Getting Ready to Sell
My name is David Sekunda and I am a 20 year veteran real estate Broker serving the Springfield, Missouri real estate market and over the years I have picked up a few thing that might help you on your home pricing. So, you have decided to sell your Missouri home, now is the time to start looking at it as a house, by that I mean it is a store of value for you and is a financial asset, it is a vehicle that hopefully has appreciated over time and has essentially made you a nice nest egg to be cashed in, this is where you turn that store of value into cash. So, putting all the emotions and memories away that can add no value to the home for the buyer we need to look at it from a home buyer standpoint and consider what you should or should not do to the home.
The following is going to vary depending on if you are in a seller’s market or a buyers’ market, good neighborhood or bad one, poor condition home or good condition, near a new exciting real estate development or in a market transition. What is important here is to know your strengths and weaknesses and the competition when making the decisions on how much to do before you put it on the market. Remember buyers’ comparison shop and can be a little more educated on values based on what they have seen before they come to your home. Buyer’s motivations are all different so it is a bit hard to be precise but in the end it is about being as educated as you can be, know what you should do to prepare the house for sale and what a good price will be to start.
Shop the Competition
One of the biggest mistakes I see Missouri home sellers make when it comes time to sell a house is that they determine value by need; often they will pull a number based on payoff and moving costs or by what the house down the road sold for or even I have had them say that a friend in California said my house should bring a certain amount of money because similar homes they know have had sold for that price. Real Estate is hyper local and values can change greatly by town, zip code, school district, neighborhood or even the street. Another mistake people can make is after interviewing listing agents they just pick one that said they could get xyz for their house while other agents were coming up with lower numbers. This is a technique some agents use called “Buying the listing” in short, it is telling the seller something they want to hear and believe in so they will get the listing, later when nothing happens the seller is asked to reduce the price gently and gradually you will be listed for what you should have been to start with which in the end may cause you to get lower offers because you missed the large pool of buyers that were initially there when you entered the market. See after about 30 days your house is old news and the buyers you get are only those entering the market.
What I tell people is think of a price they are comfortable with and realistic and then shop it themselves, put themselves in the buyer’s shoes for their home and start doing the research. The best way is to start online, compare your home and improvements or lack of improvements to similar houses for sale, try and narrow your search to the zip code, neighborhood or school district is usually good. Look at the photos of the homes for sale, compare your house against theirs because your buyer will be possibly coming from or has already been to those homes. If you end up working with an agent, you can see if that agent will open up a few doors so you can get a better look at the competition before making a solid price.
When pricing a home for sale time is money and pricing it wrong to start will only put you in a position to chase the market if it is in decline. Like above with the agent that “Buys the listing” and can’t get that sales price promised it can cost you money. For example, if you have a mortgage payment of $2000 per month and you price your home wrong to start and it takes 90 days to get a contract and then another 30 days to close, you just lost most of the additional $8000 in payments to interest. Most people don’t realize that by pricing it wrong to start with cost them more out of pocket in the end but if the market is in a decline you can add that to the losses as well, time is money in real estate.
Price, Condition and Location
The three most common issues in real estate are Price, Condition and Location; and they all are controlled by you the seller, you can also add access. Have you ever heard the expression Location Location Location? Well, it is true, a homes location can make all the difference in the world when it comes time to sell, in some areas it can be the worst home on the street or neighborhood, and it will still bring a great sales price just based on that alone, you may or may not have to do a lot to bring it to market; lets start with looking at the buyers.
Now, depending on your location, price point and type of home; your buyer can most likely be a buyer who plans to live in the home like you or it can be an investor that plans to buy it fix it up and flip it for a quick profit or someone who will buy it and use it as a rental property. In any case the condition of the property is going to be a variable factor on which type of buyer makes an offer on your property.
Let’s look at who your buyer might be as it relates to your house; this makes a difference when putting a house on the market, negotiating a sales price and what you can expect from the results of a home inspection, or the buyers type of home loan being used to purchase your house or is it cash. I like to look at it like there are a few different categories of houses that can have different factors that need to be considered, is it a first time home buyer level house or is it a move up level buyer house or executive level house for your area, maybe a vacation house at the lake; all of these will have slightly different buyer approaches and differences in how they navigate a transaction to purchase your house. Having a general idea on who your target buyer will be for the house you are selling will help determine what or if you should do anything before putting the house on the market.
Types of Buyers can influence home pricing
So, first time home buyers make up to about 45% of the total market purchases according to Zillow’s 2022 Consumer Housing Trends Report. They are traditionally going to be getting a home loan and be less concerned about overall price of the house; they are going to be pre-approved for a certain amount and that will be it, that amount determines what their monthly payment will be and that will govern the transaction for them. These buyers most likely will be using a government loan product like FHA or VA home loan and also in rural areas USDA is also used as a program. What is common about these loans and how they have an effect on you the seller is that the house must also meet condition guidelines as set down by the government, meaning that the collateral (House) for the loan is in average to above average condition in order for the buyers to be able to borrow the money to close on the loan. These loan programs are more geared to promote home ownership and make home ownership possible for more Americans by requiring little to no money down; VA and USDA are zero down home loans for qualified buyers while FHA is at about 3.5% as a down payment. So, property condition will be something appraisers look at when they visit the house, now these appraisers are different than home inspectors and I will cover that soon. Your agent is a great source and can help you determine any issues your house might have when your buyer is using these loans to purchase a house, most of the time the appraiser is looking for broken windows, roof condition and obvious things that could be a financial burden on the buyer but also going back to the average to above average condition of the collateral for the buyers loan.
First time home buyers might be more shocked about the results of a standard home inspection, these reports can be overwhelming and make it look like the house has a lot of issues when it may or may not, what is key here is the buyers agent ability to manage the buyers expectations. First time home buyers in many cases are clueless to the cost of some repairs and will want many repairs to be completed by the seller because they may not have the financial ability. Generally, if the buyers agent is good they have pointed out the obvious to the buyers ahead of making the offer so much of it is already known, but it is things like a furnace or hot water heater and ever the roof that can cause issues down the road. Sometimes light switches don’t work, and it is as simple as the bulb is out but per the 2022 NAR Home Buyers and Sellers Generational Trends Report 36% of all home buyers will avoid renovations or issues with plumbing and electrical. We will talk more later about negotiating in inspection reports; but if your house is considered entry level and your buyer might have this type of loan product just making sure everything works and is cleaned up, it goes a long way; especially the big-ticket items like the furnace, always have someone come out change the filters clean it up and give it an inspection, the last thing you want is some home inspector playing it safer than sorry and telling the buyer to have a further inspection on the furnace because it is all dirty and looks worse than it actually is, this can alarm a home buyer and create bigger issues and delays in resolving the home inspection contingency. Remember you are working with a first time home buyer and they can be more picky than someone who has already owned a home.
Also, fair warning sometimes with first time home buyers they want to bring the parents or someone who knows more during the home inspection or at some point near it; there is always a Dad who wants to save the day and call out something broken or reason not to buy the house; remember that when deciding if you should fill that small crack in the foundation with caulk or not, if it is repaired and not allowing moisture in then it can’t be an issue later, sometimes it is the small things that can matter the most.
Moving on to move up home buyers, these are buyers who have at least one home ownership experience under their belt; negotiations can be a little smoother with these buyers and many still use government financing programs but many now can go conventional financing or cash. Conventional financing is less concerned about the condition of the home for these buyers and more focused on the buyers credit and ability to repay, whereas FHA, VA and USDA was more collateral based and had a lower credit entry requirement for the buyer.
So these types of buyers, depending on how many homes they have purchased can be more or less critical of condition of the home, they will be looking at curb appeal to start, they are moving on up and want more out of a home, so repair requests will largely be decided by how bad they want the home, especially for what you are asking in your price and how it compares to the homes they just viewed before they showed up at yours. Many buyers who have owned a home always know there is a laundry list of repairs that come with every house; many will be looking at flooring condition, layout and functionality of the overall home. Many move up buyers have a growing family and are looking more space and the yard, location, schools and how close it is to work.
Many of these buyers are willing to do some painting and floor covering updating, they will have more resources available than your typical first-time home buyer. Many will want to change things up after they own it so generally, unless the flooring is bad, and the paint is in poor taste by most standards these buyers can tend to be more agreeable and easier to deal with and make these updates themselves.
Also. always consider Realtor commissions, 6% of a $400,000 is $24,000! At HouseKey Flat fee Realty we can save most home sellers thousand in real estate commissions and still getting the best price.