The go-go days are coming to an end. Here's how to get top dollar when the market slows.
After searching for two and a half years, 32-year-old Elaine Divelbliss finally found a three-bedroom apartment on Manhattan's Upper West Side to call home. By waiting for the market to cool down, she says, she saved herself several hundred thousand dollars.
"In the past, buyers were more concerned about getting an apartment and would pay any amount," she says. "This year, we could be more discerning buyers and take into account the expenses we would incur putting work into the apartment." There was also a lot less competition by the end of her search. Back in 2001, Divelbliss and her husband felt pressure to put in a bid after seeing an apartment only once. She went back to see her current home three times before buying and wasn't afraid to haggle. "In the past, there were no negotiations."
New York isn't the only market that has started to cool. The buying frenzy is over in places like Austin, Texas, Tallahassee, Fla., and Dayton and Springfield, Ohio?areas that reported very slow price growth in the second quarter of this year, according to the National Association of Realtors (NAR). At the national level, of course, the real-estate market seems to be hotter than ever. August existing-home sales increased by 5.5% to an annual record of 6.47 million, shattering the previous record of 6.13 million set in July, according to the NAR. But the NAR notes that those numbers reflected buying activity in June and July -- when interest rates hit fresh multidecade lows. Since then, rates have jumped -- and if they continue to rise, housing will certainly weaken. Typically, for every full percentage point that interest rates rise on a sustained basis, up to 300,000 fewer people nationwide buy homes, says NAR spokesman Walter Molony.
Even if interest rates don't rise, the NAR is forecasting that home-sale volume will likely slow during the rest of the year and level off in 2004. By next year the real-estate market is expected to return to what the trade group calls a more balanced market between buyers and sellers. "There will be fewer multiple bids, and homes will not sell as quickly," says Molony. "If your home has a deficiency, it won't sell for as much or as quickly as the others without deficiencies in your neighborhood," he says.
So if you plan to sell your home in the near future, call a handyman to make sure everything is in working order. Then take the pulse of your local real-estate market and find out what's selling, what's not and why. Finally, don't expect to get more for your house than your neighbor got a year ago. This is a different market, warns Nelson Zide, co-owner of ERA Key Realty Services in Framingham, Mass. Look at more recent sales data and price your home accordingly.
Here are some more tips to help you get top dollar for your house.
Price, Price, Price
Selling a house is all about price. Ask too much, and you could get stuck with a home that languishes on the market. The longer it sits, the harder it is to unload. "The first question a buyer asks is how long the house has been on the market," says Pamela Liebman, chief executive of New York-based real-estate firm the Corcoran Group. "If it's been on a while, they ask what is wrong with the house."
Ironically, homeowners who ask more for their homes tend to get less in the end. According to Liebman, studies show that if you price your home properly it will sell faster and at a higher price than if the home was priced aggressively. "Overpricing leads to low bids," Liebman says. "Proper pricing leads to high bids."
So how do you set the right price? First, take a look at recent sales in your neighborhood. And don't forget to factor in the condition of your house. A home buyer in a more neutral market is still going to pay up for a new kitchen with Poggenpohl cabinets and a Sub-Zero Refrigerator. But if you failed to notice that Harvest Gold stoves and countertops went out of style with bell bottoms and love beads, you had better be prepared to drop your price by about as much as it would cost a new owner to renovate your relic.
First impressions are everything. The last thing you want is to turn off a potential buyer before he or she walks in the door. So make sure the house is painted, and call a landscaper to get your lawn in tip top shape. "If your grass isn't green, make it green," Liebman says. "If you have weeds, get rid of them. If the shrubs are overgrown, cut them." Even small, inexpensive potted flowers can make your home seem more inviting.
Some renovations are worth an investment. An extra bathroom makes a home more saleable, says Jim Cory, senior editor at Remodeling Magazine. A few cans of paint and new carpeting could also provide a handsome return. An outdated eight-room home in South Philadelphia, for example, might go for roughly $130,000, says Cory. Pull the shag carpeting and wood paneling -- a project that costs roughly $15,000 -- and that same home could list for $180,000.
Make sure everything works. Have an inspector assess everything from your water heater and furnace to your central air conditioning system. "If there are any doubts about the mechanical functions, a buyer will walk," Remodeling Magazine's Cory says.
Even minor repairs are crucial. Hire a contractor to go through your home with a fine-toothed comb. Make sure the gutters are cleaned and the tub has new grout and caulk in the joints. Every window must slide open, and kitchen cabinets should open with ease. And don't forget to paint over ugly water stains. If you don't, a potential buyer could see it as a warning sign of a larger issue.
If you're inclined to leave your home as is, prepare to drop your asking price. "I hate to say it, but price cures everything," says Era Key Realty's Zide. Historically, buyers negotiate two dollars for every dollar of reported deficiencies, according to home-inspection company HouseMaster.
There's some basic advice that's worth repeating. Keep your home as clean and as pristine as possible. This means cleaning out your closets and getting rid of excess clutter and furniture. You want your home to look as spacious as possible. The Corcoran Group's Liebman even suggests fresh flowers. "Baking cookies could be a bit silly and obvious," she says.
How long will all this take? Give yourself a good six months. It takes time to plan, and then to coordinate projects with a contractor or handyman. Just know that the hassle will be worth it. With a little hard work, you can get the best price for your home in any market.