What will it take to get you to buy this home?
Sellers turn to creative incentives to lure buyers to sign on the dotted line.
When she put up a new "for sale" sign two weeks ago, real estate agent Mary Ellen Wasielewski had some unusual advice for the sellers: Give the buyer money to build a garage.
The family lives in the Boston suburb of Medway, where homeowners enjoyed a seller's market not so long ago. This $679,000 home has plenty to recommend it: an estatelike setting, a custom chef's kitchen, a Jacuzzi, and a stone fireplace.
But now the tables have turned. For a deal to happen, buyers must be pleased on every front. With the snow and slush of winter just around the corner, Ms. Wasielewski says no garage probably means no sale.
"The buyers are out there. I see the same ones coming around," she says. "They're not willing to pull the trigger until [they find] the perfect equation of the condition and the price."
It's a quandary faced by home sellers nationwide: How do you close a deal in today's buyer's market?
Many homeowners are getting increasingly aggressive and creative – in some cases mimicking incentives that contractors are offering on newly built homes.
In the Boston area, for example, one seller lured people to an open house by offering a chance at a free restaurant dinner. Another offered a potential buyer a paid vacation to Hawaii.
Many will cover closing costs, or even make a few months of mortgage payments for the buyer.
The incentives help in some cases. But they won't alleviate the pressure to meet buyer expectations on more basic issues such as the listing price, the condition of the home, and even that garage.
This is a time for using savvy salesmanship and managing the emotions tied to a structure that is both a home and a major investment.
Economists aren't sure how long the buyer's market will persist. Some believe home prices are already stabilizing in most of the nation, since mortgage interest rates seem to have leveled off. But other forecasters see the possibility of a protracted downturn in once-hot markets.
For now, what's clear is that home sales have downshifted and buyer expectations have upshifted.
For sellers to succeed, they should consider the following tips from real estate professionals:
Even in today's climate, a home can generate quick interest, even a bidding war, if it's a bit of a bargain.
"It's all pricing," says Kenneth Hawkins, who has seen four real estate downturns in his four decades selling homes in Milford, Conn. "The new ones on the market draw the most attention, and if they're priced competitively – maybe even a little bit below [the market] – that's the incentive for people to buy."
Don't "test the market" with a high price, experts advise. If the home languishes on the market, you've lost time and a price reduction may become essential. Too high a price also will lose the added foot traffic that usually comes with a new listing.
Sometimes special enticements do draw traffic to your home. But many brokers say they're a peripheral factor. It's the home itself and the price that will be most important for buyers. Incentives for brokers, such as adding a bonus to their commission, may help, but it's the buyer who calls the final shot.
Some flaking paint or clutter might have been OK to buyers in 2004, but not now. "They won't accept odors and they won't accept dirty carpet," says Warren Robinson of Robinson Group Realtors in Durham, N.C. "This year, it is a big deal."
Calling in professional "stagers" to redecorate key rooms is one option, but sellers can take many common-sense steps on their own, such as giving rooms a fresh coat of paint and removing excess furniture.
A "For Sale by Owner" listing allows sellers to avoid the hefty commissions that real estate agents charge. But an agent can provide help with pricing, advertising, negotiating, and even courting other brokers to bring in additional potential buyers.
"Networking becomes much more of an asset" in this market, says Wasielewski in Medway, Mass.
Even after sellers have made the wrenching decision to lower the listing price and offer other incentives, buyers are likely to ask for even more concessions in negotiations.
"It's a very emotional process," says Wasielewski. Many sellers "believe when they get to the negotiating table that they have already lost" and don't want to give up more money.
Even so, having an interested buyer is a precious thing in today's market. You don't want to concede everything, but some flexibility may keep the buyer from walking away.
For people who haven't owned their homes for very long, the financial equation may be paramount. An offer might not leave them with enough money to pay off their mortgage. One way around that, says Mr. Robinson in Durham, is that sellers may be able to negotiate with their mortgage company to pay off some of the remaining debt over a longer time span.
In the end, many sellers can take solace in one fact: They're also buyers. If they sell at a discount, a similar discount probably awaits them when they buy their next home.
It may be a tough time to sell a home, but now is actually a good time if you are in the position to rent one.
A slowdown in home purchases has helped rev up the apartment market. In effect, every potential home buyer sitting on the sidelines is one more renter competing for apartment space. "Rents were rather flat. Now the process is reversing, where home prices are flattening or even declining [and] we're seeing increased rent growth," says Brian Carey, an economist at Moody's Economy.com in West Chester, Pa.
A key reason, he says: Rising interest rates mean that "people have been priced out of the housing market."
As a result of increased competition, rents have risen nationwide this year. The average advertised rent is now $978, a rise of 3.9 percent from last fall, according to a 75-market survey by Reis Inc. in New York.
So is now a good time to rent your home rather than sell it? In many cases, it can be a good deal, but the answer isn't a simple one.
First, the wisdom of temporarily renting your home depends on your local market – and how long you can afford to wait. In most areas, home prices at least keep pace with inflation over time. But not every year. Economy.com recently forecast price declines in 100 metro areas, representing nearly half of the nation's housing stock. In many cases, these markets (from California to New York to Florida) may not hit bottom until 2008 or 2009.
Second, consider the economics. Take the after-tax income you expect from rent and subtract your costs: mortgage, maintenance, insurance, property tax. Is there a substantial positive cash flow? One rule of thumb: The annual rent divided by the property value should give you a "rental yield" of 8 percent or better, some experts advise. You can also gauge a rate of return by dividing the annual income (net of expenses) by the value of your investment – what you'd have left if you sold the home. Any price appreciation will be an added bonus.
Finally, don't forget the work involved: Not everyone is willing to find tenants, respond to repair issues, and deal with late payments.