A year ago, we saw far fewer “For Sale” signs. And this year, there are even fewer.
The surprising thing about the real estate market is its resiliency. It never fails to surprise how decisively a market turns. When it’s time, it’s time. And it’s clear to us that 2014 is looking very good for real estate.
Here is an overview of what home sellers can expect in the market this year.There are a few troubled spots on the horizon: Mortgage interest rates are at least one percentage point higher than they were a year ago. And home prices are higher. That means homes are less affordable than they were, particularly since incomes haven’t risen, in real terms, in years.
That’s good news, and not so good news for sellers. It’s great that home prices are rising. In part, homes that were in foreclosure or listed as short sales, have closed and now prices are rising again. But rising interest rates (depending on how high they go) mean fewer buyers can afford to pay those higher prices.
At the end of 2011, mortgage interest rates reached 3.7 percent, before falling back. In 2012, mortgage interest rates were about 3.3 percent on a 30-year fixed-rate mortgage. We ended the year with mortgage interest rates around 3.5 percent for a 30-year fixed rate loan. In 2013, we ended at 4.3 percent for a 30-year fixed rate mortgage. (If you’re wondering, we think these rates are still great from a historical perspective.)
The Federal Reserve has indicated it will now pull back its monthly spend of $85 billion in mortgage-backed securities and Treasury securities, which it did to keep interest rates at historic lows through 2015, or when the employment rate falls to 6.5 percent. The economy is improving. Third quarter 2013 GDP numbers were revised upward to 4.1 percent. The economy hasn’t grown that fast in years.
So, with low inventory, still low mortgage interest rates, and modestly rising prices, here’s what you need to do to get your home in selling shape for 2014:
• Overcome any possible objections a buyer would have.
Buyers are always looking for a reason not to purchase your house. Your job as a seller is to eliminate any potential objections that would stand in the way for a buyer to make an offer.
If you really want to sell quickly, you’ll work hard to exceed the buyer’s expectation of your home as well. If your home is competitively priced, and your home’s condition exceeds a buyer’s expectations based on other homes in the neighborhood, you’ll get an offer — even if it isn’t the offer you want.
• Get your home into selling shape.
Cleaning your home is a must. After that, you should consider hiring a stager to give your home the television-worthy polish so many buyers expect today. (Yes, they want your home to look like something they’d see on HGTV.) Assess what other sort of work needs to be done, such as fixing things that don’t work, touching up paint, or cleaning or replacing your carpets.
Decide if you need to update your landscaping, and paint, clean or tuck point your home’s exterior. And if you’re selling in January, clear out the holiday decorations as quickly as possible.
• Invite at least three agents to create a comparative marketing analysis (CMA).
Often, sellers simply call the agent who sold them their home to list it. While you may wind up hiring that person, you’ll be doing yourself a favor if you invite a couple of other agents in from different firms. That’s because each will bring different ideas to the table about how much your house is worth and what kind of marketing plan will work. They’ll all have different experiences to draw on and have different buyers in mind who may want to make a quick offer.
• Understand what it will take to sell your home.
If you live in an area littered with foreclosures, you may have to meet that price point in order to sell. Is it worth it? Probably not, but you’ll have to really evaluate price and timing in order to get the most for your property. If homes have begun to appreciate, you might be pleasantly surprised. Again, a CMA will be incredibly helpful.
• Be realistic about the market.
Find out what types of properties are selling in your area and how many days they’re sitting on the market. Accept the reality of your local market and make sure you price your home realistically.
Don’t blame your broker if you don’t get three offers over your list price within 24 hours of putting your home on the market. Sellers who set sky-high (or even pretty high) prices could wait months or years for an offer (one of my neighbors has been trying to sell his overpriced home for years) and may wind up with the same price they would have had if they’d priced their home correctly the first time — or a lot less.
In this real estate market, one of the worst things you can do is overprice your home from the start. The more realistic you are, the better off you’ll be.
• Rent if you can’t sell and buy at the same time.
We don’t recommend putting in an offer on another property until you have some serious interest in your current property or unless you have enough cash to cover the expenses of both properties for six to 12 months.
It’s fine to start researching other neighborhoods, but if you’re not sure what you want to do, consider renting on a short-term or month-to-month lease. While a double move is a pain, and does have some added costs, it’s a lot cheaper than carrying two mortgages for two years.
• Read all documents thoroughly before you sign them.
Why would someone sign a legal document he or she hasn’t read? I’m not sure, but home sellers do it every day. If you’re going to sell (or buy) in the coming year, promise yourself that you’ll take the time to read and understand the listing contract, offer to purchase and loan documents for your next purchase.
(If you’re taking back a loan for the home buyer, have an attorney prepare the documents so you are sure to be protected.) Unless you’ve got cash to spare, a mistake in these documents and the warranties they contain could seriously affect your finances.
• Don’t be greedy.
One big mistake many sellers make is to get a little greedy, particularly if the first offer is above the minimum acceptable price you’ve set. Then the negotiation becomes a game of how much you can get.
Remember, a successful sale means everyone walks away feeling happy. If you get so greedy that the buyer walks away, you’ve let the deal get the best of you. Resolve to be reasonable and you’ll end up shaking hands with the buyer at the closing. You should also know that there aren’t unlimited buyers out there, and if you lose one it might take you quite some time to find another.