Selling in a Depressed Housing Market
Selling in a Depressed Housing Market
By Joe DiPaola
California Sellers: the housing boom is over. This is a Buyer's Market. You must be realistic in your expectations. You must be prepared for a difficult selling process.
The market focus is price. Correctly pricing is the most critical step now to selling your house. And that price is no longer based on your estimate of value---it is based on Buyer's estimate of value. And, what you "need" to net out of a sale bears little or no relationship to whether it will sell.
If you want to sell your house, there are several steps that you are going to have to take which you will not like. Be prepared to take them.
1. Price to beat your competition. Do a radius search of all active listings within a certain radius (0.25 or 0.5 miles) of your house. That is your competition. The larger the inventory of active listings within that radius, then the lower your price will have to be to attract Buyers. For example, if there are 15 homes within that radius which approximate the features and specs of your home, you will need to be priced among the 3-5 lowest to get meaningful Buyer traffic. Your home needs to offer more, and be priced less, than most if not all of your competition. It's about Buyers now--it's not about you.
2. Stay ahead of your competition when it comes to price. Watch what the competition is doing. Your price can get stale, and you won't know it unless you regularly check the competition. If price reductions by your competition take prices to new levels that are significantly lower that yours, then your Buyer traffic will disappear. You do not necessarily have to reduce your price to match the first big reduction. But if 25-30% of your competition reduces price, you need to reduce to stay competitive.
3. Offer concessions/credits. Most lenders will allow Sellers to offer up to 3% to Buyers at COE as credits for things like repairs, improvements, and/or non-recurring closing costs. Offer them. There are not as many Buyers in the market, and some of those Buyers may need closing assistance.
4. Lower your expectations with respect to Buyers. Buyers will be less qualified, offer less down payment, and demand more from Sellers. Be prepared for that. Do not automatically reject marginal buyers - instead, work with a marginal Buyer to help him/her qualify and purchase. Do not automatically reject contingent sales offers--instead, work with a contingent Buyer to give him/her an opportunity to sell and remove the contingency. Margiinal Buyers and contingent Buyers may ironically become "good" Buyers---because they are likely to try hard to suceed in the purchase, less likely to demand Seller concessions during escrow, and less likely to jump from escrow-to-escrow.
5. Except for painting, clean-up, basic repairs, and staging, do not spend money on alterations or additions. If you are getting ready to sell, make sure that your home is staged properly, is clean and presentable, and is freshly painted. But now is not the time to make alterations or additions, or to spend money on improvements that you always dreamed of making to your home. It's better to give Buyers a credit at close of escrow (COE), or to drop the price the equivalent amount.
6. Be prepared to make concessions during escrow. In a Buyer's Market, Buyers are much more likely to demand repairs or other concessions during escrow. Be prepared to negotiate, and to make repairs or give a credit.
7. Use a discount (1-1.5%), full-service realtor as your listing broker. While I am a discount broker, I am not telling you to use my service specifically. What I *am* telling you is that many times there is no difference in quality between a discount full-service broker and a traditional broker. The only difference is price. So, save yourself some commission money on the listing side.
8. Don't be desperate; don't buy into the notion that only the large, traditional brokerages have Buyers. If a large, traditional brokerage tells you that they have Buyers, and that they only show Buyers their own listings, then they have broken the law several ways. First, they have breached their fiduciary duty to their Buyers (if they even have any). Second, they have violated Department of Real Estate (DRE) rules. Third, they have committed a violation of the California Business and Professions Code. Brokers have a statutory and common law duty to show Buyers all possible listings which might fit the Buyer's criteria. Brokers who use improper and illegal tactics to trap Sellers into listing with them are using a "pocket listing" strategy to try to "double-end" the deal. Remember, in a down-turning market, brokers have less sales, too---so they get more desperate to "double-end" each sale. Large, traditional brokers have certain things to offer Sellers---but use of illegal and improper tactics is not one of them.
9. Offer a healthy (2.5 to 3%) co-operating broker commission. Now is NOT the time to try to save on the co-operating (Buyer's) broker commission. While I recommend that you save money on the listing (Seller's) broker side, I do not recommend that you cut the co-operating (Buyer's) broker commission. You need Buyers---and you want to encourage agents to bring them to you. Cutting the co-operating broker commission will only hurt your chances. Brokers are not supposed to look at the co-operating broker commission rate, and are supposed to show Buyers all properties that fit their buying criteria. But the sad reality is that some agents will steer Buyers away from listings where the co-operating broker rate is low, because it means less money for them.
In otherwords, I recommend using a discount, full-service broker on the listing (Seller's) side, but to NOT cut the co-operating (Buyer's) broker commission.
10. If given a choice, close escrow in the shortest time reasonably possible (i.e. 30 days) . If you have a 60 or 90 day escrow, then that's 60 or 90 days during which prices can drop further, and during which Buyer can have a change of heart and try to jump escrow.
11. Be patient--your house will be on the market for quite a while. The average selling time is no longer 7-10 days---it is now 45-60 days, and getting longer. It will take patience and nerves of steel on your part to get through the process.
12. Don't argue with Buyers over little things. Don't argue about little things with Buyers--that's being penny-wise but pound-foolish.
13. Don't waste your money on newspaper ads or special promotions. Make sure that your property is correctly listed on the MLS, and that the listing is also populating to MLS secondary and IDX sites with full address. Put your listing on free classified internet sites with full address (Craigslist, Oodle, Trulia, etc.). But don't spend money on traditional advertising (newspapers, magazines, etc.). Instead, price a little lower--every little bit helps.
14. If you are thinking about re-financing, then do so before you list. Some lenders will not re-finance a property that is currently being offered for sale on the MLS. Even if a lender will re-finance while the property is actively listed, doing so just "invites" a pre-payment penalty from the lender. So re-finance before you list. And, make sure that you have no pre-payment penalty.
If you are a prospective California Seller and would like further help or advice free of charge, then you can call me at (707) 693-0400. Please note that I respect other agents' listings, and pursuant to Department of Real Estate rules I will not talk to a Seller in an existing listing contract.
1Listing.com is a California fixed fee Multiple Listing Service (MLS) listing and marketing website for California For Sale By Owner (FSBO) sellers. 1Listing charges only $299 for a listing on the MLS. Visit us at www.1Listing.com or call (707) 693-0100.
Labels: For Sale By Owner, FSBO, Real Estate
0 Comments:
Post a Comment
<< Home