14 Aug HOW TO PREPARE, PRICE AND SELL YOUR HOME IN A BUYERS MARKET
August 14, 2020 – The way that we live in our home compared to the how we sell our home are two completely different propositions. This should be in the forefront of your mind when selling your home.
What is a buyer’s market
A buyer’s market exists when the number or supply of homes for sale is more than the demand or number of buyers in the market. In a healthy real estate market, the average days on the market to sell should be less than 180 days.
As an example, in Miami we currently have 3,793 luxury condos priced at $1M+ for sale. However, over the past 6 months there has been an average 108 closed sales per month. Therefore, it is clearly a buyer’s market in Miami luxury condos given that the current absorption rate (3,793/108) is 35 months.
What to expect when selling in a buyers market
When inventory levels are high and buyers have many options, it can be a challenge to find that sweet spot that separates your property from the rest of the pack. If you don’t have a compelling offering, you will sit on the market and suffer with multiple price cuts.
Even if you are priced to the market you can expect some buyers to submit lowball offers. This is just the nature of the beast in a buyer’s market. Additionally, always keep in the back of your mind that the first offer is often the strongest.
How to prepare to sell in a competitive market
Getting buyers through the door is the first challenge and your home needs to look its pure best. Therefore, how you present the property at the time you go live to the general public is critical to your success. You will not receive attention if your space, rooms, furniture and furnishings do not appear up to date.
There are a number of tools and improvements that one should make prior to going to market. While some of these may require time and further investment, they should more than pay off in the final results. The most important initial steps to take include:
- Declutter every room, closets, and storage space
- Deep cleaning and pressure wash the exterior, walkways and roof if necessary
- Professional home staging to feature the indoor & outdoor entertainment space
- Put away personal items, such as framed photos, keepsakes, trinkets etc
- Improve your curb appeal by tidying up, remove debris, plant new flowers etc
- Take care of any deferred maintenance and repair projects
Take care of those pesky repairs and maintenance issues
Before going to market take care of any deferred maintenance and repair issues. Pay attention to any cosmetic issues that may give the impression that the home has not been well maintained and cared for.
In particular, pay attention to interior and exterior painting, plumbing, roofing, windows, flooring, fixtures, air conditioning, heating or pest issues. If you do not address them before going to market then it may easily turn off potential buyers or come up during negotiations and the inspection period. In some cases, they may even be a deal killer if they are major in nature and were not disclosed prior to going to contract.
I have experienced many deal killers in my career from sellers not disclosing material and obvious facts to surprising appraisal results. Some common examples include the presence or attempt to conceal mold, previous water damage, termite infestation, illegal additions and unpermitted improvements.
Remember, it will almost always be more costly and time consuming to try and “figure things out later”.
Consider updating to attract the right buyers
If you are looking to command top dollar in your market and have the funds available, then making certain improvements that today’s buyers are looking for will make your home stand out. Outside of making a major investment such as a new pool, there are some clear trends that will set you apart, including:
- Private outdoor space and/or covered porch
- Energy efficient and smart home features
- Air purification system
- Private home office or Zoom room
- Natural light and open space
- Storage space, large pantry and walk-in closets
- Variety of sitting areas
- In-home gym or workout room
- Finished and attached garage
- Game or play room
How to competitively price your home
Pricing your home in a buyer’s market can be intimidating and complex. If the market is slow and there are few recent comparable sales in your building or local area, then how do accurately value your home? If you price too high and out of the market, you will not receive any calls or traffic. Also, if you are too aggressive on price, you may leave money on the table.
What defines the “fair market value” of your home? The widely applied definition of fair market value reads as follows: The fair market value is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing, and able to buy.
When pricing your home ensure that you clearly understand your competition, including any special incentives being offered and the superior and inferior attributes compared to your home. Consider your pricing strategy very carefully and discuss the different pricing scenarios in detail with your realtor BEFORE you go to market. You never want to be in a situation where you are trying to catch up and then forced to make multiple price cuts too early.
Standout with buyer incentives
In a buyer’s market, it is common for motivated sellers to offer incentives to buyers and real estate agents. Agents love to find a deal that delivers more value to clients and to make a few extra dollars while doing so. The following are some tried and true seller incentive strategies:
- Pay for buyer’s closing costs: As most buyers obtain a mortgage to purchase a home and often struggle with meeting down payments, offering to cover some or all of the closing costs can go far.
- Offer a home warranty or annual service plan: A major source of worry and objections are the typical costs of maintaining and keeping a home in good condition. Consider throwing in a home warranty that covers at least the basics.
- Pay for 6 or 12 months of HOA fees at closing: Condo or HOA monthly dues are a major factor and any financial help you can offer a buyer is in your favor.
- Offer broker incentives and bonuses: Offering a bonus to close by a certain date or meet a specific price will bring in foot traffic as more agents will show your property. Never underestimate the power of broker financial incentives. Look at current home builder or condo developer incentives in the area, they work.
- Offer owner financing: This strategy works well when you are looking to defer any capital gains, or if current mortgage qualifications are challenging. It can also be in the form of short term or bridge financing that balloons in two to five years. What if a potential buyer has to sell first in order to buy? Then this is a good solution.
- Pay loan discount points or fees: Offer to pay one or two discount points (1 or 2 percent of the loan amount) to reduce a buyers interest rate by one-eighth or one-quarter percent. This results in the a more attractive mortgage payment and reduced interest payments over the life of the loan.
Don’t let your ego muddy the pond
One of the most common pitfalls that we witness is when a seller attaches too much emotional value to their property when it comes time to sell. Remember, the investment that you make in preparing your home and devising a relevant pricing strategy is far less than making several price reductions later.
The bottom line is that it can be challenging to determine an appropriate pricing strategy and product offering in a buyer’s market. This is when you most need a local realtor expert to work with you.