Selling Your Home in a Down Market

Tips for selling your home when the real estate market is slow.

Selling your home in a cold real estate market poses special challenges. You face lower prices, lots of inventory, and buyers who drive hard bargains, but who themselves may have a tougher-than-ever time qualifying for a loan. These conditions require you to use marketing techniques above and beyond what's typically necessary when the home sales market is hot.

Get Help From a Professional

When the market is down, it may not be a good time to go the FSBO (for sale by owner) route. It's tough enough attracting buyers without being on the margins of the market and particularly tough holding firm during one-on-one negotiations where the buyers think they hold all the cards. A licensed real estate agent or broker who has experience in the market you face can help you design a marketing effort tailored for tough times and keep up good relations with the buyers.

The agent can also help you set an appropriate list price an important topic fully covered in Nolo's article, Listing Your House: What Price Should You Set? 

Get Your Home Ready

It's also not a good time to go bare-bones on your marketing plan. Your job is to make your home a standout among the distressed and price-reduced homes that make homebuyers think they have the upper hand and need to pay no more than bargain-basement prices.

Start by cleaning and decluttering. If you can't or don't want to do the job, hire service workers to give your home a thorough cleaning and to remove clutter. Hire professional house cleaners, carpet and rug cleaners, fence repairers, a handyperson, window washers, and organizers. Don't forget the garage, attic, and basement. Replace stained or worn carpets, drapes, throws, quilts, and comforters.

Improve, but don't overdo it. Home improvements completed before a sale should include only changes that give your home a more contemporary, move-in ready feel. For example, consider:

• installing new major kitchen appliances, but only to replace outdated, inefficient models
• painting your home (exterior and interior) in inviting, neutral colors
• getting new floor and window coverings, and
• replacing or repairing a leaky roof.

Avoid kitchen and bath remodeling jobs or major renovations and additions. Giving the buyer a cash incentive for later improvements is often more attractive in a down market than making improvements that may not fit a buyer's lifestyle. The bottom line: Try to strike a balance between the needs of cash-tight buyers who want the home to be move-in ready and those who will have money to make their own improvements.

Improve your home's curb appeal. Curb appeal is the first impression your home conveys to prospective buyers. It should arouse shoppers' desire to own the home and entice them to cross the threshold. Remove clutter, tidy up the grounds, wash the windows, repair fences, fix driveway cracks, hire a landscaper, and put out pots of blooming flowers. Make it sparkle like a model home.

Stage your home. An empty home may sell well in hot markets when people are content to buy a house based on seeing the floor plan and that they'll have a roof over their heads. But, when sales are down, you want visitors to start falling in love with your home and imagine sitting at that cute kitchen table or on the bench in the back yard. (Even if they rationally know that the furniture doesn't come with the place, their imagination will behave otherwise.) Professional stagers help fuel these imaginative forays by taking the lead in redecorating, renting new furniture to show off the home, recommending paint colors, and landscaping.

For more information, see Nolo's article Is Home Staging Worth The Cost?

Marketing Your Home

For maximum marketing exposure, you and your agent will want to start by advertising in traditional newspaper classifieds and other print ads, using conventional for sale signage packed with fliers, and conducting open houses perhaps separate ones for real estate brokers and homebuyers. But you'll likely get the widest exposure through online marketing, described next.

Use online marketing methods. Post your listing on craigslist.org and be sure your multiple listing service's (MLS) listing is getting picked up by the National Association of Realtors at www.realtor.com, as well as on the growing number of competing listing portals, including www.trulia.com, www.Redfin.com, and www.Zillow.com. Your real estate agent or broker can do this. Or, if you're selling on your own, contact the listing portals directly to try to get yours posted.

Create a virtual tour. Take a step beyond your MLS presentation and consider a website, Web page (such as www.postlets.com or www.vflyer.com), or blog that offers digital images, videos, and a virtual tour of the home to create a 24-hour open house. You can also provide information about the neighborhood, points of interest, schools, crime, commuting, and jobs in the area.

Explore Seller Financing

In a down market, financing is often tight for buyers. Even creditworthy borrowers get rejected because of rigid underwriting. In order to facilitate a sale, consider financing the deal yourself called "seller financing." By financing the sale, you may sell your home sooner and enjoy a financial return for the effort.

How does seller financing work? You, as seller, act as the lender, but rather than actually loaning cash, you extend credit against the purchase price of the home. The buyer signs a promissory note and trust deed in your name. If there's an outstanding mortgage, the lender must agree to the deal. There are numerous variations, including equity sharing, lease options, financing only a second mortgage, and more.

You'll need to check with a real estate attorney or other professional proficient in seller-financing contracts to learn more and to determine whether you can handle the risk. (To learn more about seller financing, read Nolo's article Seller Financing in Home Sales.)

Consider an Auction

Auctions are not only for foreclosures. Selling your home at auction can attract prequalified buyers and, if successful, can reduce the carrying costs associated with a home languishing on the MLS for months. Because an auction is designed to set off a bidding war, the final price could exceed that of a negotiated sale.

Again, professional help is key. You need a recognized auction house and a real estate agent, attorney, or other professionals to assist you in deciding whether an auction would work for you and what type of auction to have and to hold your hand throughout the auction process.

If You're Desperate: Consider a Short Sale

If, perhaps, you can no longer afford the mortgage or have already missed payments, consider a short sale as a way of avoiding foreclosure. In a short sale, you sell the home for less than you owe to the lender and the lender agrees to forgive the outstanding balance on the mortgage. But it's a risky way to go, since the lenders are notoriously slow to grant their approval. (To learn more about short sales and other options for avoiding foreclosure, see Nolo's article Short Selling Your Home: Should You or Shouldn't You?.)

For a comprehensive guide to selling a home during difficult economic times, see Selling Your House in a Tough Market, by Ilona Bray and Alayna Schroeder (Nolo).