Posted on Mon, Jul 12, 2010
In a down economy, sellers must compete not only with other homes in the market, but also with buyer's fears and concerns. Selling incentives have always been a way to create additional interest in your property. Today, incentives can help motivate reluctant buyers to make that next step in the face of the present environment.
Below are a few of the more frequently used incentives that can be used to draw attention to your home.
Paying Points
Lenders charge fees known as points, with each point equal to 1 percent of the total loan amount. The base fee charged (called origination points) typically ranges between 0 and 3 points, depending on the interest rate given and other terms of the loan. Points can add up to a significant up-front cost for the buyer, particularly for larger mortgages. Offering to pay some or all of the origination points on behalf the buyer can help generate offers from cash-conscious buyers.
Buying Down the Interest Rate
Many buyers don't understand that they can receive a lower interest rate from their lender by paying additional points at the outset. Buyers can typically pay up to four "discount points" to bring down the interest rate. Offering to pay discount points can increase your home's affordability for many prospective buyers.
Providing a Home Warranty
A home warranty can help assure wary consumers that they won't be stuck with expensive repair costs shortly after buying a home. Home warranties usually cover the repair or replacement of core systems such as plumbing, heating and electrical, along with major appliances. Providing the first year (or two) of a home warranty can add to your home's appeal, especially if you are competing against newer homes on the market. The relatively low cost of home warranties ($250 to $600 annually) offers great value as an eye-catching incentive.
Paying for Closing Costs
Closing a real estate sale can result in a long list of charges, from inspection costs to attorney's fees. Closing costs for the buyer can easily total several thousand dollars - adding to the up-front cash required as a down payment. Sellers can offer to pay for the buyer's side of closing costs to help ease the burden. When doing so it is wise to either put a cap on the dollar amount you will contribute to closing costs, or specify exactly which individual costs you will be paying for.
Upgrade Allowances
Offering cash allowances for specific upgrades can sometimes be a creative way to appeal to buyers. Upgrade allowances are commonly offered by new home builders, and some homeowners are now employing the technique to help set their properties apart from the competition.
For example, if your home has older carpet you may offer to pay the price of new carpet and installation. By not replacing the carpet yourself ahead of the sale, you avoid the hassle of having the carpet installed and the pain of keeping the new carpet clean during showings. You also give the buyer the chance to select a carpet that matches their taste.
Other upgrades offered by sellers include allowances for kitchen facelifts, bathroom remodels and new landscaping.
New Appliances
Another flashy way for sellers to sweeten the deal is to provide buyers with their selection of brand new appliance packages. Updated appliances help your home compete with newly built properties. Allowing the consumer to choose their desired appliance gives them another opportunity to personalize the home to their liking. You can even lay out brochures of some example appliances to help buyers visualize your home improved with the newest gadgets.
Posted on Mon, Jun 21, 2010
One of the most common and costly mistakes made by sellers is setting an unrealistically high asking price. Every seller wants to receive the highest closing price possible for their house, but losing sight of fair market value can have serious repercussions.
In some cases a lack of objectivity results in overpricing the home, other sellers may subscribe to the theory that pricing high initially leaves room to negotiate lower later. Overpricing from the outset could actually force you to end up settling for a lower price than you would have received by setting a realistic asking price based on market research.
Common Results of Overpricing
Fewer "Eyes" on Your Listing - Mispricing your home can prevent it from ever being seen by a certain percentage of potential buyers who might otherwise be interested in your home. Savvy buyers today research the local market even before acquiring an agent. Buyers will search available listings both online and offline in real estate publications, and in most cases they will set a price range to limit the listings they review. If your home is outside of their range even by a few thousand dollars, it may not be on the buyer's radar.
Most buyers will then hire a specialized buyer's agent, and together they will develop a strategy to evaluate homes that match the buyer's needs within their acceptable price range. Occasionally an agent will provide information on a home above the buyer's maximum price point, but rarely will they stray too far above that boundary.
Lack of Showings - Agents who work with homebuyers will know local market conditions and the listing prices of comparable homes. If they feel your home is overpriced, they will be reluctant to show your home to their clients for fear of wasting their time.
Helping Competing Listings - It may not be your first thought, but overpricing for your home for the market can actually help the competition. Your home's higher asking price will make other nearby homes of equivalent size and quality look like steals in comparison. Astute selling agents for other properties will use the price gap between your home and their own as a further selling point of their listings.
Stagnation and Stigmatization - If your home is priced higher than what buyers in your market are willing to pay, it runs the risk of sitting on the market for a longer period. The longer your home sits on the market, the more likely it will become stigmatized as "overpriced" in the real estate community. Once that happens, removing the stigma and restoring interest in your home can be a difficult task. Even dropping the price later will not have the same level of impact as the initial, negative, impression of your listing.
Tough Negotiations - A high listing price can be a warning flag that buyers use for leverage during the negotiation process. If the asking price seems high without home improvements or features to warrant the difference, buyers may assume that you are either A) not well informed about the market, B) not a highly motivated seller, C) have a need for money (perhaps forced by a move to a higher-priced area), or D) are simply creating some bargaining room. If the buyer believes any of these, they are likely to fish to determine how low of a price you will accept.
On the other hand, if your home has languished on the market as a result of a high price, buyers may believe you are becoming desperate. Interested buyers will make lower offers as a result.
Appraisal Problems - Should you be fortunate enough to find a motivated buyer willing to pay your overestimated asking price, you still run the risk of having the deal fall apart prior to closing. Most buyers will use some kind of financing to pay for their home purchase, and every lender requires an appraisal of your home's value.
The appraiser will review your home in person to assess its value based on similar homes that have sold (usually within the last six months). If the appraised value is below the agreed selling price, the lender will only approve a loan for the lower amount. You may be forced to reduce the selling price or risk having the deal collapse, and your home return to the open market.
Overpricing and Today's MarketToday the tendency to overprice relative to the current market can be even more tempting. Home prices have dropped since the high peaks in the summer of 2006, and as a result many are in denial about the current market value of their home. Homeowners who bought within the past five or six years in particularly may be overly influenced by the purchase price they paid during the real estate boom.
This comes at time when overpricing couldn't be a worse strategy. There is a smaller pool of highly motivated buyers, and today's buyers tend to be well educated about the market. Without the assumption of price appreciation, few buyers are willing to gamble and overpay for a home. In addition, credit tightening has reduced both the number of buyers who can qualify for a mortgage as well as the size of the mortgages available.
Creating a Pricing PlanWhen pricing your home, the best strategy is to remain objective and compare your home closely to similar properties on the market. Take the opportunity to visit open houses and pay attention to recent sales in your area. Are you more focused on selling quickly, or on receiving the highest possible selling price? Is the price you have in mind reasonable when compared with what other homes are asking for and selling for?
Priced Too High: CorrectionsIf your home has been sitting on the market with few offers or showings to its name, consider whether or not it is priced correctly. Review recent sales of comparable listings, especially those that have sold since your home went on the market. Another method is to ask agents who have shown your property for feedback they received from their clients. Have buyers who looked at your home in person purchased other homes in the area instead?
Acting quickly to adjust the asking price is the best way to keep as much of your marketing momentum as possible. Depending on how long your listing has been on the market, additional marketing may be needed to help repair some of the "damage" done to the reputation of your home's listing at the higher price. In some cases, you may be forced to slightly under price your listing to create additional interest.
Posted on Mon, Apr 12, 2010
Prepping For a Last-Minute Showing
It's nearly impossible to keep your home in a "show-ready" state day in and day out. In many cases you may find that your home will be shown to a prospective buyer with very little advance notice.
Even if you're keeping things as clutter-free as possible, a little preparation for the actual showing is probably in order. Here are some short-term ways to get your home looking and feeling its best.
Step 1: Cleaning Frenzy
- Scrub tile in the kitchen and bathrooms.
- Thoroughly clean hardwood floors.
- Vacuum carpets. If time permits, rent a steam cleaner to shampoo carpets, particularly in high traffic areas.
- Dust all wood furniture, TV screens and computer monitors.
- Clear counters of all clutter. If time permits, move unnecessary appliances and decorating touches into storage areas.
- Clear the kitchen sink and counters of all dirty dishes.
- Pick up all dirty laundry. Avoid over-filling any open air hampers - laundry is better kept out of sight inside your washer or dryer.
- Remove stains from bathtubs, toilets and sinks.
Step 2: Critical Eye Test
- After doing the first round of cleaning, take a walk through the house with the perspective of a buyer. Look for clutter, excess furniture or highly personal touches that might turn off prospective buyers.
- Try taking pictures of main rooms with a digital camera for an "instant review".
Step 3: Curb Appeal Checkup
- Sweep the entryway, porch and walkways.
- Mow and water the lawn.
- Store any toys or garden equipment.
- Clean up pet droppings.
- Clean gutters and downspouts.
- Add potted plants to the porch or deck.
Step 4: Closing Touches
- Turn on all lights.
- Open drapes and blinds.
- Open windows to let in fresh air.
- Burn scented candles or open jars of lightly scented potpourri. If you don't have either on hand, you can always bake cookies (the oldest trick in the book) or simmer a few drops of vanilla extract on the stove.
- Turn off all TV's, stereos and computers.
- If possible, relocate pets to a friend or neighbor's home during the showing.
- Clean the litter box thoroughly to rid your home of smells. If pets can be temporarily relocated, remove the litter box entirely.
- Hang fresh towels in every bathroom.
- Put fresh liquid soap or bar soap in each bathroom.
- Remove rugs to showcase hardwood floors.
- Put out fresh flowers and fill candy dishes.
Posted on Fri, Apr 09, 2010
Re-Painting? Know the Essentials
Painting interior walls is relatively easy and cheap way to transform the rooms of your home while protecting overall resale value. Aside from adding personality and drama, re-painting protects the surface from moisture and fading. Here are a few things to know before you start planning your DIY masterpiece.
Sheen/Luster - A paint's "sheen" classifies its degree of shine. Flat paint is the dullest of the sheens and is best uses in low activity areas such as hallways and dining rooms, or on ceilings. Eggshell (sometimes "low-luster") has more shine that flat and is easier to wash. Eggshell finishes are appropriate for bedrooms and living rooms. Semigloss and glossy sheens reflect light for a brighter look. Both are durable and easy to wash, although glossy sheens will highlight any imperfections on a wall or surface. Semigloss sheens finishes are good choices for bathrooms and kitchens, while glossy finishes are often reserved for trim, railings, cabinetry and doors.
Quality - While it may be tempting to save money by buying cheaper paint, you will likely end up paying for it in the long run. High quality paint has higher pigment levels and a higher percentage of titanium dioxide, which increases coverage ability and improves durability. Their heavier bodies will go on smoother with less splattering and fewer applications, and will resist fading over time.
Color - Darker hues are known to add interest or warmth to a room, while lighter colors can open up a room and make it seem more spacious. Painting one wall with a rich color can add new drama to the space. In terms of durability, colors such as white, brown tend to fade less than brighter greens, yellows and blues.
Testing - Paint chips and samples can help you whittle down color options, but the best test of a paint color is to see the hue on the intended surface during different lighting conditions. Purchase quart or sample sizes of your top paint choices to get the best feel for the paint's affect on its surroundings.
Amount - 1 gallon of paint will typically cover 350 square feet of surface. Multiply the width of your walls by the height of the room to determine the total square footage you need to cover. Some manufacturers provide coverage calculators that will help you determine how many gallons of paint you will need.
Preparation - Paint adheres best to clean, uniform walls. Scrape clear any flaking paint and spackle in holes and cracks. Wash walls with a trisodium phosphate solution. Use plenty of painter's tape on baseboards, moldings and windowpanes. Applying a primer will conceal stains and ensure uniform color and absorption.
Equipment - Latex paints are best used with nylon brushes (or rollers), while natural brushes 9or rollers) work best for oil-based paint. 3-4 inch wall brushes work well on large, flat surfaces. Angled sash brushes are ideal for detailed areas, and trim brushes are perfect for doors and window frames. Paint rollers work well on rough or textured surfaces. The rougher the surface, the longer the roller nap should be.
Posted on Thu, Feb 11, 2010
Just over 40% of available homes for sale had reduced prices in January 2010, compared with 44% in December 2009, according to a monthly survey of home listings in 27 markets.
With fewer reduced price homes available in January, sellers were able to ask for their original list prices, rather than cut them to attract buyers.
"Sellers are taking a realistic look at current market conditions before listing their homes," said Pat Lashinsky. "We have a lot fewer homes for sale right now than we did last year, and we are seeing more sellers sticking to their original list prices, rather than cutting them to try to attract buyers."
Results of the survey include:
- January was the fifth consecutive month of fewer priced reduced homes on the market, with sellers reducing list prices by $21,925 on average across 27 markets
- Homeowners in San Diego reduced prices by the highest dollar amount, cutting an average of $44,901
- Homeowners in Houston reduced prices by the lowest dollar amount, cutting an average of $10,000
- Markets with the lowest percentage of price-reduced MLS-listed homes were Los Angeles and San Diego (both at 32.6%), San Francisco (31.9%), and Denver (29.5%)
- One out of every two home listings in Jacksonville (49.9%) and Phoenix (48.8%) had cut their list prices, the highest percentage in the survey
Source
Posted on Sun, Jan 24, 2010
RISMedia reports:
MyHouseDeals.com surveyed residential real estate investors in the Houston area about the current investing climate and outlook for the real estate market in 2010. According to the survey, Houston investors have a positive overall outlook on the market. Seventy-seven percent of the 122 investors surveyed believe now is a good time to invest in Houston real estate, while 23% of them are neutral. Only 3% of investors surveyed believe now is not a good time to invest.
When asked about Houston home values, 36% of investors believe values have already hit a bottom and will be flat or up in 2010. Fifty percent believe home values will hit a bottom sometime in 2010, and 13% believe home values will decline beyond 2010.
Fifty-six percent of investors surveyed indicated an overall optimistic outlook for the year, with 5% of investors rating themselves as highly optimistic. In comparison, 2% feel highly pessimistic, with an overall 20% indicating a negative view on the market. Twenty-five percent of investors surveyed had a neutral outlook for 2010.
Read the full article on RISMedia.com.
Posted on Thu, Jan 14, 2010
Allison Wollam at the Houston Business Journal reports:
The extension of the home-buyer tax credit and housing affordability is expected to improve the local housing market this year, but one local expert predicts that 2010 will be a holding-pattern year rather than a rebound year in the Houston market.
Mike Inselmann, president of Houston-based research firm Metrostudy, spoke at the Greater Houston Builders Association Forecast Luncheon on Monday and told the group that although credit is still tough to obtain, there are reasons to be optimistic about the housing market in 2010.
Inselmann said that publicly-held builders exhibit the most optimism as the year begins and are beginning the year aggressively.
He added that most industry observers expect the current low mortgage interest rates to rise later in the year because the Federal Reserve has stated its intent to cease buying mortgages in April.
Inselmann predicted an increase in additivity in the first half of 2010 as big builders are expected to test the market to see if it will support their strategy of putting speculative inventory into the market and betting on the continued success of the home-buyer credit.
He said Houston likely passed the low point in the housing cycle in the early months of 2009.
Builders started roughly 18,000 homes in 2009 and will close 21,000 sales and reduce inventory once again by 3,000 homes. Builder inventory of homes under construction has dropped from 18,000 to below 6,000 since mid-2006.
Read the full article here.