Discount real estate Altru Realty founder Keith Gordon says it’s time to use his 10 day sell strategy to beat a sluggish market (home prices fading as rates rise and mortgage applications fall)
Home sellers should price their homes aggressively now because we will be seeing lower home prices for the next two years as we transition from a slow market to a down market in full-correction mode. The markets are always slow to react to fundamental changes because no-one wants to leave any money on the table; “bulls and bears make money and the pigs get slaughtered” is the Wall Street go to phraseology including home sellers, so don’t go to the slaughter.
Mortgage applications were down 22% from last year (same week) and refi’s are down 40% from a year ago as the 30 year mortgage rates hit an 8 year high reaching 5.17%. Home prices have outstripped buyer’s ability to buy. But there’s more…All indicators point to lower home prices, higher inflation, and lower stock prices all courtesy of record budget deficits, political uncertainty, trade wars, higher interest rates and world tensions.
Applications to refinance a home loan, which are highly rate sensitive, fell 4.3 percent for the week and were 40 percent lower compared with a year ago — the lowest level in nearly 18 years. While homeowners now have more collective home equity than they ever have in history, thanks to higher home values, fewer are willing to tap that equity through a refinance, because it would require giving up their rock-bottom interest rate. Since rates sat so low for so long, there is a shrinking pool of borrowers who could now benefit from a refinance, cash-out or not.
Short sales will be back on the table come mid-2019 along with other pressures on the market. Once the new trends gain momentum it’s too late to sell because home sellers will have to price at market value minus 2-3% to get a contract. Right now you can price a home at market value plus 0-1.5%. That will ensure offers flowing within days not months.
The real estate market peaked in the 4th quarter of 2017 and has floundered for all of 2018 and is now ready to roll south, so don’t assume that we are in an even to up market. The more logical and pragmatic assumption is that you should sell now at today’s market values and recast yourself in 3 years. If you add any wiggle room to your listing you will be chasing a market as it fades. The real risk is a 10% lower market. Giving up 2-3% now is better than 10% later.
As a professional negotiator who focuses on buyer’s psychology, I know why buyers make offers and why they don’t. It’s all about hopefulness that they can get a deal done at a number that makes sense to them. I have a saying that buyers are perfect because they have the cash. Adding unnecessary wiggle room takes away any buyer-hopefulness. This is best illustrated when a home gets 20 showings and no offers. All 20 buyers said no to the valuation by declining to make an offer. The correct list price actually forces the buyer to make an offer either at full-list price or lower. The smart negotiator takes these buyers’ offers and pushes them towards the list price. This process is called proving value. If a list price doesn’t garner offers it is literally worthless to the listing agent and the seller alike. A successful sale starts with an accurate well-thought out list price and ends with some tough-savvy patient negotiations.
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