How to Sell Your Home in the Slow Market?
It has been hard to miss the run up in real estate profits that have
taken place over the last several years. Many circumstances, including
record low interest rates, a robust economy, new mortgage products and
rapid growth, seem to have converged to create a perfect world for those
selling homes. Now that the rate of home appreciation has begun to slow,
it can be much more of a challenge to sell your home for an acceptable
price.
Part of this challenge is psychological. Even though the seller may have
a substantial profit in the home, it can be difficult to sell when a few
months earlier the home would have sold for much more. Therefore, it is
important for every seller to take a step back and evaluate the true
value of the home and the surrounding area. In a more realistic world,
that mobile home in California probably never was worth $1.2 million,
even if the trailer park features swimming pools and tennis courts.
Those selling into today's more challenging market should sit down and
calculate just how much they have invested in the home, and how much
equity has been accumulated. Even those who purchased their homes
recently are likely to have experienced good gains in the recent run up,
and it is very unlikely that the property is worth less than it was when
purchased.
Sitting around with an unsold home on the market can certainly be a
frustrating experience, especially if the home seller has already
purchased a new home. It is important not to panic, however, and not to
drop the price precipitously. A dramatic drop in price is a big red flag
to buyers, and it may make the home less likely to sell instead of more
likely.
Often, the best way to sell a home more quickly in a less than stellar
market is to adjust the terms of the sale instead of the price. While it
may sometimes be necessary to adjust the asking price downward, or to
negotiate a lower price with the buyer, sometimes offering help with
closing costs, or an extended settlement date, will go a lot further.
When deciding which terms of the sale to change, it is important to
remember that the recent run up in home prices has left many potential
buyers stretched and unable to afford the traditional 20%, or even the
more generous 10%, down payment. Often sellers who offer a so-called
"seller contribution" have better luck selling their homes than those
who simply lower the price.
For instance, a seller may offer to help pay some of the closing costs
of the sale, thus freeing up more of the buyer's money for the required
down payment. Sellers have been using this strategy for years in down
markets, and it may be time to bring this tactic out of storage.
Most lenders will allow such seller contributions and not look at them
as price reductions. This distinction is an important one, since the
mortgage will be written as a percentage of the lesser of the sale price
or appraised value. Many lenders will allow the seller of the home to
make a three percent seller contribution, while others are more generous
and will allow a seller concession of six percent or even higher.
Real estate brokers will have much more information on how to negotiate
and write such a seller concession in lieu of a decrease in price. As
these agreements become more and more popular, more home buyers are
looking at these types of financing options. Since the down payment is a
deal breaker on so many homes, it makes a lot of sense to engage in a
negotiation that allows the buyers to have more cash in their hands at
the closing. For more tips on how to sell your house in the slow market,
you can read this related article on
selling your house fast here.
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