I have no idea what the reality is of selling a home in this market and do not know what properties are worth. But I hear you on the radio and read your column and I have heard you say that the market could be down for another one to two years or more.
With my job moving out of state, how should I approach the process of selling my home? I’m not sure where to start.
A: Have you really spoken with all of the top brokers in town? If you look around your neighborhood, do you see “for sale” signs just about everywhere? If you can’t even get a real estate firm to list your property, that might be a good indication that the housing market is in trouble in your neighborhood.
The first thing is to try to establish what your property is worth. To do that, you need to enlist the help of a local real estate agent or broker who can spend some time with you to figure out what is going on in your area.
The idea is to gauge both the number of sales and the number of foreclosures in the area. That agent should also have a good feel for the number of short sales occurring in your area. If your neighborhood is awash in foreclosures, with nothing moving, then you have to recognize that you may not be able to sell your home at a price you’d want for some time.
If you are underwater with your property (that is, the home is worth less than the mortgage amount still owed), and you don’t have enough cash to make up the difference at closing, you might have to think about doing a short sale. The bank will have to agree to sell your home for less than you owe, and that can take some time as well. A short sale will also damage your credit history and credit score, and you will be unable to get another mortgage for the next two to three years, or longer.
That will bring you to the next big decision you have to make: Do you want to try to sell your home anyway or can you rent the property even though you’ll be living out of state?
I think out-of-state rentals are hard to manage. While you might wind up with the model tenant, you don’t really know what is going on with your house. You may also not receive enough income to compensate for the risk that your tenant will damage or destroy your property. There are property managers who will handle a rental for you, but they charge relatively high fees and it is difficult to find a good one.
If you decide to try to sell your property, there are two avenues available to you other than hiring a real estate agent: You can try to sell your home yourself or you can engage an auction company and hope that bringing more eyeballs to the process will produce an offer.
In good times, it’s easier to sell on your own and save on the commission. But in a tough market, you typically would want local real estate agents to bring all buyers. You can still engage them, by offering a higher-than-expected commission rate. If you offer to pay the buyer’s broker 4 percent, instead of 3 percent, you might get some additional traffic.
However, if you are selling your own home and what you owe the bank is greater than what you might get when you sell the home, you might not be able to give the buyer’s agent a higher-than-expected commission rate. Some lenders will review each and every cost in the sale of a home and may not allow some of those expenses. In some cases, lenders will allow payments but at a reduced amount.
Real estate agents have come to realize that short sales can be quite a bit of work to get completed and that some lenders may not let them get what they were promised by the seller.
If you decide to sell by owner, you also have to do all of the marketing of the property and all the legwork to get the property sold. And, above all, you will be competing to sell your home with sellers that may have vacated their homes, banks that are now owners of homes that they plan to sell at any cost and with other sellers in the neighborhood.
If you proceed to sell by owner, you should engage the services of an online by owner listing site, and be sure to list the property in the local MLS. You should also set up a website for the property, and take some high-quality digital photos and video to display on the home page. Print up some listing sheets and be sure to pass them out at your company, and down the block (maybe a neighbor has a relative looking to move to the area). Ask your company’s human resources department to alert you if there is a new transferee to your area. And, don’t forget to host an occasional open house.
One important thing some sellers forget is to make sure your home is in top shape for sale. Now more than ever, you want to have your home look better than all the other homes you are competing with. Make sure the exterior of the home looks great. The last thing you want is for a prospective buyer to come along and stop in front of your home and move on because the house looks like it’s about to fall apart, or the landscaping is looking terrible.
Make sure the interior looks clean and roomy and the home smells fresh. If you have pets, make sure to have a friend come over to tell you whether your house smells or not. And if you are a collector of things, this would be a good time to pack up as much as you can from your home to make the rooms look cleaner and larger. If you are handy and rooms need to be painted, you might want to paint those rooms with a neutral color that will appeal to most people.
I’m glad that you’re beginning this process a year ahead of time. It might take some time to figure out what is going on in your neighborhood and then some time to clean up the interior of your home for sale and then quite some time to actually get the home sold.
One final thought: While many agents would normally help you for free, you have to be prepared to compensate the agent or broker for their time if they have no interest in listing your property.