Thanks to today's housing market, most sellers feel confident knowing their homes will sell quickly and for a higher price than they could have ever imagined. Now you're ready to make a hefty profit from the sale of your home, but what happens to home sales prices when the housing market softens? Let's look at a typical home seller's journey as they prepare to sell their home as the housing market softens.
You consult with your real estate agent about selling your house, and she compiles a CMA. You're surprised to see a lower-than-expected estimated sales price for your home. You feel disappointed and ask why you can't list your home for a price closer to what your neighbor sold his house for. Your agent explains that the housing market has softened, and buyers aren't willing to pay inflated prices. Houses are sitting on the market longer, the potential home buyer pool is diminishing, and remaining buyers anticipate reductions in home prices.
According to your agent, you can still secure a high-priced offer on your home above what you would have received from the sale of your home 2 or 3 years ago. But as the housing market softens, offers will be at or below the asking price vs. over the asking price.
Your agent encourages you to list your home sooner rather than later because mortgage rates are expected to rise, deterring potential home buyers. You feel secure knowing that your real estate agent will do whatever it takes to get you the highest offer on the sale of your home. Excitement sets in as you begin preparing to sell your house.
The example above is a typical scenario in today's real estate market, a seller's market that's beginning to soften. The inflated price of homes and bidding wars are likely to subside. To prepare for the changes in the housing market, here are some pricing scenarios to consider when selling your home.
- Must-have selling price
- Pricing above comps
Many home sellers set high expectations when it comes to pricing their homes. For instance, you expect you can sell your house for the same price or higher than that of a neighbor who recently sold their home. As the housing market softens, your real estate agent will highlight how previous sales comparables are no longer a good indicator of what your home will sell for.
If you insist on pricing your home higher than the existing market comps, buyers may show little interest as they see the market slowing down. Your high-priced home may sit on the market for a longer period of time compared to homes priced to fit the changing market.
If you decide to underprice your home in hopes of getting multiple home buyers to bid against one another and drive the price up, your strategy may prove to be futile in a softening housing market. Some buyers may see an underpriced home and wonder what's wrong with it, which isn't in your favor. An underpriced home may even attract lower than list price offers from buyers who think they're going to secure a bargain. Underpricing a home can also be perceived as false advertising, which is never in your best interest. Avoid underpricing your home if you want to sell it in today's softening housing market.
Trust an experienced real estate agent to recognize when the housing market softens so you can be sure to list for a price that buyers are willing to pay. Price your home too high in a soft market, and you may see fewer offers and more days on the market. Price your home too low, and you may create buyer skepticism and receive offers well below your expectations. Work with your agent to outline a strategy for pricing your home to sell quickly and for a price buyers are willing to pay.