Missteps When Selling Home In Soft Market

Ray Martin on insurance you do and DON'T need - June 7, 2007, CBS Early Show segment
CBS/EARLY SHOW
The Early Show's resident money maven, Ray Martin, offers the second in his three-part series on home buying and selling in a slumping market — a walkthrough on the sellers' side.

Home Selling in a Buyers' Market

The supply of homes and condominiums continues to grow throughout the United States. Hopes that the 2007 spring and summer selling season will see a rebound are fading. Many experts have already declared this season "a bust," and say the hope of seeing any possible rebound is delayed until next year. Home prices are flat-to-declining in many areas, and a sudden tightening of lending standards is limiting the supply of potential buyers by preventing them from getting the loans they need.

It's been a long time since home sellers have faced these conditions. In fact, many are in uncharted waters.

Face the New Reality — It's a Buyers' Market

Homeowners looking to sell have a choice: sell now in the current market, or wait to sell later, when market conditions improve. Of course, the latter assumes they can wait. But if you are determined to sell, you need to forget about the real estate market of just two years ago and face the new reality in many regions: It's a buyers' market, and you will be competing with a growing supply of motivated sellers to get someone to buy your home.

When trying to sell in a buyers' market, two most important factors are price and condition, according to real estate pros. I would add — flexibility. Buyers know real estate prices ran up far too much during the last two years of the real estate boom, and just because you may have paid too much for your home, many buyers don't think they should have to pay to bail you out.

With all this in mind, here are some of the most common mistakes sellers make in a down market, along with ways to avoid them:

  • Pricing it too high: Real estate pros say that the key to selling a house is to "price it right." Setting the wrong asking price can cost you real money. In a buyers' market, it doesn't matter what you or your realtor think your house is worth; the only thing that matters is what a buyer thinks and is willing to offer. Sellers fear pricing too low and leaving money on the table, but there is little danger of doing this. If a home is priced too low, far below the competition, then you should receive multiple offers that will drive up the price to the fair market value.

    You don't want to over-price your house, because buyers will then ignore it and your listing will loose its freshness and appeal, not to mention the uncompensated effort of keeping the home spotless during the showings.

    Also, the "original listing price" and "current asking price" are on your home's Multiple Listing Service listing, and some buyers will see it as a sign that you have unreasonable expectations of what you can fetch for your home.

    Look at the listing for every comparable home that is or was listed in your neighborhood in the past six months. Compare similar properties, make adjustments for locations, age, upgrades and lot sizes, and come up with a range of values. Most buyers search the Internet and buy a home within 12 miles of their existing home — so use the Internet tools available in your area to see what the supply of homes for sale looks like near you. Also, if you are working with a realtor, don't choose to list with the one who suggests the highest listing price; rather, select a listing agent who can back up his or her proposal with the most facts, market research and experience.

    When setting the listing price for your house, use round numbers, in increments of $5,000. Most buyers use the Internet to search for a home. When searching by price, they typically search in increments of $5,000. So, listing at a price of $250,000 will turn up in more searches that listing at $249,900.

  • Making a poor first impression: Real estate pros often talk about "curb appeal." Homes with it sell more quickly and those without it can languish on the market longer, further eroding the price buyers are willing to pay. Realtors often comment on the number of homes that are put on the market with little or nothing done to improve their curb appeal. One put it this way, "Most buyers know the house is 'the one' when they see it the very first time. If they make a connection on the first showing, it's sold."

    For this reason, doing what it takes to get your house in selling shape is the second most important factor, after setting the correct price, if you want to get close to your asking price or sell as quickly as possible. Inexpensive things you can do to increase your home's curb appeal and help it show better include:

  • Sprucing up the yard, sweep the walk, mow the lawn, prune the shrubs, and clean up debris.
  • Clean the windows, floors, carpets, the kitchen, appliances, the bathroom, and even wash the windows.
  • Paint the front door, walls leading to entranceways, ceiling stains, cracked or chipping areas.
  • Fix or repair broken doorbell, leaky faucets, broken floor or counter tiles, door that don't close properly, and broken deck railings.
  • Organize all rooms, closets and the basement.
  • Set the stage by removing pets and litter box, lighting scented candles, playing background music, rearranging and removing excess furniture, even baking something to get the pleasant aroma from the oven!

    The industry term for doing this is "staging a house" and, as you can imagine, it goes far beyond decorating and cleaning. But doing this can result in selling your home more quickly and getting a higher price, according to pros who offer those services.

    If you don't have the time or would prefer to have someone trained and objective do this for you, ask your realtor to refer you to a professional home stager. Some realtors have earned the Accredited Staging Professional (ASP) designation and can do this for you. You can also learn more and locate a professional home stager at www.stagedhomes.com.

  • Not getting a pre-sale inspection: Sellers are strongly advised to consider getting a pre-sale home inspection, especially if their home is older or in need of repairs. This way, they can either use a clean home inspection report as a selling advantage, or take care of the repairs listed on the inspection report. Of course, make the repairs before listing the home, if possible, especially if they involve things that can be messy and unsightly, such as replacing the roof or removing an old fuel oil tank. But if you can't make the repairs, you can use the report to make estimates available to show potential buyers about the cost of repairs.
  • Not being flexible: In this market, buyers will expect to pay less than the asking price. They will be armed with the original list prices and final sales prices of comparable homes, and will know the price reductions other sellers are accepting. Many buyers may make a low-ball offer to see what your reaction is. Remember to keep emotions out of it — your objective is to sell the house and, if they are truly interested, there is a higher price they may be willing to pay. Don't simply reject their offer; instead, make a reasonable counter-offer and send the message that you want to work with them to close the gap between their offer and the price you need to get for the house.

    Also, ask the buyers or their realtor what information they used to determine the price they offered and why they want to buy your house. For example, say the buyers respond that they based their offer on comparable price per square footage for two other listings. If your house includes upgrades and a finished basement that the other listings don't have, include an explanation of the cost of your upgrades and the additional value per square foot with your counter-offer.