What do you get when you combine higher mortgage rates, already high home prices, and hesitant sellers? That’s right: the lowest number of homes sold in almost 30 years.
It’s no secret that 2023 was a rough year for real estate. In addition to higher rates, high inflation crunched everyone’s budgets as housing costs soared, and incomes did not keep up. Although sellers gained tons of appreciation the last few years, they couldn’t—and still can’t—easily make a “lateral” jump from a 3% to a 7% loan. And first-time buyers? If they don’t earn six figures, it can be difficult to buy even a basic starter home! It’s no surprise the market slowed to a crawl, and continues to crawl, even as home prices return to near-peak levels.
Sell High, Buy Low, Borrow Smart
Rates are likely to remain elevated through 2024, but that’s not the big issue. Mortgages can be refinanced any time, usually without penalty. The more pressing concern for sellers who want to buy again is this: how can I sell and buy a replacement home without taking a hit on my equity or lifestyle?
The answer? By selling high, buying low, and borrowing smart. This means:
• Maximizing your sale price (selling at the top of the market, or higher)
• Minimizing your purchase price (buying under-market, by choosing a home that doesn’t show well or hasn’t gotten traction), and
• Improving your loan (reducing your rate and paying off small debts in order to increase your purchasing power and lower your cost).
If you do all three, instead of taking a hit, you could end up in an equally valuable home with more eequity than before:
Improving your Sale Price
“Selling high” is by far the most impactful part of this equation, and the one we’ll focus on here. With the right strategies, you can net significantly more money for your home and roll it into a better replacement home.
Here are the strategies we’re using with our own sellers:
1. Make it Modern and Move-In Ready
Buyers are more discerning than ever. They get that prices are higher, but they cannot fathom paying a higher price for a home that isn’t perfect (which is why buying an imperfect-looking home can earn you instant equity). Counterintuitively, it’s the little improvements generating the biggest returns in today’s market. Don’t remodel your kitchen; instead, reface or paint the cabinets, upgrade the counter on the island, and invest in new, higher end appliances. Paint your interior walls a nice, neutral color, at least in the main areas. Replace any stained carpet and refinish any scuffed hardwood. Make sure your doors are scratch-free, and the doorknobs are gleaming. The idea is to make your home look modern and new. We can advise you on the most profitable updates and refer you to reputable contractors.
2. Stage
Staging can make a huge, huge difference, because buyers are emotionally-driven. Start with your curb appeal; plant flowers, power-wash the sidewalk, and throw a fresh coat of paint on your front door. Inside, deep clean every nook and cranny. If you can’t move out of your home before it goes on the market, clear out your stuff, keeping only your essentials and whatever furniture and décor will show well. Our stagers will work hand-in-hand with you, staging each room effectively. Staging is all about form over function, and less is always more. To foster an emotional response, consider not just the furniture and accents but the lighting, air flow, scent, and overall ambience. If you can get buyers to fall in love with your home, they’ll have a greater sense of urgency and determination to buy it. This will drive your price up more than anything else.
3. Price Competitively
Unfortunately, simply looking at other sale prices in the area will not give you an accurate idea of a good list price for your home. Buyers don’t even look at homes they think are overpriced. The trick is to price your home at a level that will draw multiple offers, and then allow the irrational exuberance of buyers to drive the price up. This strategy usually allows your home to sell very quickly, and most often for significantly more than the asking price.
4. Offer Enticing Concessions
In addition to a competitive list price, attractive concessions can increase buyer engagement and ultimately improve your final price. Here are two you can offer up front or keep in your back pocket for the negotiation phase.
• Rate Buydowns are one-time, up-front payments made to your buyer’s mortgage lender to decrease their mortgage rate for a few years. It’s one of the most attractive concessions you can offer today, carrying more weight with buyers than a dollar-for-dollar discount.
• Cooperative Compensation is a term you may have read in the news recently; it’s when the seller pays the buyer’s agent’s compensation. Due to recent changes, beginning in August some sellers may opt not to offer it. If you offer buyer agent compensation, more buyers will want to see your home, otherwise they will have to pay the compensation themselves.
If you have questions about the market or are considering a move, give us a call at 703-981-7802 today. I love talking real estate, and my advice is always free!