As spring arrives, home sellers and buyers are dredging up tools and tactics that have lain dormant ever since the housing boom shifted the balance of power to the sellers' side. Now, with lots of homes to choose from, buyers are calling the shots in many markets. Bids are calmly offered for less than the asking price, and contingencies for inspections, financing and even appraisals are once again appearing in contracts.
The Office of Federal Housing Enterprise Oversight reports that home prices nationwide grew by an average of nearly 8% during the 12 months ended September 30 -- the latest quarterly data available. But prices began backtracking in late summer, and the number of houses on the market rose through the fall. Still, how much muscle buyers have regained depends on where they're looking. In California, prices rose nearly 11% statewide over the past year, but they fell in more than half of its metro areas during the third quarter. David Lereah, chief economist for the National Association of Realtors, calls for such "mixed" conditions to continue for at least part of this year. He predicts that home prices over three-quarters of the country will experience a "sluggish expansion," while prices elsewhere will continue to fall.
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It's not all bleak news for sellers. Price run-ups barely paused in Arizona, Florida, Idaho, Oregon, Utah and Washington -- all of which posted average increases of more than 15% last year. In many other markets, there are signs that buyers are returning, enticed by seller concessions on price and lower-than-expected interest rates -- recently 6.3% for a 30-year fixed-rate mortgage. The number of homes for sale may have finally stabilized, partly because many sellers have chosen to wait out the soft market and speculators have finished dumping their properties. The National Association of Home Builders predicts that sales of new homes will fall further, though, and builders will continue to cut prices and offer incentives to attract buyers as they finish the projects they've already begun and put the brakes on new construction.
No matter where you're buying or selling this year, if you educate yourself about conditions in your market, keep your price expectations realistic and include a safety net of contingencies, you can get the deal done. Finding an experienced agent you can trust is also essential. For tips on choosing an agent who will act in your best interests, whether you're a buyer or a seller, see Hire Your Own Agent and No Time to Go It Alone.
Sellers get smarter
The housing slump is firmly entrenched in California's Central Valley. Sales are off by a third, and prices are down 4% from a year ago. Sue Clinton sold her house in Fresno, the valley's largest city, last August, and she's glad she got out when she did. After her divorce and her daughter's departure for college, Clinton was ready to downsize from a 2,200-square-foot, four-bedroom home. She first listed the house in late 2005 at $465,000. After two weeks, she reduced the price to $455,000 and received an offer, which she refused because the buyers wanted a 90-day contingency to sell their own home. Her agent advised her to reduce the price again, but she refused and the house sat unsold until June, when Clinton took it off the market.
In July, reality set in. Clinton relisted the property with Elaine Colett, of Guarantee Real Estate, who told her that she needed to reduce the price by $25,000. Clinton listened, and the house sold in 16 days, for $429,500.
Price it realistically. Colett says that most sellers still aren't facing reality. If a home doesn't have showings, she says, the price is too high. And if it's showing but not selling, something is wrong with the interior. Agents elsewhere concur. In Jacksonville, Fla., where sales have fallen 25% since last year, Lynda Learn, a broker with Keller Williams, says she and her partner, Karen Gartley, have to be tough with their clients: "We ask, 'What does your home have that the one next door, priced for $50,000 less, doesn't?'"
The amount by which you overprice often equals the amount by which you will end up selling under market value, says Ken Bacon, director of the Northwest Multiple Listing Service, in Seattle. A price that's too high puts off buyers, and the house sits on the market. After a while, buyers sense your urgency to sell and bid accordingly. If pushed, an agent may agree to briefly test a higher price or offer a price range (called value-range pricing). But Carolyn McGee, in Portsmouth, N.H., who represents buyers exclusively, points out that if sellers advertise a range of prices, why would buyers ever offer more than the bottom number?
The first step in finding the right price is conducting a competitive-market analysis. Colett checks comparable properties that are listed for sale (active), are scheduled for closing (pending), or have been sold within the past two to three months. Then she lists the home for less than others in the same category.
Stage it right. In a slow market, presentation is almost as important as price. You have to make sure your home is clean, clutter-free and depersonalized. To help you see your home as buyers will and window-dress it for sale, you can hire a "stager" by the hour or the room. Homeowners typically pay from $200 to $3,000 to have this done, depending on the level of service, says Barb Schwarz, founder of StagedHomes.com. Overfilled countertops, cupboards and closets scream "not enough storage space" to buyers, says Alexandra Stroup, who helps sellers in Fresno primp their homes. She encourages clients to start packing as soon as they decide to sell. If you can't afford to rent a storage bin, she says, stack your moving boxes neatly against a garage wall.