
To find the most appropriate agent, try checking out the local newspaper and see what agents have consistently advertised properties in your community, says Catherine Adams, an associate broker with Windermere real estate company in Seattle.
“They are the ones with inventory,” says Adams, a 30-year veteran of the real estate business. “They are making an investment in being an expert in your area.” Adams says another way to find an experienced agent with solid knowledge of the community is to drive around the neighborhood and see which ones have the most signs up advertising properties.
After tracking down the best representation, the seller and agent need to figure out the right price. “One of the primary responsibilities of your realtor is to assist you in pricing your home,” says Charney. “A realtor should provide you with comparable sales in your neighborhood, as well as a realistic asking price for your home.”
Charney says sellers shouldn’t be afraid to reduce the price, painful as that may sound.
“Reducing the price can attract new interest in your home and a whole new set of buyers in that new price range,” she says.
Charney recently represented Ivan Brockman, an investment banker at Citigroup (nyse: C ), as he sold his home.
Brockman owned a four-bedroom, three-bath, 3,200-square-foot house in Menlo Park, Calif. With three young children, ages 8, 6 and 2, Brockman and his wife decided it was time to move to a bigger space.
They put their house on the market for $2.395 million in August.
“I realized that was a bit high but I didn’t want to take too much off the table before I had to,” Brockman says. “My hope was that it would sell quickly. We loved that house and thought it was in great condition. So we had hopes. But I also knew it would be hard. It was a week before school was starting. People were going away. I realized that the ideal time was to wait. But we didn’t.”
The house sat on the market for three weeks. At that point, Charney urged the family to consider reducing the price. Brockman says that was tough advice to take.
“I don’t like to lose any negotiation and I don’t like to give up if I don’t have to,” he says, “but we were in a fortunate position. We could swing it financially.” So Brockman relented, agreeing to lower the price by $100,000. That price point was enough to lure in a new, interested party. “It was a fair price,” he says of the final transaction.
In addition to settling on the right representation and price point, it’s equally critical to stage the property appropriately, agents say.
Stacey Gero-Kanbar, a director at Brown Harris Stevens in New York City, says that the seller needs to work hard to present the property at its best.
“You need that property to look as good as it can,” Gero-Kanbar says. “Don’t let people come in and just imagine what the home could look like. People say they can imagine it. But they can’t. Don’t force them to. Have them come in and fall in love with the space.”
An important part of the staging process, agents argue, is clearing out clutter, keeping the house smelling pleasant during open houses (some suggest baking cookies in the kitchen or burning scented candles) and generally maintaining a very neat, well kept home.
Sometimes, presenting such a home is hard, especially for those with young children. So parents need to get creative. The Brockmans, for example, have two little girls whose bedrooms weren’t always so tidy. So they decided every night was a camp-out.
“We set up Aero beds and they slept in the den upstairs,” Brockman says. “It was a pain. But it allowed us to have an efficient process so that the house was always ready to be shown.”
Marketing the home effectively is also key, agents say. It’s important for sellers to always figure out who the most likely buyers are for their property.
“Know the market you’re selling to,” says Adams. “I believe in profiling the buyer. Target a specific group. People will respond to marketing if it speaks to them. People don’t respond as well to generic advertisements.”
Adams put her theory to use when she came to represent a very unique house in Broadview, Wash. The one-level, 7,500-square-foot home had a commanding view of Puget Sound, complete with patio and infinity pool. But the owner, a commercial contractor, had built the house with massive amounts of concrete and steel.
“The walls were 12 inches thick of poured concrete,” Adams says. “This place wasn’t going anywhere.”
The house sat on the market for two years. Adams was the third agent from the third company to list the property. Rather than try and market the home to the general public, Adams instead stopped and considered what segment of the market would be most curious about such a one-of-a-kind house.
“Anybody who owned a construction company or electrical company would appreciate how much work went into building that house,” Adams said. “These are people aren’t necessarily interested in aesthetics. They’re interested in how things are built.”
So Adams had a series of postcards designed that showed off different areas of the house like the kitchen, pool and living room. Then she sent the postcards to 17 people who worked in the construction industry and lived nearby.
One of those postcards made it to just the right prospective buyer: an electrical contractor ended up grabbing the property.
Finally, real estate agents also urge clients to consider offering incentives to prospective buyers. That could include paying some or all of the closing costs, or throwing in some of the high-tech toys decorating the home, like the plasma TV or stereo system. Some sellers even try luring in buyers with a generous perk, such as a vacation package or new car.
Even when every trick is tried, and the property is perfectly priced and presented, the house still might not move. If that’s the case, renting is an alternative. But Catherine Adams urges sellers to first consider the amount of cash it will take to upgrade the house once the tenants leave.
“Renting is a viable option,” Adams says. “But is it enough to cover the costs to put the house back on the market? Because, once the tenants move out, you will need to clean and paint again. Otherwise, if you don’t, you will diminish the asset.”
But renting her home is one decision that Doreen Cardin and her husband are mulling over. Moving back in with her folks on their five-acre property has been a stressful and a tough adjustment. But she stays optimistic.
“I’m still positive,” she says. “I think, when spring comes, the market will change. There are some real deals out there right now. Houses are a deal compared to what they have been. That will motivate people, I hope.”
