How to make a home sale in the midst of a meltdown

Realistic pricing, cosmetic improvements, and greater patience are needed for today's sellers.

Andrea and Travis Murray, a couple in their early 30s, live in Akron, Ohio with their three children and a fourth due in May. Their family is relocating to Denver, where Mr. Murray will soon assume a position at a hospital.

As a result of this transition, the Murrays are experiencing the full heat of the national housing meltdown, putting their home on the market at a time when buyers are reluctant. For families such as the Murrays, who for personal or career reasons will be selling in the next 12 months, a well-crafted strategy and knowledge of the market is vital.

A recent survey by the Conference Board on consumer confidence indicated that the number of Americans planning to buy a house in the next six months is at the lowest level since 1994.

The Murrays bought into the "American Dream" in 2003, believing that homeownership was the foundation of financial security. But housing, Americans' primary asset, has suffered a powerful blow as prices have plummeted. Homeowners have witnessed losses of value on which many retirement dreams are built. Home prices dropped over 13 percent on average in 2007 in all but a few markets – the largest annual drop since the early 1980s, with sales dropping almost 27 percent. In our housing-driven economy, Americans have lost over $2 trillion in home equity. Two million home­owners now risk foreclosure. According to housing economists, the housing meltdown will continue through 2009, with an expected additional 10 to 25 percent drop in values in many cities.

For homeowners who do not need to sell in the next five to seven years, the consequences may be limited to accepting less than double-digit appreciation on a home investment. While retirement finances may need to be recalculated as housing appreciation slows, most homeowners will not suffer principal losses.

But people faced with selling their home now face an uphill battle to break even. Unlike a poor stock investment that can be sold quickly at a loss, selling a home in a sinking housing market demands a more complex strategy, extended time, and tough emotional decisions.

The Murrays decided, after consulting with their real estate broker, to be realistic in pricing their home. They are not expecting to make any money on their five-year ownership, but hope to recover their mortgage and closing costs. They have decided to sell, rather than rent their home, as they are not interested in a long-distance leasing arrangement and plan to utilize a portion of their home equity to repay outstanding medical school loans. The family has set a flexible timetable for moving. They have already begun looking in a suburb of Denver, planning initially to rent in a good school district.

"We are surprised by how affordable rents are for a home larger than what we currently have," Mrs. Murray says. "This is a good time to be a renter – we will save money, upgrade our living space, and wait out the housing downturn."

Not panicked by today's market conditions, the Murrays incorporated three savvy decisions:

•Realistically pricing their house to reflect today's declining values. The Murrays educated themselves to market conditions through, an online real estate service; their Realtor's multiple-listing service, reviewing latest sales data; and visits to neighborhood open houses. Real-estate prices are local – know the price-per-square foot value of properties in your market area and, if necessary, engage a professional for a prelisting appraisal.

•Selectively undertaking cosmetic improvements to attract buyers. At the minimum, Realtors urge home sellers to clean carpets/drapes, paint outside trim and reduce the pileup of unused items in the garage and basement. Mrs. Murray understands, "In a more competitive market, there is a fine line between costly repairs and attracting buyers. We are focusing on maintenance items that would be addressed in a home inspection report prior to closing escrow, such as recaulking our bathtubs."

•Extending the time period to sell their home. In an appreciating housing cycle, the average time on the market was four to six weeks. In today's weak housing environment, time on the market has extended to three months or longer, depending on the number of for-sale properties, the condition of a home, and local foreclosure inventory. The Murrays' Realtor expects a sale within 90 to 120 days.

By being informed of real-estate values, both in their current market and in their new neighborhood, the Murrays are assuring that they will be well positioned for a future home purchase. They are smart sellers who will continue to revise their strategy as market conditions change.

Kathleen Connell, PhD, is creator of

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