Selling A Home Complicated By Higher Interest Rates

On front lawns across the country, “For Sale” signs are popping up almost as rapidly as tulips and daffodils.

It’s an annual rite of spring: Houses go on the market as the weather warms, and with any luck, change occupants before summer’s end.

A couple of years ago, home sellers had a better-than-average chance of achieving that goal, thanks to improved economic conditions and historically low mortgage rates that brought buyers out in droves.

Prospects aren’t quite as good this year now that the economy has slowed somewhat and rates are higher. The average rate on a 30-year conventional mortgage is expected to hover in the 8.5 percent range this spring and summer - about where it was last year, although about 1.5 percentage points above the summer of ‘93.

“The buyer out there is probably in a good position” to negotiate an attractive deal, John Tuccillo, chief economist for the National Association of Realtors, said in a recent interview. He noted that inventory of available homes has edged up this year while demand has lessened slightly.

By the Realtors’ account, nationwide sales of previously owned homes are expected to drop around 6 percent this year over last, to a seasonally adjusted annual rate of around 3.7 million. Home prices, on average, are expected to keep pace with inflation.

As a result, sellers in many parts of the country will have to be more aggressive in marketing their homes, from the way they price their properties to the way they show them off to potential customers.

Real estate experts offer some crucial selling tips to help move things along in today’s market:

Price Competitively

An inflated asking price could keep a home languishing for months.

To set a fair price, sellers might consider an independent appraisal.

Otherwise, experts suggest keeping abreast of the competition by studying what comparable homes - those similar in location, style, age and condition - have sold for recently.

This information should be available at a municipality’s real estate tax office. A listing agent should also have that information.

Some real estate agents suggest leaving room for negotiations by asking a slightly higher price than sellers expect to get. Depending on market conditions, that could be anywhere from 1 percent to 10 percent above that price.

Advertise Aggressively

For those selling a home through a real estate firm, the listing agent should handle all the marketing chores. Just make sure he or she explains in which publications and how often the home will be advertised, when, or if, “open house” tours will be conducted, and where the “For Sale” signs should be placed.

Those going it alone - known in the industry by the pronounced acronym “fizzbos” (For Sale By Owner) must be prepared to handle all those details, along with preparing documents like fact sheets and setting up appointments with prospective buyers.

However, if they succeed in selling their homes without a broker (or even through a discount broker that takes half the usual fees), they could save thousands of dollars.

Clean Up, Spruce Up

A dingy, cluttered or dated house will turn buyers away.

Experts suggest sellers regularly tour their properties inside and out, noting and fixing problem areas like leaky faucets, broken fences or torn window screens, and cleaning out messy closets and rooms.

Outside curb appeal is important, and so is the way the inside of a home is decorated - and in some cases, not decorated.

“Homes should be neutralized; color (for walls or kitchen appliances, for instance) is not IN right now,” said Dorcas Helfant, president of Coldwell Banker-Helfant in Virginia Beach, Va.

Inspections, Home Warranties

Having a home professionally inspected before it’s listed can tip off sellers to where they should make necessary repairs. It also can help them in setting a fair price for their property. Sellers, for instance, could forgo putting on a new roof in exchange for lowering the price.

Getting a home warranty policy also may help sell a home. What this does is protect the buyer for a period of time, usually a year, should anything go wrong with the major systems within a home, such as heating and air conditioning or major appliances. Policies can also be purchased on swimming pools.

Incentives For The Buyers

Sweetening the pot can’t hurt, either.

Depending on the market conditions in a particular region, some homeowners might consider helping buyers with their financing by paying some of their closing costs, such as the “points” charged by mortgage lenders. Borrowers can “buy down” their mortgage rate by increasing the points, each of which is equal to 1 percent of the loan amount. That will help lower the buyers’ monthly mortgage payments and make the house more affordable.

A few homeowners, especially those who’ve paid off their own mortgages, may also be in the position of taking the role of lender themselves. This is particularly helpful for buyers unable to qualify for an institutional mortgage.

Other suggestions include: leasebuy options, having buyers assume the current mortgage if permitted by the lender, even “decorating allowances” paid to the buyer to replace the orange shag carpet they so despise.

Incentives For The Brokers

Real estate agents are sharply divided on whether this is necessary.

Some confide that incentives - such as an extra $1,000 commission if the property is sold within 30 days - will make them work harder to sell a home.

Others think it only causes resentment.

“It’s an insult,” said Franz. “It’s my job to do everything possible to get the house sold. If I have to be given a bonus of some kind it suggests you think I’m not doing everything I’m supposed to do.”

Whatever the agreed-upon bonuses and commission (6 percent of the sale price is fairly common), hire a competent broker knowledgeable about the local housing market and financing options with an aggressive marketing plan in place.