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The traditional spring-summer home-buying season has begun. The national housing market remains brutal, affected by high inventory, high foreclosure rates and a historically high level of underwater mortgages.
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Without a doubt, it is a buyer’s market. But is there anything sellers can do to get the best price for their house and in the shortest amount of time?
24/7 Wall St. examined the U.S. home market with the help of a number of the leading real estate experts and organisations that track housing trends.
We asked them just that: What can sellers do in a housing market that a Case-Shiller report last year described as worse than the Great Depression? All of the experts agreed that there are several concrete actions that can help most sellers.
The home sales environment in the U.S. has changed in two profound ways in the past decade. First, the housing bust, which began in 2006, has depressed home values in some markets well over 50%. In these regions, as real estate research firm RealtyTrac reported, more than 1 in 500 homes can be in foreclosure in any given month.
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In states such as Nevada and Florida, the figures are worse. A foreclosed home often sells for a third less than the price of a house not in foreclosure. And if there are foreclosed homes in their neighborhoods, it is nearly impossible for homeowners selling their houses to get a premium price.
The downward pressure on home values is compounded by the fact that one in five U.S. mortgages is underwater, according to research firm CoreLogic. All of these homes have mortgages with balances greater than the appraised price of the houses themselves. Put together, foreclosures and underwater mortgages make it harder for homeowners in most regions to get anywhere close to what their homes were worth five years ago.
The other profound difference in the home-buying market is the presence of the Internet. 20 years ago, buyers had few tools to sort through the available houses before visiting them in person. Now, according to Elizabeth Blakeslee, an associate broker with Coldwell Banker in Washington DC, 70% to 80% of buyers look at homes online before they visit a house.
The figure is much higher in cases when people are relocating from one part of the country to another. The ability to present a home well online and achieve maximum penetration on the different real estate sites has become of paramount importance — expertise that a good broker has.
Despite the changes, our research shows that some aspects of successful home sales have not changed at all. Homes with “curb appeal” — the impression a buyer gets before reaching the front door — tend to sell better than houses with poor landscaping and exteriors.
An excellent real estate agent is by far the best consultant for setting price and preparing a house for sale. Getting a house appraised helps in setting a price that a bank is likely to accept when the buyer applies for a mortgage. Getting the house inspected before the sales process begins allows the seller to identify potential impediments to a sale.
24/7 Wall St. identified the 13 actions homeowners should take to increase the chance of selling their homes, regardless of where the homes are located. Obviously, a seller in a market in which houses are moving quickly and at premium prices has a better chance to sell a home. But these pieces of advice apply to slow, troubled markets as well as to the hot ones.
In order to identify these best practices, 24/7 Wall St. interviewed real estate experts from Trulia, Zillow, Realtor.com and Coldwell Banker and reviewed the most recent housing data from S&P/Case-Shiller, Corelogic, Fiserv and RealtyTrac.
Finding a buyer for your home is crucial, of course, but ensuring a smooth selling process come closing date is no small matter either.
Sales can fall apart on closing, and one of the most frequently cited causes is when the buyers are denied a mortgage. This often happens when the sale price -- the price the buyer is using to apply for a loan -- exceeds the bank's appraisal.
When the value of residential real estate rose consistently from 2000 to 2006, it was rare that mortgages were worth more than the appraisal on a house. With home prices still falling, in some markets by as much as 10% a year, an appraisal can be obsolete in a matter of a few months.
According to Trulia's Corbett, it is not necessary to pay for an appraisal if the agent has reliable comparables and the home is priced to sell. However, if sellers are not confident, or there are no recent comps, they should get an appraisal.
Appraisers and banks price more conservatively than they did five years ago. For a few hundred dollars, an appraiser can give you a safe price that will not present a possible hurdle when the buyers try to get a mortgage.
When the market was booming, the rule was that the seller pays 6% of the purchase price for broker's fees -- 3% to the buyer's broker and 3% to the seller's.
But in a market where brokers are desperate for business, there's room for negotiation and sellers should try to press for a lower fee.
The savings from the lower fees can allow sellers to lower the price of their homes, while still walking away with a profit.
However, real estate experts warn that pressing brokers for a fee that is too low may hurt the seller's chances. Trulia's real estate expert Corbett suggests caution when it comes to lowering the buyer's agent fees. Sellers can ask their brokers for a discount in their fees, but they should leave the buyer's agent fee untouched.
While you can provide other incentives to your broker, you want the buying agent to have an incentive to show your home over others.
To offer your broker an incentive, set a time limit on the sale of the home -- say, two months. If the house is sold within 5% of the asking price during that period, offer the broker a lump sum bonus.
A well-maintained home that is priced right will sell quickly, says DuBois at Realtor.com. While a seller should be cautious about installing new granite countertops or bathroom tiles, they should take fixes seriously.
Corbett recommends making as many obvious repairs as practical. Water stains, doors that creak and windows that do not shut should be fixed.
They distract potential buyers from the best parts of your home. If they are not fixed before the sale, buyers' estimates for the cost of the fixes likely will be far more than their real cost, forcing a lower sale price.
DuBois warns that the stricter lending environment means that buyers have less money for renovation. As a result, buyers want homes to be move-in ready. While not always cheap, new carpets, new floors and a fresh coat of paint may be the difference between selling the home or not.
You never get a second chance to make a first impression. That is especially true for home buyers.
The first thing a buyer sees when looking at your house, either in a drive-by or online, is the front of your house.
This opinion can be based on whether the lawn is well kept, the driveway is in good condition, and the house has relatively fresh paint. If they do not like what they see, they will not explore further.
According to Corbett, 80% of qualified potential buyers make their decision to preview a home based solely on the look of the front of the house.
Buyers also are likely to look at the street where the house is located, and probably the general neighbourhood.
Sellers cannot do much about the place where their homes are located, but they can be sure to present as manicured a front as possible.
A buyer will have your home inspected before the purchase is final. Homeowners should have an inspection done before their homes are put on the market.
This will cost a few hundred dollars, but will prevent nasty surprises that could derail a sale or cause a buyer to press for a price reduction.
While Realtor.com's DuBois recommends inspections, she advises that they are also not without their risks. While costs to perform typical inspections are not outrageous, they can add up. And once a problem is discovered, the seller is obligated to disclose that problem to the buyer or fix it.
The inspection should also go beyond the home itself. Make sure that your house does not currently violate any laws, including distances from roads or adjacent properties.
Sellers can visit their local government to make sure all the paperwork and land maps of the home are current.
In many cases, no matter what you do to improve the likelihood of selling your home, you will be advantaged or disadvantaged by local market conditions.
In places like Denver, the average time on market for a home is slightly more than a month.
In Asheville, N.C., the average home remains unsold for nearly half a year. The differences between the markets have much to do with desirability.
Based on 24/7 Wall St.'s analysis of Realtor.com data, markets with quickly selling homes are, for the most part, larger. They are also, as would be expected, much more popular among people searching for new homes.
Detroit, for example, has the 10th-shortest time on market and was the second-most searched for real estate market, according to Realtor.com.
Whether you can sell your home has much to do with whether people believe they are getting a good deal on your property. Most of the markets with rapidly selling homes have had among the largest declines in home value from their prerecession peaks.
Five of the 10 metropolitan statistical areas lost more than half of their home value from prerecession peaks. For the first time, real estate data resources like Trulia, Realtor.com and RealtyTrac can help you become aware of the factors that can affect your ability to sell your home.
There is little reason not to take advantage of these resources and stay informed.
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