Sellers – Wrong time to sell

April 8, 2008 at 3:27 pm Leave a comment

If you are considering selling your home you should ask yourself a few questions and then put off selling if at all possible.  Why would a real estate broker advise anyone not to sell?  All the indicators are negative for sellers at this time.  The number of homes available to buyers is running 10 to 15 homes per qualified buyer and the days on market before a home sells increases everyday.  Most listing services have an inventory to 8 months to one year.  Many homes have been on the market for over 6 months and they will be on the market for another 6 months if they don’t lower the asking price by 10% to 20%.

 

Most qualified buyers are not buying because they feel housing prices will fall further.  I am working with two buyers who will not even make a low offer on a home because they are afraid they may suffer a major loss if the real estate market crashes.  They don’t want to buy a home for $400,000 and find out it is worth $350,000 a year later.  They maybe right.  They are looking for a steal or they will not make an offer.  The credit crisis has eliminated many potential buyers with more restrictive qualifications and there is no 100% financing that makes any sense.  Appraisers after over appraising thousands of homes are now playing by the rules and with homes over priced the deals may die because they just won’t appraise at the selling price.

 

Homes in the King and Snohomish County area are still too expensive and sellers are not being realistic about what their home is worth in this market.  Until all these factors force the prices down sellers will have a very difficult time selling their homes. 

 

The traditional reasons for selling are loss of job, divorce, death in the family, relocation, a major reduction in income, need a larger home and need a smaller home.  There are certainly other reasons, but these are at the top of the list.

 

If there is anyway to stay in your home for another year or so you should consider doing this.  If you can’t you should consider renting your home and waiting to sell.  Renting is something many can’t afford, but if your mortgage payments are low enough to allow you to rent and cover the mortgage payments with a little left over for miscellaneous expenses you should consider this.  Even if there is a negative cash flow you may want to consider this if you can afford to carry the payments for a year or so. 

 

I just met with an older man who can no longer afford his monthly mortgage payments and he wants to sell.  His home is not in good shape and needs up-dating and repair.  He would not be able to get much for the home if he sells now.    We discussed his options and he has a friend who could move into his lower floor and pay rent.  He is also asking his fellow workers if they know anyone who wants to rent a bedroom and full bath with their own small family room; they would have to share his kitchen.  He would be far better off if he can make this work and wait for the market to turn around.

 

For those who have run out of room and need more space because they have children, you may want to consider adding a room or two to your existing home if possible.  Builders are looking for this kind of work and they may make you a great deal on an addition?  This happened to me 20 years ago when my second son was born.  Adding two rooms turned out great because when we sold we got all our money back and then some for the addition.  The real estate market was better then, but when we looked at selling and buying a bigger home or expanding our existing home, the cost was actually less to add two rooms when we figured the cost of selling and moving. 

 

If you do decide to sell be realistic about pricing.  Ask several agents to give you a market analysis of your homes value.  Take a long hard look at the list of competing homes, those currently for sale.  Look at them using the local MLS on your PC and compare them to yours objectively.  If the competing homes have been remodeled and your home hasn’t, you need to be priced much lower.  If they are larger, you need to be priced much lower, etc.  All agents are honest and hard working, but some agents are afraid of offending people with a low market valuation.  If you have friends ask them to look at the competing homes on line and then compare your home with these homes and give you their opinion as to the comparative value of your home.  In this market your price is the single biggest factor in determining if your home will sell.

 

Finally, look at all your costs of sale.  Included in these are real estate fees (4% to 6%), excise taxes, pro-rations and title insurance and escrow fees.  You can get a discount if you use the same company for both title and escrow.  You may want to use a broker who charges less in real estate fees.  In this market you should ask for a discount even if you are using a friend as your agent.  There are many options here.  The average cost to sell is about 10% of the purchase price when you include excise taxes, pro-rations, real estate fees and title and escrow.  If you can reduce these costs by 2% to 3% of the purchase price (that is 20% to 30% of your selling costs) it represents a major cash savings.  If you don’t understand any of this, drop me an email and I’ll send you a quick overview of sellers closing costs and a short list of companies that offer discounts. 

 

Knowledge is power – sellers take the time to get knowledgeable and look at all your options before you decide to sell in this market.   If you can wait don’t sell now.

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