Options for Sellers in Today’s Market

This past week our listings saw an average of 1.5 showings each, although this average is a result of some listings getting lots of traffic while others are seeing little or none.   The pattern is clear that aggresively priced homes in great areas are showing well, while the others that are simply priced fairly are not getting the same attention.

In closely watching the market, I have noticed a strong pattern in the past two months.   While the volume of sales is down significantly, the listing inventory is declining.   This is because we are seeing more homes falling off the market because they are expiring or being withdrawn as opposed to selling.   The expired/withdrawn listings seem to be outpacing the new listings that are hitting the market.   It could certainly just be the time of year; many people opt not to list in late fall because of the holidays.   But I also get the feeling that many sellers feel that the market is just hopeless right now.   However, that idea only holds true for homeowners that are stuck on a number.   Unfortunately, the market does not care what we want to get for our homes.   The market and the market alone will dictate that number.

Many sellers (that want to sell, but don’t like the numbers) seem to think that holding on to their property for a few months or even years, will get them at least back to where prices were in 2008.   That is certainly true if the hold period is long enough.   But lets evaluate that realistically.

In general, prices in the Charlotte area are down about 10% from the peak prices in mid 2008, from roughly $265K in 2008 to about $240K today.   (Some parts of town  may have been  affected more or less.)   Before the real estate boom and before all the speculative buying, back in the days when people bought houses because it made more financial sense than renting, home appreciation in our area was typically about 3-4% per year.   If we were to assume that we’ve hit bottom and the days of 3-4% appreciation were to come again, it would take about three years to get back to 2008 prices.   Of course, there is an awful lot of “if” in that scenario.

There is some truth that waiting until spring could be a good idea because seasonally, there is more demand and sales prices tend to be higher in the spring.   However, if too many people take that idea to heart, we could end up with huge increases in supply this spring  if demand doesn’t increase proportionally.

The bottom line is that three or more years is a long time to put life on hold because of attachment to what home prices looked like two or three years ago.   And even then, so much can change that there’s no telling what other obstacles there might be when that time comes.   So, anyone that really wants to sell their home and press forward with life, really ought to consider doing just that.   The question is:   Do you pull your band aids off slowly to try and stifle the pain or do you rip  them off quickly to get it over with?

The real estate market operates based on supply and demand just like any other market.   There IS  a price at which buyers will buy.   The problem right now is that many sellers are not willing to sell for that price.   Those who decide to become willing are going to find a sale.   The first step is truly understanding how to find that price.   If you are a homeowner that wants to sell, but thinks you can’t, you may find yourself in one of the following situations:

1)   I have enough equity to sell my home at today’s market prices, but I just don’t want to take the loss.   This response is about attachment to the past.   Do you really want to put your life on hold for the next three years?   Do you want to pull your band aid slowly or get it over with quickly?   If you are buying another home, the seller of the home you purchase is ALSO going to take a haircut so you are likely to make up your sales loss on your purchase.   Plus, with today’s low interest rates, you’ll probably be able to afford more home than you could previously.

2)   I need the equity from my home in order to buy the next home.   If I take a loss on my home, I can’t afford to purchase another.   This is a valid point, but with a little bit of planning and execution this can be worked through.   First step should be to contact a lender to find out what you might qualify for and home much downpayment would be needed to make a purchase if you sell in today’s market.   Additionally, if you can work closing costs into the price of the next home you buy, you can reduce the amount of money you’ll need to bring to the table.   If you take all of these steps and are still coming up short, perhaps you can begin to make extra payments against your current mortgage to pay down the balance faster.   The sooner you can reduce the total amount you owe, the faster you can sell and move on with your life.  

3)   I owe more than my home is worth and after all the closing costs, I cannot payoff my current mortgages.   Therefore, I cannot sell.   Again, this is a valid point and a challenge that many people face today.   You have two options in this scenario.  

If you have sufficient income and can afford to remain in your current home, you should do just that.   It is the responsible thing to do.   However, perhaps you can start working towards paying down the balance owed by making extra payments so that you can build enough equity to allow you to sell in the future.   Perhaps between that 3% appreciation and the extra payment of principal, you’ll be ready to move sooner than you would have by simply waiting for the market to improve.   With today’s uncertainty, I wouldn’t count on appreciation to dig you out of the hole.   Coming up with an extra payment plan is a sure bet in helping you reach your goal faster.

If you have found yourself in a situation where you cannot afford your current home and are concerned about the possibility of foreclosure at some point in the future, you should contact your lender immediately.   Many people have found themselves in this situation due to circumstances beyond their control.   Your lender may be willing to work with you to sell your home through the short sale process.   If your credit has been damaged, you might not be able to buy another home in the near future, but at least you can eliminate the stress that your current home is likely causing.

Although sellers do have options available to them, many choose to simply evade reality and just wait.   Time will tell if waiting is a winning or a losing strategy.   But at the present, it does not appear that our housing situation is going to improve dramatically anytime soon.   The waiting game could be longer than expected.   Perhaps a  better solution is to surrender to a new reality, cut losses, and press forward in life.

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