Selling Your Home in a Post-Bubble Real Estate Market

September 06th, 2017

In the Washington DC metro area, we have seen the real estate market begin to stabilize in 2011.

Prices haven't fully rebounded but many homeowners, both young and old, are getting the itch to

sell and move on with their life plans. The fact remains however that many homeowners have

seen the equity in their homes decrease significantly or evaporate altogether in the past four

years. For first time homeowners who are starting families and needing additional space, many

simply do not have the option to short-sell their home and many have no desire to walk away

from a home without any savings after making a significant down payment. Equally frustrating

is the scenario for retirees who watched their home values peak, made plans for retirement and

then saw those savings slip away as the bubble burst. I’ve come across these sellers, both young

and old, who have found solutions to moving on with life without having to sacrifice the selling

price of their homes.

When discussing solutions that worked for sellers this year, I was amazing to find one common

denominator among them all – they focused on their end goals. When it came down to it, their

goals were to move into larger homes, relocate for a new job or retire. Selling was just one

option but it didn’t necessarily have to be the only solution.

Example 1) Young couple owned a condo that was upside down. They were starting a family

and needed a bigger home. After properly staging their home and listing it for sale, they did not

receive a single offer for several months. They did however come across someone that was

interested in renting their condo. With a baby coming around the corner, the young couple found

the best solution to meet their goals would be to lease their condo until prices increased. Since

the couple did not have enough funds remaining for a new down payment, they opted to sign a

lease for a larger home. The great part is that they didn’t let the timing of the real estate market

affect the timing of their family plans.

Example 2) A retired couple living in Virginia owned a vacation home in North Carolina. They

listed their home for sale at a competitive price but did not receive any offers. They approached

me seeking a solution and I suggested offering seller financing. In today’s market where it’s

difficult to obtain a mortgage offering financing can be more attractive than being the lowest

priced home in the neighborhood. They advertised “seller financing available” and within a few

weeks accepted an offer just below their asking price. The buyers made a significant down

payment, made monthly payments equivalent to a 4% interest only loan and were given two

years to pay off the loan. Just recently I learned that the buyers decided to pay off the remaining

balance after only a year of ownership.

Despite the challenges homeowners face with lost equity and financing availability for buyers,

we’ve seen prices slightly increase throughout Northern Virginia, especially in regions like

Prince William County that saw significant decreases in home values (upwards of 50%)

throughout 2008 and 2009. This suggests it’s easier to sell today than a year or two ago.

However, many homeowners who have been waiting to sell and developers who have been

sitting on the sidelines for the past two years are now entering the market again. A steady supply

of new and existing homes for sale, along with current challenges in obtaining a mortgage, will

keep pressure on sellers for at least another year or two. I recommend that sellers in today’s

market look outside the box for solutions that meet their current goals in life, just like the couples

above. In addition, try not to focus exclusively on the price when you receive an offer. Look

into the details of a contract and ask the buyers questions to identify all of their goals. Every

goal has a level of priority and there may be room for negotiation on price if you can satisfy

other goals such as better financing, longer period to settle, paying for a new home warranty or

throwing in some furniture. If repairs or significant home improvements are requested before

settlement, I would recommend asking for an equally sizable non-refundable deposit than can be

applied towards the purchase price. Meeting a buyer’s goals may win them over but try not to

put yourself into a deeper financial hole if you can avoid it.

Comments