As the director of media relations for the Arkansas Realtors Association, I’ve kept track of homes sales in my state in both good times and bad. Like most markets around the nation, we saw an unprecedented boom in sales in Arkansas from 1999 through 2005. At the beginning of 2006, sales started coming in noticeably slower and have continued to decline since.
The rate of declines in sales depends on where you happen to live. We’ve heard of catastrophic declines in markets where sales were outpacing other areas around the nation from 1999 through 2006 — areas such as Dallas and San Diego from which we hear all sorts of grim housing market news. Most smaller markets, however, didn’t shoot up as quickly as larger, urban areas during the boom years and the declines in those areas haven’t been as severe either. That’s certainly been the case in Arkansas, where sales have declined, but home values have remained relatively flat — good news when you’re comparing markets here against those in which homeowners are losing short term value in their houses.
But there is one thing common to almost all housing markets right now. Inventories have increased substantially, meaning sellers have found themselves in a position where they must compete with each other for buyers. That’s quite a bit different than how things were just a couple of years ago when buyers were in competition with each other and it was very common to find sellers sitting back and enjoying bidding wars driving up the prices of their homes. That shift has made it essential for sellers to change their strategies in order to find buyers.
However, a lot of sellers still behave like its 2005 when listing their homes, thus making some critical mistakes that prevent them from selling their houses within reasonable amounts of time or, in some cases, not at all. The good news is, there are some strategies sellers can employ that can dramatically increase their chances of selling their homes.
Pricing is critical
Just a couple of years ago, sellers commonly employed a common tactic of finding out what their homes were worth and then listing them for more money. If the fair market value of a home was, say, $180,000, then why not list it at $210,000 then negotiate a lower price is necessary? That tactic worked well in 2005 when inventories of quality homes were considerably lower — when demand outpaced supply — but it doesn’t work as well right now. If a seller puts that $180,000 house on the market, it’s a near certainty that he or she will be competing against a lot of other sellers with similarly priced homes. If a buyer is in the market for one of those homes, why on earth would that person go look at the overpriced one when equivalent homes are on the market for less money? If a seller doesn’t attract any serious buyers, then the strategy of listing high then negotiating downward simply fails.
Still, there are a lot of sellers out there who still cling to the notion they can always drop their list prices if their homes don’t sell quickly. Again, such an assumption is a mistake in today’s market. Homes get the most exposure within 30 to 60 days of being listed, so a seller who lists high then reduces the price later on will miss out on a lot of potential buyers. There is a bit of a stigma involved with homes that have been on the market for too long in that sellers ask themselves what’s wrong with a house that has languished without offers for a few months.
By the way, how does one go about finding that fair market value? The short answer is to hire a Realtor and let that individual run a comparative market analysis and find that value. Not everyone wants to hire a Realtor to sell a home because they don’t want to have to pay a commission. That’s fair enough, but homeowners still need to realize the importance of finding out the fair market values of their homes. A homeowner not wanting to hire a Realtor to figure out how much a house is worth can possibly figure that out by looking through courthouse records and seeing how much homes in the neighborhood have sold for recently. Also, one can definitely find out the value of a home by hiring a real estate appraiser to make that determination.
What do I offer that my competitors don’t?
With a lot of homes on the market, it’s very important for sellers to make sure their houses stand out from the pack. That can be achieved in many ways, of course, and the most obvious tactic to use it to simply list the home at a bargain. If a home has a fair market value of $180,000, then listing it for $170,000 will certainly attract buyers.
But most homeowners aren’t interested in selling their houses for less than they are worth, and there’s simply no need for such tactics in most markets. Generally, a house will sell if it’s priced well, provided the homeowner is a bit patient. To boost the chances of finding a buyer even more, consider the time-honored draw of curb appeal — if your home looks better from the street than the one for sale next door, guess which one potential buyers are going to look at first. Boosting that curb appeal can be relatively inexpensive. Make sure that lawn is mowed and edged so there’s a crisp, sharp division between the yard and driveways and sidewalks. If you’ve got hedges, trim them. Painting the front door and shutters if they look a bit ragged can boost the appeal of your home, too.
Some more aggressive tactics to use involve throwing in a little extra with the home. In this market, sellers have had great success in throwing in a free home warranty with their houses. A home warranty is, simply put, an insurance policy that will replace or repair the major systems in a home if they fail. Buyers like the piece of mind that comes with a home warranty and sellers are attracted by the fairly low price of taking out a one-year warranty — typically less than $400 in this market.
Homeowners with pricier properties have found some success in offering very tantalizing items in their listings. While we haven’t seen a lot of homeowners throw in free cars with their houses here in Arkansas, we have seen sellers offer items such as high definition television sets, generous remodeling allowances, privacy fences and other items that buyers appreciate.
The outside of the home looks great, but what about the inside?
A home that has great curb appeal may well get a buyer inside a home, but that’s only half the battle. The inside has to be appealing, too. Fortunately, sprucing up the interior doesn’t have to be expensive. Most of the time, simply removing clutter from the interior is enough to impress a buyer. Always remember — buyers want to imagine what a home will look like when they move into it and place their items inside of it, so remove anything that will interfere with the buyer’s ability to do just that.
Removing clutter, in other words, involves more than just tidying up a home or, indeed, giving it the thorough, “both barrels” cleaning. When we talk about removing clutter, we’re talking about taking out almost everything that is too personal. Knick-knacks, pictures of family, that painting of Elvis on black velvet and other personal items provide buyers with a great idea about how a home fits in with your life, but can prevent that buyer from painting a mental picture of how his or her items will suit the space. So, remove those items. While you’re at it, remove much of what’s typically in storage areas such as closets so that prospective buyers can get an idea of how much space will be available to store their items.
Similarly, removing evidence of pets in the home is a good idea. If you’ve got a buyer who hates cats, that person will react harshly upon seeing a litter box and will likely be biased against the home. I know of one Realtor who removed pets entirely when his house was being shown — he spent a lot of time putting his dogs in his truck and driving around town with them when prospective buyers would come to visit. The theory, of course, is that pets would distract buyers from forming the requisite mental picture of how the home would suit their lives.
Another thing to consider is how much furniture is in each room. If there’s too much furniture in a room, it can looked cramped. Interestingly enough, a room will also look small if it’s completely stripped of furniture. A good rule of thumb to use is to put no more than three major pieces of furniture in a single room — in that case, three really is the magic number. A room with three major pieces of furniture just looks right and demonstrates how the space can be utilized well without making a room look to barren.
For those wanting to really spiff up the interior of their homes, fresh coats of paint and a little updating can go a long way. If you’re going to paint a room, make sure to stick with neutral colors. You may like that bold green wall with purple trim, but will a prospective buyer like such bold color choices? Also, it doesn’t cost much to update a bathroom with new faucets, towel racks and other items that will modernize that often overlooked room of the house.
A few years ago, one could get away with simply sticking a “for sale” sign in his or her yard and waiting for offers. In the current competitive market, that tactic doesn’t work as well. Hiring a Realtor can take care of the bulk of those marketing problems because Realtors have access to the local multiple listings service (MLS). Most homes are sold through MLS systems as Realtors in a given area both list and review properties in them. If Sam Seller lists his home in the MLS, it can be shown to Sam Seller even if both the buyer and seller are represented by different Realtors.
Again, however, there are a lot of sellers who had rather go the “for sale by owner” route and take care of selling their homes without going through a Realtor. While having a listing in an MLS is valuable, it’s not the end of the world for people who don’t have access to the local MLS because they aren’t selling their homes through Realtors. Still, it takes a lot more these days to sell a home than putting a “for sale” sign in the front yard, so make sure to set aside some money for newspaper ads or, if available, magazines in your area that run listings of homes.
However you choose to market your home, remember that pictures are perhaps more important than ever in selling your house. If you have a Realtor who is listing your home through an MLS, then you’ve certainly got the option of posting a lot of photos of your property in that listing. Make sure those photos are of good quality and show off the home in the best light. Avoid using photos with people and animals in them and make sure you’re not sending in photos that are dark, show cluttered rooms and etc. When going through an MLS, listings and photos are picked up by national sites such as Realtor.com — places where people around the nation go when shopping for a home.
Whether you’re marketing through an MLS or otherwise, it’s always a good idea to have photographs available. If you can get those photographs posted on high traffic Web sites, you’ll wind up with more buyers.
Know your market
Here in Arkansas, we’ve seen the housing market slowdown in the higher price ranges, whereas things are moving along well in the lower and mid-price ranges. The reason for a lot of that slowdown is, of course, that builders were very interested in constructing expensive homes a couple of years ago because there was a lot of demand for them. A lot of buliders ignored the middle price ranges, resulting in the current situation in which there are a lot of expensive homes in inventory and an actual shortage in some other price ranges.
So, someone selling an expensive home has a tougher row to hoe than someone with a house in one of the lower price ranges. Finding out which price ranges are moving and which ones aren’t can be a very important factor to consider if you’re thinking about selling a home. Doing some research before putting your house on the market can save you a lot of time and aggravation — whether homes in your price range are selling might well be the deciding factor as to whether you’ll list your home and try to find some buyers.
But what if you’ve got to sell that expensive home? The good news is that there are still a lot of homes being sold and sellers that are marketing their homes well and making them attractive for buyers are finding that, with a little patience, they’ll receive some good offers. One thing we’ve found is that a lot of buyers have caught onto the fact that they’ve got a lot more buying power than they did a couple of years ago and are out to find some bargains or, at least, get a home for fair market value. Pricing your home well and marketing to those buyers will typically pay off in the end. You might have to wait a bit longer to sell your house than you did a few years ago, but you will eventually sell it.