At a party over the weekend, I meet a recently divorced homeowner who had received the house in his divorce settlement and was now trying to sell it.
The house has been on the market for 7 months — which might as well be an eternity for a home seller. On the plus side, there have been more than 60 showings. Clearly, there’s interest in the property — just not at the list price.
He said he was desperate to get rid of the house. What could he do to finally sell it?
When you’ve tried all the regular selling tricks, like cleaning your house, organizing it, and pricing it right, it’;s time to employ a few last-ditch efforts to pull in the right buyer:
If your home isn’t selling, there may be a problem with either its condition or price. But sometimes buyers need an extra nudge. There are things you can do that will effectively lower the net amount you take away from the deal, but could help get your home sold. If you’re having trouble selling, and haven’t received an offer, perhaps these suggestions will help:
-Pay your buyer’s closing costs. A buyer (particularly if you’re selling in the first-time buyer market) may want to purchase your home, but not be able to afford all of the cash costs, including closing costs or the amount the lender will require the buyer to have in reserve (in a savings account in case something breaks). Instead of turning away a prospective buyer, consider paying some or all of his or her closing costs. While it might cost you an extra $1,000 to $2,000, you may be able to keep the price of your home a little higher (because the buyer can finance it) while solving your buyer’s cash flow problem.
-Buy down the buyer’s mortgage. If the buyer can’t easily manage the monthly mortgage payments on your home after purchasing it, you may want to buy down the buyer’s mortgage. A buy-down loan can lower the monthly payments for a period of three to five years. Here’s how it works: You pay the difference between what the buyer would have paid with a market rate loan in the first few years and an interest rate that is lower.
For example, in the first year of a buy-down loan, if the going interest rate on a 30-year mortgage is 7 percent, you might buy down the buyer’s loan so it appears to be 6 percent. The second year, the loan carries an interest rate of 6.25 percent (instead of 7 percent). The third year, the loan rate is now 6.5 percent. The fourth year, it rises to 6.75 percent and in the final year, it’s back to where it should be, 7 percent.
You pay the difference between where the rate is and where it should be, which may only be a couple of thousand dollars. But it might be enough to get the buyer to purchase your home over another down the street.
-Offer seller financing. Seller financing is when the seller acts as the lender for a prospective buyer. In the past, buyers liked seller financing because it was cheaper for them and easier than going to a conventional lender.
These days, conventional lenders are so flexible and so competitively priced it’s hard to imagine someone who is credit-worthy but can’t get a mortgage.
Seller financing should be a last resort for you, if you do it at all. If you do decide to offer seller financing, you’ll only want to do it for someone who has great credit (and who therefore should be able to get a bank loan).
To make sure you don’t take any unnecessary risks, be sure to hire a real estate attorney to draft the paperwork and help you qualify the buyer. If your buyer doesn’t need a first loan, but a small second mortgage, you could offer that for a short period of time, say two to five years. But the risk is still huge because you’ll be second in line behind the main lender.
Still, if you’re desperate to sell, it might be a good move.
-Offer to solve a specific problem. Roseanne used to live in a 3-unit condo building that only had 2 parking spaces. So every night, one of the condo owners was looking for parking on the street.
In Roseanne’s neighborhood, parking can be so tight, you’ll spend 15 to 30 minutes circling the block looking for a space. Roseanne ultimately sold her condo by offering to pay for a year’s worth of parking at a lot down the street.
If your house has a problem that could be an obstacle for buyers, you’ve got to find a solution or no one will ever buy your home. You don’t have to solve the problem forever — just long enough to seal the deal.
If your homeowner’s association is about to levy a special assessment, offer to pay part or all of the special assessment. (At least you won’t have to live through the work.)
-Offer freebies. What could make your property more attractive to a buyer? Try a freebie.
During the Gulf War and the recession of the early 1990s, many sellers offered buyers (and their brokers) all sorts of extras, including gift certificates to fancy shops and department stores, free trips to Disney World (airfare included), cars (one seller I know offered the buyer a used Mercedes), cash for decorating their new home, meals at fancy restaurants, massages, etc.
Today, sellers and developers are offering these kinds of freebies and more. While these things will cost you money, they may draw more attention to your property.
-Offer a bonus to the broker who brings the buyer. Real estate commissions are usually split equally between the buyer’s agent and the seller’s agent. So if the total commission you pay is 5 percent, each side would get 2.5 percent of the sales price (which is then further split between each agent and the firm they work for). If you hire a discount broker, a 4 percent total commission might be split differently, with 2.5 to 3 percent going to the buyer’s agent and just one percent to the listing agent.
But if your house isn’t selling, you may want to offer a bonus to the agent who bring the buyer to the closing table. How much should you offer? It could be a bigger commission (4 percent to the buyer’s agent instead of 3 percent) or it could be a flat cash bonus of $500 to $2,000, depending on the price of your home.
While no self-respecting agent will force his or her buyer to purchase your property just because of the bonus, most agents will make sure any client they have who might be right for your property gets in to see it.
-Make a video of your home and create a web page for it. There are plenty of listings on the Internet, but few people have made videos of their homes. There are companies that do this for you, for anywhere from a few hundred to a few thousand dollars. But getting your video loaded up onto search engines gives you the ability to reach out to millions of potential buyers. Since there isn’t a lot of competition in the marketplace at the moment, you’ll be able to draw attention to your property in a whole new way.
Talk to your agent about what you can do to increase the odds of selling a tough property. While lowering your price is one way to do it, you may be able to achieve the same result by offering one of the freebies I’ve suggested and walk away with more money in your pocket.
For example, let’s say you have a house that’s worth $500,000. If it’s overpriced, you could either lower the price $40,000, or offer a brand new $20,000 car as a freebie. You’ll do better if you can get someone to bite on the new car rather than lowering your price that much, and the idea of buying a house, and getting a new car thrown in, may be just what some buyer out there is looking for.
Remember, the idea behind freebies and special offers is to raise awareness of your home. Buyers like deals and they may be drawn in by the deal you’re offering.
Getting the Word Out
If you’re going to offer special terms with the sale of your home, you should let as many people know as possible. Your first step is to ask your agent to include the special terms of the deal in your MLS listing. Your listing sheets should also spell out whatever you’re offering, whether it’s a car or a free vacation or a $10,000 decorating allowance.
Remember, once you commit yourself in writing to that deal, it’s out there unless you put a specific time limit on it. For example, you might say “Free car for 30 days” or “Free car until January.”
If you leave it open ended, and then drop your price, you could end up with a buyer who is expecting to pay the lower list price and get whatever freebie you promised when the list price was higher.