From a financial standpoint, the pandemic was an idyllic time to sell a home. Available properties were ridiculously scarce -- so much so that when rare open houses occurred, wannabes lined up just to take a peek. What often followed were bidding battles pitting purchasers with “escalator clauses” against one another.
Demand is still greatly outstripping supply, especially for young adults itching to escape their rental units. Indeed, the National Association of Realtors estimates that the U.S. now confronts a 6-million-unit housing shortage. What’s changed suddenly is buyer financial power.
“As households pay much more for cars, clothing, food, gasoline and services, there are fewer dollars left over from each paycheck at a time when housing affordability is a growing challenge,” says George Ratiu, an economist for the home listing company Realtor.com.
An even more compelling factor affecting affordability is that mortgage rates have ascended dramatically of late.
“For a household with a $75,000 income, only 23% of homes on the market are affordable, down from 50% of inventory in 2018,” Ratiu estimates.
Another economist, Mark Zandi of Moody’s Analytics, says that due to the Federal Reserve’s attempts to tamp down inflation through higher interest rates, many purchasers have backed off for obvious financial reasons.
Of course, all is not lost for those who still intend to put their houses on the market during the remainder of 2022. In many areas, underlying demand remains intense, given that many young families have yet to obtain their first property.
Experienced real estate pros say homeowners are often the last to fully accept the pricing realities of a changing market.
Stacy Berman, a veteran real estate agent in the Washington, D.C., suburbs, tells the true tale of an investor in her area who’s “in denial” about the real market value of a small ranch-style house he bought to flip for a quick profit.
“This is not my listing. But it’s obvious to me this house is terribly overpriced, even after three price cuts,” Berman says.
Berman warns against the temptations of testing the market under current circumstances: "If you overprice, you’ll be the one who will get punished in the end. Your house will just sit unsold for a lengthy time while you pay your own mortgage and also cover your AC bills during these hot summer days.”
Here are a few pointers for sellers:
-- Pick an experienced agent for your listing.
Eric Tyson, a personal finance expert and co-author of “House Selling For Dummies,” says too many sellers take a casual approach when picking an agent. He notes that some make the mistake of hiring a relative, a friend or a young agent looking to get started.
“The underappreciated reality is that many sellers don’t distinguish between an average agent and one who’s highly qualified to manage their sale,” he says.
Tyson recommends that sellers seek an agent with experience handling various sorts of deals -- though within the sphere of their immediate location.
“It’s a big mistake to pick a person who doesn’t know your local ‘farm,’ which is what the pros call the area surrounding your property. Local agents are much more likely to pinpoint the right asking price,” he says.
-- Rule out unqualified prospects.
Sharp sellers are careful to check the financial standing of would-be purchasers.
Before accepting an offer, sellers should insist on seeing a genuine preapproval letter from a known lender. This should establish that the prospective buyers have had their credit checked, their employment confirmed and their assets verified.
In addition, prospects can be asked to supply other details about their creditworthiness, such as their credit scores. The most common of these, known as FICO scores, range from 300 to 850. The higher that number, the more likely are borrowers to get the loan they need to close the deal.
-- Take an early look into house flaws that could hinder your sale.
Even in high-demand markets, many purchasers exercise their right to a home inspection. And many use the process as leverage to renegotiate the deal.
Homeowners should never try to talk buyers out of a home inspection. But smart sellers will consider paying for their own inspection even before the property goes on the market.
“The person you hire for a pre-sale inspection is unlikely to find all the same small problems that the buyer’s inspector locates. But both should spot the really major problems, like a failing roof or electrical system,” Tyson says.
-- Try to avoid troublesome buyers.
Not all sellers can be choosy about the offer they select. But if you’re reasonably certain you’ll have more than one bid from which to pick, Tyson says you should seek to avoid cutting a deal with difficult people.
You may not have any direct dealings with your prospective bidders. But your listing agent or others might observe them when they visit your place. And their behavior can be very telling.
One telltale sign of difficult people is that they often make negative remarks when visiting a property. Though you’re likely to not be present for showings, your listing agent should learn of these unpleasant comments and pass them on to you.
By avoiding such prospects, you could spare yourself a lot of grief.
“If you’re lucky enough to get multiple bids, you can be pickier about the buyers you choose. If possible, resist troublesome folks who might nickel and dime you all the way to closing,” Tyson says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)