How to change the price of your home to keep up with rising interest rates
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Not too long ago, the real estate market was so hot that sellers could fuel bidding wars and sell above the listing despite asking buyers to waive contingencies and waive inspections. But the Federal Reserve’s action to fight inflation made money much more expensive to borrow, which cooled demand and brought that balance of power back into balance.
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The result is sellers watching the weeks go by with barely a nibble on their listings, and many of them realizing the one unchanging truth of buying and selling – when demand drops, so do prices.
“It’s important to be realistic in any market, and you may need to make price adjustments,” said Beatrice de Jong, broker and consumer trends expert at Opendoor. “Especially with the current state of interest rates. The longer a home stays on the market, the harder it can become to sell. »
Keep reading to find out what changes you need to make to sell your home.
A lower price equals more eyes on your ad
When searching for homes, buyers filter the results to ignore anything over their maximum budget. Thanks to rising interest rates, these ceiling prices are getting lower and lower. If your asking price follows them, your ad will almost certainly get more views.
“A lower price can open up the listing to a new group of buyers, because people often define their search parameters based on the price range they’re buying in,” de Jong said. “Lower prices can be seen by more potential buyers.”
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A lower asking price could lead to a higher selling price
Lowering your price might draw more attention to your listing, but the trade-off is a lower selling price, right? Not necessarily.
“Right now, price reduction is not the enemy because we’re in a very different housing market than we were five months ago,” de Jong said. “In some cases, a strategic price cut can be an effective tool, triggering a bidding war that could potentially result in a higher bid than your original asking price.”
If you decide to lower your list price, it is important not to wait too long.
“One strategy that I see working across the board is not waiting more than a few weeks – three to four – after your home is listed to do a price reduction if you don’t get any offers,” said de Jong. “While you can do multiple showings and generate interest in the first few weeks, that doesn’t always guarantee deals. Acting quickly to effect a price adjustment can cause buyers who may have been on the close to act quickly on this new offer.
Kevin Watson, senior lending strategist at Churchill Mortgage, doesn’t necessarily agree that sellers should rush to lower prices, despite the anxiety that comes with the longer average time to market. of today.
“Although the time it takes to sell a home has increased, if sellers have priced the home correctly, they shouldn’t have to lower it to compensate for rising mortgage rates,” Watson said.
But if you do decide to lower your asking price, Watson is adamant that there are two very important steps you need to take – and two very important people you need to involve.
“First, consult a trusted real estate agent for relevant comps to see what the market value should be – not six months ago, but what it is today,” he said. declared. “Second, consult with a trusted mortgage lender about how they can help a potential borrower reduce the interest rate to a level where the borrower will be comfortable with the payment. There are special tools available to mortgage lenders. mortgage lenders who can show how buying a lower rate can be much more beneficial than lowering the price of the home itself.
So what is the strategy for a downward price revision?
Aislynn Radley, a licensed realtor and broker/owner of Acrosstown Realty Inc., has a three-step system for finding your Goldilocks listing price that isn’t too high or too low.
First, find a high line to avoid dropping your asking price too little, which could put you back in the same predicament in a few weeks.
“Find a comparable home that sold for a higher price last month and use that as your ceiling,” Radley said. “You don’t want to be in the position of chasing the market because constantly falling prices erode your bargaining power.”
Second, are you part of a group that’s small enough for buyers to notice you, but large enough that you’re not an outlier.
“Pay attention to how many homes appear in the same price range and area as yours when a buyer searches for a comparable home online,” Radley said. “Ideally, there are no more than five – max 10 – houses to choose from. Otherwise, buyers won’t make a decision very quickly.
Finally, choose a price that brings you as close to the center of the pack as possible.
“Put your home no higher than the middle of the comparables you’ve found,” Radley said. “Sitting at the top of the price range means a buyer will see no urgency in making an offer on your home and can sit and wait to see if a price reduction occurs.”
Another option, of course, is to remain confident in your original figure, let your ask price rise, and wait for the market to see the wisdom of your valuation.
“Sellers shouldn’t worry too much about interest rates,” said Catina Willis, real estate broker and business finance expert. “Sellers should price their homes based on the direction of the market. Having a good local agent who specializes in working with door-to-door sellers will make the pricing process much easier. A good selling agent will have a great strategy for getting your house under contract quickly.
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