Homes take longer to sell today than they did in 2005. This is due to a slow home-sale market that has resulted in a build-up of the inventory of unsold listings. Although there are exceptions, this situation is expected to continue until late 2008 or 2009 — at least. What options do sellers have whose homes aren’t selling quickly enough?
Many of the homes that aren’t selling are priced too high for the current market. The median sale price of homes sold nationally in February 2008 was down 8.2 percent from a year ago, according to the National Association of Realtors. This percentage was even higher in cities like Miami and Las Vegas that were speculative hotbeds in 2004 and 2005, and now have high foreclosure rates.
Some areas are doing better than others. For example, the median sale price of homes sold in the San Francisco Bay Area in February 2007 dropped only 5 percent compared to a year ago.
There are few areas in the country where prices have actually increased during the past year. Even so, sellers often have a difficult time coming to grips with the fact that the value of their property has declined.
It has often been said that sellers are the last to know when it comes to the value of their homes. Buyers, on the other hand, are often ahead of the game. They know the market better than most sellers. They are aware of the risks involved in today’s market, and they gauge the price they’ll pay accordingly.
HOUSE HUNTING TIP: Sellers whose homes aren’t selling should analyze the price they are asking with the help of their real estate agent. It’s useful to look at similar homes in your area that have sold recently. Why did these homes sell when yours didn’t? If price is the key determinant, adjust your price accordingly, if you can.
Sellers who are unable to accept a reasonable price for their home should take it off the market and wait for a better time to sell. Letting your home sit on the market overpriced won’t accomplish your goals. And, it could hinder your sales effort at a later date when you get serious about selling. You don’t want to be known as an unrealistic seller.
Some listings need more than a price adjustment to sell in this market. If modifications can be made to the property to make it more salable, consider removing the listing from the market temporarily until changes can be made. Then, adjust the price some to give the listing an entirely new look when it is re-marketed.
Finding a tenant rather than a buyer might seem like a good option for some sellers. Before taking this approach, talk with a tax advisor. The tax laws affecting single-family residences differ from those relating to income-producing properties.
One tax benefit of owning your home is that you are entitled to $250,000 of tax-free gain ($500,000 for a married couple filing jointly) when you sell. But, restrictions apply. For instance, you need to have owned and occupied your home for two of the last five years. If you were to move out of the area, with no plans of returning, this could pose problems when you decide to sell.
It can be difficult to sell a tenant-occupied property, particularly if the tenants are content to stay where they are. Also, your home might not show well with a tenant living in it. Ideally, plan on selling after the tenant has vacated.
THE CLOSING: This way you can have the property repaired, painted, cleaned and staged for sale before it goes on the market.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer’s Guide," Chronicle Books.
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