By: Carey Harris
The best way to tell if your area is in a buyer's or seller's market is to check the average number of days homes are on the market before selling. When this number rises above 60 days, it's definitely a buyer's market. That means it's a great time to be a buyer, but not such a great time to be a home seller.
Another method is to look at the number of months' supply of homes for sale at the current sales pace. Just divide the number of local homes sold during the last 30 days into the number of homes listed for sale. If the result is more than a six-month supply of homes, the oversupply of listed homes shows it's a buyer's market.
Fall is usually the second-best season to sell a home (spring is the best because that is when the largest number of prospective home buyers are in the market). This year (2006) however is proving to be different.
The number of homes listed for sale in most cities is at or near an all-time record high. The result is prospective buyers know they can negotiate hard over price and terms. (Simple laws of supply and demand apply here)
For example, a few days ago a Realtor told me about his $1 million house listing where a buyer offered $800,000. Normally, the seller would be insulted. Instead, his seller counteroffered at $950,000, a $50,000 price reduction. But, according to the Realtor, the buyer wants a bigger price reduction. (As an investor I love slow markets as I can much easier find great deals and I don't have to work as hard.)
STEP #1: If you seriously need to sell your property, and are not just "testing" to see what price you might get, the first step is to get your home into top notch, near-model-home condition. Most buyers don't want to buy a fixer-upper; they prefer to turn the key in the door and move in.
Cleaning, repairing and painting are the most profitable actions to take. Install new light fixtures and new carpets or flooring if needed. But don't waste money on major renovation, which you won't get to enjoy and buyer prospects might not like.
If you have lots of unneeded "junk" you don't want to move, September and October are ideal times to hold weekend garage sales. Better yet, call it an "estate sale."
STEP #2: Today's home-sale market is not a good time to be a do-it-yourself "for sale by owner" home seller. The reason is there is so much competition from serious home sellers whose listings are professionally marketed through the local MLS (multiple listing service). Most MLS agents also put their listings on the Internet where more than 70 percent of today's home buyers begin their searches, according to a recent survey by the National Association of Realtors.
Before selecting the best listing agent, smart sellers interview three or more successful agents who sell homes in their vicinity. Successful home sellers should understand they are hiring an individual listing agent, not the impersonal brokerage with the well-known name on the agent's door or the fancy franchise name with expensive image advertising.
Smart home sellers ask the agents interviewed lots of questions. Ten examples include (1) what are the names, addresses and phone numbers of your five most recent home sellers? (2) if I list my home with you, what price will you get for it in today's market? (3) what is your minimum listing term? (4) how long have you been selling homes in this area? (5) do you sell homes full time? (6) what professional courses and designations have you completed? (7) how many listings do you have now? (8) what is your written marketing plan for my home? (9) what sales commission do you suggest? and (10) do you recommend "staging" my home?
As part of their listing presentations, each of the three or more agents interviewed should anticipate these questions. The best agents will present you with a written CMA (comparative market analysis) form showing recent nearby comparable home sales prices to justify their estimate of your home's market value.
Sharp agents will suggest a 90-day listing. If the agent asks for a longer term, be sure it includes an unconditional cancellation clause after 90 days just in case you chose a bad agent.
As for the sales commission, although 5.1 percent is the national average according to Real Trends, in today's market it often pays to raise the commission to get buyer's agents to show and sell your home first. Low commissions to buyer's agents often result in no sales.
Although agents being interviewed will be reluctant to criticize your home, be sure to ask if the agent recommends "staging" the home to make it appear more attractive. Staging a home means bringing in a professional "stager" to make the home more marketable. Stagers often suggest removing old-fashioned furniture clutter during the sales period and renting more contemporary furnishings.
STEP #3: After selecting the best listing agent, but before exposing your home to the market, be sure to obtain all the customary local inspections, such as for termites, energy efficiency and building-code compliance. Your listing agent will know what's required.
Although not required, a professional home inspection avoids surprises later. I recommend hiring a member of the American Society of Home Inspectors (ASHI). The cost is around $300 and takes two to three hours.
Be sure to attend the inspection to discuss any defects discovered. Then you can decide if you want to repair them or merely disclose them to buyers and let the buyer make the repairs.
If the repair cost is minor, it's usually best to have repairs completed before listing the home, thus removing possible buyer objections. Local ASHI members can be found at www.ashi.com or 1-800-743-2744.
STEP #4 After getting your home ready to sell, hiring the best listing agent and having all professional inspections completed so you can disclose your home's defects, it's time to set a realistic asking price.
With the help of your listing agent, study those CMAs (Comparative Market Analysis) prepared by all the agents you interviewed. Consider whether the local market for homes in your price range is rising or falling. In most markets, prices have leveled off from what was attainable a year or two ago. If you really want your home to get sold quickly, don't get greedy.
Asking a few thousand dollars less than your closest competitor homes can mean your home sells while the others don't. Holding your home an extra month or two often costs far more than setting a realistic asking price.
Here's another asking price secret: set your asking price $1,000 below threshold amounts. For example, if your home is worth around $300,000, set the asking price at $299,000 rather than $300,000 or higher. The reason is buyers who tell their agents they will pay up to $300,000 will then see your home on their MLS computer search. But if you set the asking price at $300,000 or above, those buyers might not learn about your home.
STEP #5: Many home sellers are insulted if they receive a written purchase offer substantially below their asking price. Some sellers and their listing agents won't even make counteroffers.
That is a major negotiation mistake. Always make a counteroffer to keep communications open with that prospective buyer. Negotiations often take several weeks, back and forth, before determining either a sale will result or the parties are too far apart in price or terms. But unless the seller counteroffers every purchase offer, even a "low ball" offer, you will never know if a sale can result.
After both buyer and seller sign a firm purchase contract, the sale isn't over. This can be the most difficult time period. You and your listing agent must keep on top of deadlines, especially to be certain the buyer follows though on obtaining the mortgage appraisal and other essentials.
Sellers should be aware the buyer might be encountering the dread "buyer's remorse" disease. For this reason, it is essential for sellers and their listing agents to keep in touch with buyers and their buyer's agent to be certain the sale closes on schedule successfully.
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