A few years before the housing market started turning downward, it was virtually guaranteed that you would be able to sell your home if you put it on the market. In fact, in many markets there was a virtual hot bed of activity, with bidding wars driving prices well above the asking price. Low interest rates at the time were all the encouragement buyers needed to start snatching properties at historic rates. As a result, numerous investors were able to double the investment they had made in short period of time.
Many experts predicted that home sales would not continue at such record-breaking rates and as if they had crystal balls the real estate bubble did indeed burst. Equity evaporated into thin air, thereby causing once high hopes and expectations of many home owners to sink to the lowest along with their “underwater” mortgages. Once hot markets have declined rather rapidly, leaving investors and homeowners alike wondering what they can do to remedy their unmarketable properties as loan underwriting guidelines tighten and the market floods with inventory.
If you find that you absolutely cannot wait until the market turns around to sell your property and must sell it now, your best hope may be to employ creative marketing tactics.
The first thing that must be understood about the current market is the fact that the market is rife with choices. A few years ago buyers felt a decided pressure to move, and move quickly, when searching for a home or property to invest in. Choices were few and the best properties were likely to be snatched up as soon as they hit the market; Not so today! That is not the case because there are far more properties on the market, prices are lower and buyers know they have the advantage of being able to take their time looking. This means if you are going to be competitive in selling your property, you will need come up with something that will set your property apart and entice buyers.
In the last few years before the market crashed, sellers had no need to use seller concessions (a percentage of the property’s sales price paid towards buyer’s closing costs), although it was always available in varying amounts depending on the mortgage type utilized. In areas where the inventory is high, however, the use of seller concessions are becoming far more common. The range of possible seller concessions varies quite a bit. For example, you might provide a decorating allowance if your carpeting is outdated or use a seller concession to encourage first-time home buyers to consider your property.
In the past these types of concessions were not offered as often and were restricted to 3% if the mortgage was PMI or Conventional. All FHA-insured mortgage financing permitted up to 6% seller concession until the final stage of the S.A.F.E. Act took effect on January 1, 2010. In most pre-market-crash real estate transactions such concessions would not even be offered on a Conventional loan. That does not mean that they could not be offered during negotiations in order to attract seal the deal, so to speak, with a prospective buyer.
In today’s reality the key is to recognize that the balance of power has definitely shifted. Buyers hold the upper hand right now and sellers must be prepared to do what they can to attract them. If you have already taken certain steps to move your property, such as pricing it aggressively then you may wish to consider making some concessions to increase the interest of prospective buyers. It must be pointed out here that the number of qualified home buyers have also decreased due to the high unemployment numbers, so all methods, tactics and negotiation strategies must be employed in the marketing and sale of your home in today’s market.
One option would be to pay points for the buyer. This is actually a situation that provides a win for both parties. Let us say you have a property listed at $150,000. If you slashed the price 3% then you would be taking $4,500 off the price. You could use that same amount of money to purchase mortgage points for the buyers. In fact, you might even find that you can purchase a substantial amount of points. This strategy would allow buyers to obtain lower interest rate and as a result, have a lower monthly payment. This would make your home more affordable than similar homes in the neighborhood and may just provide the incentive a buyer need to snatch up your home.
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