Homeowners Guide for Motivated Sellers
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Some signs indicate the housing market may be becoming more balanced for the first time in several years. Home price acceleration slowed in 2018, as interest rates and inventory increased.
However, in competitive markets, sellers may still have the advantage; home prices will likely continue to increase at a relatively rapid pace in these locations, which include many of the top metro areas in the U.S, such as Denver, Los Angeles and Portland, Ore.
Homeowners in any area who wish to sell quickly, and at the best prices, will need to focus on three key areas: marketing, pricing and home availability.
How did the housing market change in 2018, and what do sellers need to know now?
The housing market slackened during the fall and winter of 2018, as fewer purchases were made and price increases slowed. As of November 2018, the monthly supply of homes was one point higher than in November 2017, according to the St. Louis Fed (calculated based on Census and U.S. Department of Housing and Urban Development (HUD) data.) This indicates an increase in inventory — generally an advantage for buyers. After steadily increasing in 2018, mortgage rates have followed a downward trend since November. trend. As of late February, rates for 30-year, fixed mortgages averaged 4.35% after falling for three consecutive weeks, according to the St. Louis Fed.
Nationally, the Federal Reserve increased interest rates four times in 2018. While the Fed doesn’t actually set mortgage rates, raising the federal funds rate can affect home loans. The average rate for a 30-year, fixed mortgage at the end of 2017 was 3.99%. In 2018, it reached a high of 4.94%. In turn, we saw a slowdown in mortgage loans, according to the Consumer Financial Protection Bureau, likely because some consumers were more reluctant to take out loans with higher interest. It should be noted that, on a historical basis, mortgage rates are still quite low — and after hitting their 2018 peak in November, rates began to trend downward again.
Existing home sales are also predicted to decline by 2%, according to the National Association of Realtors, but demand still may outstrip inventory in many areas.
Lauren Schellhase, a Phoenix-area realtor, said, “I don’t feel this is the market where you can shoot for the stars with your list price. More and more people have equity now than ever before.”
Schellhase predicts that inventory will rise as people look to sell while the market is up. “If your home is priced well above everyone else’s, they’ll just go right on to the next one,” she said.
If you price your home competitively, you may still be able to sell relatively quickly. With that said, you should manage your expectations for receiving multiple offers unless your home is priced below market value.
How can motivated sellers find buyers?
First, you should consider working with a professional. If you’re trying to sell your home as soon as possible, going the cumbersome and labor-intensive “For Sale by Owner” route is likely not for you.
Megan Brenn-White, a realtor at Halter Associates Realty in New York, said her No. 1 piece of advice to sellers is to price the home according to its market value. As a seller, she said, the best chance you have at receiving an offer close to your asking price is in the very first week it’s on the market.
“The longer the home is on the market, the less likely it is to get your asking price,” Brenn-White said. This means you should eliminate emotion and sentimental value from your pricing strategy.
That may be easier said than done. Fortunately, if you work with an agent who knows the area, understands the competition and advises you on your pricing, you may already be one step ahead.
Of course, some aspects of finding a buyer are beyond your control. For one, noted Nick Boniakowski, market manager for Redfin’s New York/New Jersey region, sellers in metro areas such as New York have an advantage of a large pool of motivated buyers because of limited inventory. Sellers in these locations may still see multiple offers, some above asking price and often all in cash. In areas with less competition and more inventory, buyers will have more of an advantage.
To find a motivated buyer, a seller should indicate they’re motivated and possibly willing to negotiate. Availability for showings and open houses is a key component, as it gives as many buyers as possible a chance to view the home. It also pays to have a strategy in place before you even put your house up for sale.
For example, Brenn-White said, sellers could consider setting a quota and pricing strategy with their agents, such as, “If we have 10 showings and zero offers, we’re going to drop [the price] by X amount.” That may help keep emotions out of the process and can prevent a house from lingering on the market at too high of a price.
How can motivated sellers get the best price for their home if they’re looking to sell quickly?
You have to put yourself in the shoes of your buyers. What would make you excited to even look at a home, let alone buy it?
For starters, you don’t want to scare away motivated sellers by setting your home price too high. Buyers may then wonder what’s wrong with the house if it’s been on the market longer than comparable properties.
Next, you’ll need to think of the whole housing package and how you’re presenting it. To even get buyers interested in your home, you have to make your listing as attractive as possible — that means featuring professional-grade photography and a detailed description with as much information as possible.
“The first showing is when people look at it on Instagram or Zillow,” Brenn-White said.
“I spend a lot of time trying to convince buyers to look at properties that don’t have good photos,” she added.
Most buyers scroll quickly through home listings; you want yours to be eye-catching and reflect your home at its best.
You also may consider staging your home for showings and open houses.
Another consideration is knocking out small repairs and affordable upgrades before even putting your home on the market. If you know your home is due for a fresh coat of paint, it may make more financial sense to refresh the paint than to list the home at a lower price and hope a buyer realizes the price reflects that consideration. You might even want to pay for a home inspection to get a running start on any issues that may be raised during negotiations.
If the property is used as a short-term rental, whether on Airbnb or another platform, you can include a transfer of the associated account (provided it has positive ratings and reviews) as a perk to buyers.
In this case, “You have to think of the property as a commercial investment, too,” Brenn-White advised. She recommends including a list of the team, such as who changes the property over, your handyman and more, to show buyers who want to have an Airbnb-friendly home that it is a turnkey offering.
If buyers aren’t interested, what else can motivated sellers do now to show they’re willing to work with buyers or negotiate?
To start, tell your agent you’re motivated to sell. Some multiple-service listings have a section called “agent notes,” Brenn-White explained. That’s where an agent might write “motivated seller” to indicate to other agents who might show the home that the seller is looking to sell quickly.
But the key way to signal you want to sell is to drop your asking price. In general, you have control over two things as a seller: price and how the home is presented. Boniakowski advises sellers to consider “well-timed price reductions, closing cost concessions or offering to pay down the mortgage as part of the price.”
He continued, “The easier you can make it to close, the more likely the buyer is to move forward.”
One potentially helpful strategy is to request that your agent asks for feedback from open house attendees. Perhaps a sticking point is the 20-year-old roof, the popcorn ceilings or the unfinished basement. If enough people voice concerns about one aspect of the property, you may consider either fixing the issue or reducing the price to reflect any necessary upgrades.
What is expected to change for both sellers and buyers in 2019?
With mortgage rates fluctuating and home price growth slowing overall, 2019 may see a slowdown in the housing market compared to recent years. That’s not to say we’re in a significant cooling-off period; but, as Schellhase noted about the Phoenix area, it’s more balanced between buyers and sellers now, as the relative buying frenzy of recent years has tapered. Buyers will likely be choosier with offers, and homeowners may see slower price increases. Houses for sale may also spend a longer time on the market due to increasing inventory in certain areas.