As the headlines have probably told you, it is no longer a seller's market out there in many parts of the country. The tightening of the credit markets, the fall-out from the sub prime mortgage mess and the increasing difficulty for potential home buyers to afford homes in their area have put a major crimp on demand in many areas. In certain markets such as Los Angeles, existing home transactions have slowed to a fraction of where the market was just 6 months earlier. Given these conditions, home sellers need to maintain both a dose of reality and humility with respect to their expectations when they want to put their home on the market.
The good news is that real estate is and has always been a very cyclical part of the U.S economy. Long-term trends in population bode well for demand and current U.S. homeownership rates are at all-time highs. However, in the short-term, it will most likely take longer to market and sell your home and your eventual realized sales price may well end up being less than you had hoped for. We suggest that as you begin to think about selling your home, you spend some time really getting a sense of what is happening in your market area. You could live in a particular neighborhood that has limited supply and high demand and even in a cool market could find yourself achieving a quick sale at a great price. Alternatively, your property could possess unique characteristics such as a large lot size, proximity to a beach or lakefront or specific amenities such as a sunroom or finished basement that clearly distinguishes your property from others for sale in your area and can create some buzz and excitement among potential buyers.
One of the most powerful and sometimes underappreciated factors in real estate transactions is the theory of substitution. This theory holds that the ultimate realized price on any real estate will be based on the prices of other similar properties on the market. If two homes with similar features have a substantial difference in price, it will be hard for the higher price home to sell while the lower priced home remains available on the market. This substitution effect is especially exaggerated in markets that have seen high level of new home construction. One such market is Indianapolis where many existing homes have sat on the market for months as home buyers have been able to get better features in newer homes for prices below the asking prices on existing homes. The better sense you can get for what is available in your market area that is comparable to your home, the more comfortable you will be in setting your place.
To help increase the chances of selling your home in a slower market, it is important that you make your home as marketable as possible. This can be done through focusing on the items that create the first impression in the buyer's mind when they see the property. Some of the key first impression items to consider include:
- Landscaping in and around the front of the property- fresh flowers, plants, etc.
- Welcome mats - inside and outside of the front door
- External paint and trim
- External lighting
- Window treatments
- Organization of the garage and other external areas
- Impact of initial entry into property - walls, furniture, floors
Working with a knowledgeable real estate professional who understands the needs of local buyers in your market becomes increasingly important in a slower market, especially if you notice that your property is similar to others that are on the market in your neighborhood. When selecting a Realtor, be sure to understand what their marketing plan is for your property. You should be cautious of a Realtor that suggests a selling price that is far higher than other Realtors that you meet with. The selling price will be a combination of your home and its features, the other housing options in your market and the marketing prowess and negotiating skills of your Realtor. If a Realtor has unique marketing channels or strategies that they can bring to your property, this can make a big difference in drawing in buyers and hopefully decreasing the time on the market for your home and increasing the eventual selling price.
You may need to budget some additional dollars to making quick upgrades to the property that can help the marketability of your home. Depending on your time frame for having to sell the property, these small improvements can make a big difference in helping a Realtor successfully market your property.
Lastly, do not panic just because the housing market in your area is slowing down. If you work with a strong Realtor and follow their suggestions to give your property an advantage in your marketplace, you will find the right buyer for your home and be ready to move to your new home before you know it.
