Selling Your House in the Downturn: Day 8 of 30w30d

0 Posted by - September 8, 2009 - 30 Ways in 30 Days to Redesign Your Life and Travel the World, Life

This post is part of 30 Ways in 30 days to Redesign Your Life and Travel the World. This series seeks to give you the practical, real world steps you need to take to get from wherever you are, to exactly where you want to be– traveling the world and living the lifestyle you want.

30 ways in 30 days, real estate, finance, economy, international travel

Two years ago when we sold our home, we were in a depressed market.  Since then, not much has changed.  We sold our house in about 3 months at a $2000 loss after living in it for under 3 years.  Considering how little we had paid down the mortgage, plus all the closing costs, this was about as close as to break even as we could have hoped (the final sale price was $20,000 more than we had paid for it).

If you’re trying to plan for a trip around the world, one of the first questions you might have is: what about the house?  The bad news is that right now you may be facing similar or worse numbers.  The flood of uber-cheap foreclosed homes in your area may not help either.  That doesn’t mean it’s impossible to sell your home, but it does mean doing everything that you can to be competitive.  Here are some things you can try to get that house sold faster.

1.  Comparison shop. Pretend to be in the market and look at houses in your price range and neighborhood.  You may find that the foreclosed homes are a bit stripped down (before the bank kicks them out many people take everything that isn’t nailed down, and sometimes those things too).  Your meticulously cared for home has a huge leg up on these bare-bones models.  But what else? How does your home compare as far as square feet, special features, lot size, cosmetically (paint, rugs, cleanliness, style) and location?  This will give you an idea of what potential buyers will be grading your home against– and ideas of what you can improve in order to better compete.

2.  Price your home well. Now is not the time to test out the market to see if you can get more.  Appropriately priced homes sell faster, that’s just a fact.  The key is to find a good agent that will be able to set a price that is most likely to move your home.

3.  Stage your home. You don’t need to buy anything to do this.  If you already have a home full of “stuff” you’ll just need to strip out a good portion of your belongings.  It’s not too early for a yard sale!  Setting up your house so that it’s just minimal furniture and a few decorations will get rid of that cluttered look, make the space seem larger and leave a better impression on potential buyers.  If you have anything bulky or broken that needs to go, don’t be afraid to use the “free” section on craigslist.org or even the curb with a big sign.  We had a broken hot tub removed within an hour by someone who was sure they could fix it.

4.  Clean, clean, clean. As a buyer, nothing is worse than walking into a dirty home (unless it’s a real fixer upper and that’s what you’re looking for).  An unclean home sends the signal that you don’t take pride in your house and begs the question about what else you’ve been neglecting maintenance-wise.  Putting up fresh flowers or baking cookies (nothing better than that smell) are some small touches you can add.  While it won’t sell your home alone, positive impressions can make a big difference.

5.  Be flexible on financing options. First time home buyers especially may ask that you cover the closing costs for them or help them with the down payment.  You can roll these expenses (plus charge a bit more than you would otherwise) into the price of the home and you’ll re-coop the cost once all the checks clear.  Now is a good time to borrow a money from family and friends (if you get such an offer) if it means closing your house and being able to reimburse everyone in short order (usually 30 days).

6.  If you have time… There are so many projects you could start to fix up your house, but be careful in bogging yourself down in further expense (you’ll see only a fraction of the cost in added value to your home) and delaying putting your house on the market.  Aim for things with the biggest visual appeal: cleaning up the front yard and planting some flowers or filling in gaps in the landscaping, painting the inside using neutral tones, getting the carpets cleaned, or completing (or covering up) unfinished home improvement projects.

And then, be patient.

“What if my house won’t sell?”

First, I’d caution you from assuming that it won’t sell.  If you have put it on the market, cleaned it up, taken away the clutter, made any easy fixes that you could and priced it correctly and it hasn’t sold in 6 months, then yes, it’s time to move on to plan B.  Other scenarios might include being “upside down” on your mortgage (owing more than it’s worth), having lived it for under two years (capital gains tax will apply) or just not wanting to sell it.  Can you still travel? Yes.  Here are some options:

1.  Get help. If you’re “upside down” on your loan, facing a huge ARM interest rate hike or have missed any payments on your loan, now is the time to call your lender.  From all accounts they are severely behind in their account departments, but the sooner you can get on their radar the better.  Also check out some of the federal programs in your country, (like the “Making Home Affordable” program in the US).

2.  Rent instead of sell. If your goal is to avoid the monthly mortgage payment, so you can travel, renting may be an option.  If you have someone you trust to manage the property and make sure your investment is safe, then perfect.  Otherwise, you’ll be looking at hiring a property manager to oversee things for a cut of the monthly rent.  Property managers are often realtors and their real estate site will have a section on their management services.  Some ask for a flat fee, others take a percentage of the rent (like 15%) and still others ask for both.  If your mortgage is higher than what the average rental goes for, you may end up paying the management fee out of pocket.  The question is, can you swing a few hundred dollars a month to travel and if so, is it worth it to you?

3.  Home swap! You’ll still have to cover your mortgage, but you’ll have all of your housing expenses overseas covered.  HomeExchange.com is a good place to start.

4.  Eat the cost. If you’re looking at travel for a finite period of time, it is always possible to start paying ahead on your mortgage now, and over time, bank up enough time to take 6 months or a year off.  It may take you longer, but the upside is that you’ll return to your home and things without having to start from scratch.

5.  Wait it out. When will the downturn end?  It depends greatly on where you live.  Right now southern Florida has more people leaving than entering and foreclosed properties litter the classifieds.  High priced/high demand areas may have been hit less hard and you could see an improvement next year.  Who knows!  Give your local realtor a call for the local insight.  They see hundreds of listings and have the experience to better predict where you’ll be in a year.

Homework:

1.  If you’re looking for an agent, make sure you find someone who’s actually moving houses.  Having a few dozen year old listings, may be a bad sign.  Also be sure to ask which websites your listing will be on and how many photos they upload.  In this digital-age, it’s unwise to ignore the online market.

2.  Visit a few properties in your price range and create your to-do list by priority.  Give yourself a definite deadline for putting the house on the market and set a realistic budget.

3.  If you need to reach out for financial help, do it now.

4.  Even as you plan to sell your home, begin to research your Plan B options.  The realtor you pick will be able to hook you up with property management companies in your area.

Additional Reading

Can’t Sell Your Home?  Rent it.

Why You Should “Stage” Your Home

10 Tips to Help Sell Your House in a Downturn

Resources:

HomeExchange.com

US homeowners: Making Home Affordable program

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