To sell homes in down market, use strategy, observers say

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A foundering market with falling prices and more than 30,000 homes for sale in Southern Nevada. It’s enough to paralyze any prospective home buyer. So how do home sellers convince skittish consumers that their place is a safe bet and that now is a solid time to buy? Realtors say pushing consumers off the fence requires a combination of emotional appeals and economic inducements. And for some sellers, the best answer is to sit out the market altogether.

Below are several strategies offered by professionals:

• Focus on the real reasons buyers should buy your home. Thanks to big gains in housing prices in 2003, 2004 and 2005, consumers began to think of homes as investments rather than lifestyle choices, says Mike West, broker-owner of Century 21 MoneyWorld. But sellers and agents must remind buyers that investment potential should be one of the last reasons they purchase a home. Instead of appreciation potential, highlight pride of ownership, tax benefits and quality of life.

• Don’t forget “staging” and marketing. How you present and promote your home are especially important in a tough sales climate. For as little as $800 or $1,000, depending on the size and price of the property, a Realtor can help you “stage” your house, says Ed Hellmuth, a Realtor with Century 21 MoneyWorld.

•Use the Internet. Nearly 55 percent of home buyers in a recent survey from Marketing Solutions used the Internet in their search for a new home, according to company analyst Steve Bottfeld. And consumers who read magazines such as Las Vegas New Homes Guide are three times more likely than those using other home-guide media to access a Web site in their search, Bottfeld added. So hire a professional photographer to take several shots of your place for marketing online, in home guides and in newspaper classifieds.

• Reduce your loss when you buy. If you’re frustrated about getting less for your home than you would have netted a year ago, consider that the property you’re buying will cost less also. And that can mean recouping your loss, especially if you’re buying a pricier house than you’re selling. If you’ve knocked $30,000 off the cost of your $330,000 home, remember that the seller trying to move a $550,000 place probably had to pare $50,000 from his asking price. “If you’re buying up, that can absorb part of the blow,” West says.

• Understand competitive pricing. It’s unrealistic in this market to post the same asking price your neighbor just got, experts say. Because it can take weeks or months to complete a deal, the contract that closed last week on a place across the street probably carried a higher price than today’s market will bear. Once you pinpoint your neighborhood’s most recent comparable prices, Hellmuth suggests you undercut those prices at least $2,000 or $3,000. John Izzo, a sales agent with Coldwell Banker Premier Realty, counsels clients to set a price about 5 percent below the lowest recent sale price on a nearby home that was not in foreclosure or default.

Izzo also recommends asking two or three Realtors for a home-market analysis. They will look at the surrounding neighborhood, propose a listing price and show you a marketing plan. Realtors often offer the service free to attract business.

• Understand that pricing is not everything. Only 5 percent of resale listings on the market are selling right now, Hellmuth says, so dropping your price, even dramatically, will not always get the deal done. Use other strategies as well.

• Offer a bonus. Selling agents propose offering a bonus to the buyer’s agent, on top of a conventional commission. Tacking on extra cash to close the deal could lure more brokers to a property, upping the chances of finding a buyer. West says Century 21 MoneyWorld recently started its Extra Value program, which offers a buying agent’s bonus, a home warranty and a signature from the sales manager verifying that the house is “very competitively priced.”

• Consider sweetening the deal with goods or services for buyers. West advises his clients to think about perks they or people in their professional networks could supply. A homeowner who manages a travel agency could throw in at cost a high-end vacation package to Hawaii. Or a seller who knows a plumber through a professional group could arrange to provide a water-softening system at cost. Whatever the incentive, it needs to be worth at least $3,000 to $5,000 to make a difference in this market, West says.

• Make the deal financially easier for the buyer. Many sellers already take on closing costs to get a contract signed. But going a step further and financing a part of the mortgage could pay even bigger dividends.

Sellers with substantial equity might not need all that cash to close on a new place. For some clients in that position, Hellmuth recommends carrying a note for 10 percent to 20 percent of a purchase price. A seller’s loan can close the gap for buyers who need 100 percent financing but no longer can find it in a tightened mortgage market. The seller can command steeper interest rates than banks, sometimes as much as 1 percent to 2 percent higher, Hellmuth says.

• Finally, don’t sell now if you don’t have to. Homeowners who do not need to move should reconsider placing their properties on the market. And even sellers who must move should consider renting their homes rather than listing them in a down market, agents say. Sure, with thousands of investment properties on the market, competition could make it difficult to set rent high enough to recoup mortgage, title insurance and property-tax costs. But covering even some monthly expenses might pencil out better than letting a home sit vacant for months.

Tallying equity is key to determining whether renting is a smarter option than selling, West says. A person who owes $50,000 more on the mortgage than the home is worth might need to rent for two to three years before the home’s value has increased enough or before he or she has built up enough equity to pay off the bank and break even. If the owner rents the home, he or she might lose $300 or $400 a month. But even over three years, the loss on rent would total roughly $7,000 to $15,000, considerably less than the loss the owner would sustain if he or she sold now.

Renting at such a monthly loss makes less sense for the homeowner who is upside down on his mortgage by $10,000 or less, West says.

A lease with an option to buy could draw in reticent buyers, Hellmuth says. Allowing a prospective buyer to rent for a few months or a year, while he or she cleans up credit or gets comfortable with buying in an uncertain market, could clinch an agreement.