Size up the market before you list

With home prices back where they were ten years ago and sales still sluggish,  it seems as if sellers can’t catch a break. But if you want to sell your home  this year, there are glimmers of hope. In January, the National Association of  Realtors reported that sales of existing homes nationally rose slightly from the  year before and were also higher than in three of the preceding four months.  Plus, the inventory of existing homes for sale fell 21% from the year before.

But even if you have less competition and better prospects, today’s buyers  are still a tough sell. They’re nervous and risk-averse. They want a home in  move-in condition, with all the upgrades completed, because they know they can’t  count on a quick increase in the home’s value to help them recoup money they  spend on improvements. They try to negotiate a steal from list price. “You must  find a way to improve the condition or lower the price until a buyer pulls the  trigger,” says Leigh Brown, an agent with Re/Max in Charlotte, N.C.

How long will it take to sell your home? You can get a rough idea by looking  at the average “days on the market,” preferably for your neighborhood and price  tier. You’ll find that and other market statistics on the Web site of the local  Realtors association or from an agent. You may have some advantage if your home  is in a desirable location because, say, it’s in a good school district or close  to jobs.

As a seller, you may have your own issues to grapple with — not the least of  which is thinking your home is worth more than it is. Gayle Henderson, an agent  with Re/Max in Phoenix, recommends that sellers play “buyer for a day” to check  out the competition in their neighborhood. It will help you be more realistic  about the price you set for your home.

Above all, find a good agent. Don’t interview just one candidate — that’s a  mistake that two-thirds of sellers make, according to the National Association  of Realtors. In addition to a history of successful sales in or around your  neighborhood, you want total honesty — even if it’s painful to hear that you  must spend money in order to sell.

In 2010, sellers nationwide paid an average commission of 5.4%, reports Real  Trends, a real estate consulting firm. If an agent or the agent’s firm wants to  be able to represent you and a buyer in the same transaction in order to collect  the full commission, try to negotiate the rate down by one or two percentage  points.

Get your home in shape to sell


To hook buyers and reap the highest possible price, you must clean, declutter  and stage your home, inside and out. Cotty Lowry, an agent with Keller Williams,  in Minneapolis, tells his sellers that they should expect to spend two to four  weeks preparing their home for sale, and be ready to spend as much as 2% to 3%  of its list price on improvements. Lowry tells balky sellers that spiffing up  the place could cost them less than having to make an initial price reduction.

As a first step, Lowry says, you should hire a home inspector for a  “pre-inspection” to identify all the issues that would otherwise turn up in a  buyer’s inspection. Get a termite inspection, too. (The report would count  toward any closing requirement.) Each will cost you $300 to $400. The  inspections give you the opportunity to make repairs so buyers won’t reject your  home out of hand or use problems to negotiate against you.

Charlotte, N.C., agent Leigh Brown says that you may also need to invest in improvements that  buyers now expect as standard features. In many markets that means granite  countertops and hardwood floors, even in starter homes. All other things being  equal, those two features will put you head and shoulders above your  competition. Ask your agent to check the features of recently closed and pending  sales. You’ll know what amenities you need to match, or what you can do to sell  faster, even if you can’t raise your price.

Expect to get advice about spiffing up your home from agents and their  stagers. But you can begin preparing your home using the checklists in the “Home  Sale Maximizer Guide” by HomeGain,  a home-marketing Web site. Stagers declutter if you haven’t, rearrange furniture  to improve traffic flow and create a sense of spaciousness, and make sure your  décor doesn’t shout your personal tastes. Home sellers spend an average of  $1,800 staging a home, but the cost can be $5,000 or more. Agents may provide  the service as part of their fee.

Staging proved critical to the sale of Tim and Kristel Barber’s home, in  Minneapolis. They thought that their four-bedroom, four-bath home had everything  a buyer could want, including high-end finishes and a hot location in the city’s  Linden Hills neighborhood, where million-dollar homes were replacing tear-downs.  But the sticking point for buyers was a long, narrow living room.

The Barbers first put their home on the market in March 2011, but by October,  after several price cuts and an attempt at staging, it hadn’t sold. So the  couple got serious: They moved their four children and belongings to their new  home, and a stager brought in new furnishings throughout and redesigned the  living room to create a welcoming entryway and a seating area with smaller-scale  furniture. A month later they got an offer. Altogether, the Barbers spent $6,200  on two stagings.

Price it right and negotiate


No agent can guarantee that your house is worth x and will sell for z. Instead, you and your agent should scrutinize all the comparables  (current listings of homes for sale, recently closed sales and pending sales in  your neighborhood) for the past six months that are similar to your property.  Agents must visit comparables in person to accurately assess differences that  will influence desirability, price and whether they really are your competition,  says Francie House, an agent with Seattle broker Windermere.

If you want to start with a price at the high end, be prepared to lower it  within a certain length of time or number of showings, based on your agent’s  experience. While sellers may think that a price reduction suggests weakness,  Lowry says it shows buyers and their agents that sellers are flexible. Plus, it  will generate automatic e-mails to buyers and inclusion on agents’ “hot sheets,”  which prompts renewed interest and showings.

Negotiate the price. To head off a price reduction, try offering perks  that add value for the buyer without costing you too much. But wait to include  the incentives until you make a counteroffer, or else your tactic could  backfire. For instance, buyers may want you to cover

part of their closing costs. But if they know too early that you’re willing  to ante up the money, they’ll expect you to reduce your price by that much —  and still ask for closing costs later.

If the buyer gets a mortgage backed by or sold to Fannie Mae or Freddie Mac,  the agencies’ rules will limit how much of the buyer’s closing costs you can  pay. If the down payment is 10% or less on a principal residence or vacation  home, you can cover up to 3% of the closing costs; from 10% to 25%, 6%; and 25%  or more, 9%. With VA financing, you can pay all closing costs, plus up to 4% of  the sales price for other buyer costs or to pay down debt so that the buyer will  qualify for a mortgage.

Perks in lieu of price cuts. When you make a counteroffer, instead of  a price reduction you can try to offer something that adds value for the buyer  without costing you too much. Your agent can ask the buyer’s agent, “What’s  important to your buyer? What do they need?” says Leigh Brown, an agent in  Charlotte. The possibilities include a  flexible closing date, a home warranty  (about $400), paying homeowners-association dues for some period of time or  offering appliances or furniture that you don’t want or don’t want to move.

Qualify the buyer. The best offer isn’t always the one with the  highest price. It’s the one that will close, and that means buyers must assure  you they will qualify for the financing they need. A preapproval letter  (the buyers have qualified for a loan based on an application and some  documentation) from a known, creditable lender beats a prequalification  letter (a ballpark estimate of what the buyer can afford). If you receive an  offer with only a  prequalification, your agent can call the buyer’s lender to  scope it out. Or better yet, ask the buyer for permission to get financial  details from the lender.

You could ask buyers to sign a financing addendum to the purchase contract.  The buyer must agree to be fully approved for financing and ready to close in a  set amount of time — typically two weeks to a month — before the scheduled  closing. If the buyers and their lender don’t meet the deadline, the seller can  cancel the contract.