There are more houses for sale than there are buyers to buy them. Price has become a very prominent criteria to buyers who know that if they wait long enough, they will either find the perfect house or a suitable property at a very good price. This is an ideal environment for buyers and a not so ideal one for sellers.
The Federal Reserve has made it clear that interest rates will remain low for the foreseeable future and housing price surveys have shown that there has not been any meaningful price appreciation in the local market. In fact, prices may still be declining and will decline further if banks step up the release of REOs into the market. All this bolsters buyers' confidence that prices are not rising anytime soon. There just is no urgency to buy, which is critical for price support.
Until the cost of buying residential real estate begins to rise, buyers will bide their time or shop for the bargains. Rising mortgage rates, reduced inventory and increased demand are the three major factors that will move housing cost higher. None of them appear imminent.
While you can't
change the market, you can work it to your advantage. Determine your
time line. If you have six months to a year, you can afford to price in
the middle to upper range of fair market value, to see if you can find
that right buyer. When using this strategy, it is imperative that
regular price reductions are employed every three to four weeks to ease
the property down to where the market is. Failure to do so will tend to
make the property "stale"which will adversely affect marketability. If
you have less than six months, the property should be priced more
aggressively, again with regular price reductions to bring it down to
market. In urgent situations, such as an upcoming foreclosure or move
in which you can't afford to pay for both the new residence and the
old, the property should be priced at the very low end of fair value to
facilitate a quick sale.
that should be considered in
pricing is what happens if the house doesn't sell? The less options you
have the lower the price should be. Many sellers are choosing to keep
the property and rent it out if it doesn't sell at an acceptable price.
The rental market is strong and being a landlord can be a rewarding
experience. If that option is under consideration I urge you to read
our page on Property Management.
A very important
factor in pricing is property condition. The more
attractive a property looks, the more you will sell it for. While it is
understandable that sellers hesitate to put money into a property that
they are going to sell, just imagine how the buyer feels about having
to take money out of pocket (assuming they have it) and put it into
their new house. If they have to spend money, they will discount the
house accordingly. In most cases buyers greatly overestimate the cost
of the repair. Our Selling Tips page in the Sellers section of the site
has great tips for improving the appearance of your house without
spending a lot of money.
The bottom line,
if you wouldn't pay what you
want to ask for the house, buyers probably wouldn't either, so price it
where buyers will see value. Doing so will take your house out of the
recession and put it squarely in the active market. If you failing to
do so there is always plan B.
ability of residential real estate is at historic lows. Thanks to
recession pricing, lots of inventory and very low interest rates there
has never been a better time to buy a home.
There has been a
lot of attention given to foreclosures, many of which need repairs. So,
which is better, buying a house needing work that is cheap or buying
one for more money that does not need work? There are several important
factors to consider. Do you have access to cash to pay for the repairs?
Your mortgage will only cover a percentage of the acquisition cost. Can
you do the work yourself or have access to cheap labor? Generally,
paying someone at standard rates to do the work negates any savings
from the price. Do you have experience with the kind of work that needs
to be done? If the answers are "yes" you could benefit from buying a
fixer upper, otherwise you may actually come out better buying a house
that has already been updated and upgraded.
don't get all their money back for improvements when they sell, which
means the buyer is getting the upgrades and updates at a discount.
Also, look at the financial cost by comparing the added monthly cost of
buying a house that is move in ready versus the opportunity cost on the
out of pocket money you spend for repairing a cheaper house. For
instance, at 4.50% on a 30-year mortgage every thousand more you spend
for the house costs you about $5.00 more on your monthly payment. If
you save $10,000 on the price, how much can you repair for $50 a month?
Carefully weighing all the factors will help you make the best
To read a discussion on the 2005 - 2010 housing decline please click here.
experts in Omaha, Nebraska & Council Bluffs, Iowa
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