Smart Moves

From a financial standpoint, the pandemic was an idyllic time to sell a home. Available properties were ridiculously scarce -- so much so that when rare open houses occurred, wannabes lined up just to take a peek. What often followed were bidding battles pitting purchasers with “escalator clauses” against one another.

Demand is still greatly outstripping supply, especially for young adults itching to escape their rental units. Indeed, the National Association of Realtors estimates that the U.S. now confronts a 6-million-unit housing shortage. What’s changed suddenly is buyer financial power.

“As households pay much more for cars, clothing, food, gasoline and services, there are fewer dollars left over from each paycheck at a time when housing affordability is a growing challenge,” says George Ratiu, an economist for the home listing company Realtor.com.

An even more compelling factor affecting affordability is that mortgage rates have ascended dramatically of late.

“For a household with a $75,000 income, only 23% of homes on the market are affordable, down from 50% of inventory in 2018,” Ratiu estimates.

Another economist, Mark Zandi of Moody’s Analytics, says that due to the Federal Reserve’s attempts to tamp down inflation through higher interest rates, many purchasers have backed off for obvious financial reasons.

Of course, all is not lost for those who still intend to put their houses on the market during the remainder of 2022. In many areas, underlying demand remains intense, given that many young families have yet to obtain their first property.

Experienced real estate pros say homeowners are often the last to fully accept the pricing realities of a changing market.

Stacy Berman, a veteran real estate agent in the Washington, D.C., suburbs, tells the true tale of an investor in her area who’s “in denial” about the real market value of a small ranch-style house he bought to flip for a quick profit.

“This is not my listing. But it’s obvious to me this house is terribly overpriced, even after three price cuts,” Berman says.

Berman warns against the temptations of testing the market under current circumstances: "If you overprice, you’ll be the one who will get punished in the end. Your house will just sit unsold for a lengthy time while you pay your own mortgage and also cover your AC bills during these hot summer days.”

Here are a few pointers for sellers:

-- Pick an experienced agent for your listing.

Eric Tyson, a personal finance expert and co-author of “House Selling For Dummies,” says too many sellers take a casual approach when picking an agent. He notes that some make the mistake of hiring a relative, a friend or a young agent looking to get started.

“The underappreciated reality is that many sellers don’t distinguish between an average agent and one who’s highly qualified to manage their sale,” he says.

Tyson recommends that sellers seek an agent with experience handling various sorts of deals -- though within the sphere of their immediate location.

“It’s a big mistake to pick a person who doesn’t know your local ‘farm,’ which is what the pros call the area surrounding your property. Local agents are much more likely to pinpoint the right asking price,” he says.

-- Rule out unqualified prospects.

Sharp sellers are careful to check the financial standing of would-be purchasers.

Before accepting an offer, sellers should insist on seeing a genuine preapproval letter from a known lender. This should establish that the prospective buyers have had their credit checked, their employment confirmed and their assets verified.

In addition, prospects can be asked to supply other details about their creditworthiness, such as their credit scores. The most common of these, known as FICO scores, range from 300 to 850. The higher that number, the more likely are borrowers to get the loan they need to close the deal.

-- Take an early look into house flaws that could hinder your sale.

Even in high-demand markets, many purchasers exercise their right to a home inspection. And many use the process as leverage to renegotiate the deal.

Homeowners should never try to talk buyers out of a home inspection. But smart sellers will consider paying for their own inspection even before the property goes on the market.

“The person you hire for a pre-sale inspection is unlikely to find all the same small problems that the buyer’s inspector locates. But both should spot the really major problems, like a failing roof or electrical system,” Tyson says.

-- Try to avoid troublesome buyers.

Not all sellers can be choosy about the offer they select. But if you’re reasonably certain you’ll have more than one bid from which to pick, Tyson says you should seek to avoid cutting a deal with difficult people.

You may not have any direct dealings with your prospective bidders. But your listing agent or others might observe them when they visit your place. And their behavior can be very telling.

One telltale sign of difficult people is that they often make negative remarks when visiting a property. Though you’re likely to not be present for showings, your listing agent should learn of these unpleasant comments and pass them on to you.

By avoiding such prospects, you could spare yourself a lot of grief.

“If you’re lucky enough to get multiple bids, you can be pickier about the buyers you choose. If possible, resist troublesome folks who might nickel and dime you all the way to closing,” Tyson says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

The steep rise in mortgage rates is crushing the hopes of many young adults who feel trapped in their rental units.

“We have never seen mortgage rates shoot up this fast at this magnitude. Even people who want to buy, they are priced out,” says Lawrence Yun, chief economist at the National Association of Realtors (nar.realtor).

Compounding aspiring buyers' pain, home prices are staying at high levels. Indeed, the median price of a U.S. home hit a record $416,000 in June, a jump of 13.4% over last year.

Although the affordability problem has slowed sales, there’s still a hard core of would-be homeowners determined to meet the ownership challenge before 2022 comes to a close.

“These are ‘leftover buyers’ who missed out in bidding wars during the last 12 to 24 months. They’re not throwing in the towel until they obtain a property,” says Richard Rosa, president of the National Association of Exclusive Buyer Agents (naeba.org).

Because many sellers are starting to cut asking prices, some housing analysts expect that home values could eventually slip somewhat from the high levels they reached during the worst of the pandemic, though this hasn’t occurred yet.

Ivy Zelman, who tracks real estate stocks for Wall Street investors, says a further decline in list prices is a real possibility, especially when it comes to newly constructed homes sold by builders.

Given the current uncertainties facing real estate, it’s time for aspiring buyers to rethink their plans, says Rosa, who co-heads a Massachusetts realty firm with 20 brokers.

“We’re not yet in a buyer’s market by any means. But there are opportunities for purchasers who think through their priorities and take a strategic approach,” Rosa says.

Here are a few pointers for income-stretched buyers:

-- Don’t play the “bottom feeder” game at this stage of the real estate cycle.

Though many neighborhood markets are now entering a new cooldown phase, that doesn’t mean buyers can dominate the way they did after the 2008 financial crisis.

“In the Boston area, for instance, there are still too few available homes to meet demand. That’s why we still see multiple bidding situations -- though with many fewer bidders than before. Therefore, if you’re buying in a high-demand area like this, don’t get overconfident about your ability to bargain right now,” Rosa says.

Even so, buyers in the current market have somewhat more latitude than during the most heated days of the market. That means they can be more choosy about their property picks. They’ll also be under less pressure to forgo a home inspection as part of a competitive bid.

-- Consider a home that’s gone vacant.

It’s tough to gain details on a house that’s been vacant for months, especially if its owners have moved away to retire or take a job transfer. It’s harder still if the empty property has fallen into the ownership of a bank through foreclosure.

“The bank won’t tell you anything. And frankly the folks at the bank, or the real estate agent they’ve hired, probably won’t know much about the people who lived there,” says Merrill Ottwein, a veteran real estate broker with Coldwell Banker.

To get the scoop on a vacant property that interests you, your best sources are often neighbors.

Neighbors “probably know all the skeletons in the closet. They’ll spill all they know and tell you if the people who lived there kept up the place before they moved out,” Ottwein says.

Most people who must leave due to foreclosure don’t deliberately damage their home. Still, their financial problems could mean they lacked money for crucial maintenance chores during their tenure in the property, he says.

-- Don’t rule out a “pre-inspection” of a vacant place.

Perhaps the property you like has gone unsold for so long that you’re nervous about hidden defects. In fact, you don’t even want to make an offer until you know more. In such cases, Ottwein advises you to consider hiring a home inspector to take a preliminary look.

What are the advantages of hiring a home inspector to check a property before (rather than after) you’ve submitted your bid?

“If you decide to go through with the purchase, a pre-inspection will let you set your bid based on findings from the inspection. Then if you decide to back out of the deal, you can walk away without complications,” Ottwein says.

-- Factor in neighborhood property values before bidding.

“Before you shape your offer, you and your agent should take a careful look at the recent sales history in your neighborhood. In markets that are still hot, it’s imperative that you be extra vigilant to avoid overpaying,” Ottwein says.

Ideally, you’ll want to examine at least three similar properties that have sold in the immediate area in the past three to six months, adjusting for differences, such as a larger garage or a second fireplace.

Although you’ll want to take a home’s condition into account when judging its market value, Ottwein cautions against seeking out-of-proportion discounts to compensate for superficial shortcomings.

“So what if the owners took the light bulbs with them when they had to move, or if they painted the walls in a color you don’t like? Don’t get emotional about these small issues,” he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

A 29-year-old cyber engineer from Seattle credits the pandemic for his chance to move to the city of his dreams: Austin, Texas. Due to COVID-19, his company declared his job “permanently remote.” That means he can work from anywhere.

“Remote work has opened up housing possibilities all over the country,” says Amanda Pendleton, a home trends expert for Zillow (zillow.com).

Zillow ranks American cities on their desirability for single workers. Austin is one of the top ten.

“If untethered from an office, singles can move to places that offer more affordability and a vibrant singles scene,” Pendleton says.

But there’s one major factor impeding the engineer’s move to Austin. He must prep for sale the bungalow he bought in Seattle five years ago. The place is crammed with excess clothes, tech gear, furniture and books. And the man’s real estate agent warns the glut must go, or the house will sell at a steep discount.

Decluttering the bungalow seems like a daunting project to the engineer, a single with a busy work and social schedule.

Neen James, a time management expert, doesn’t know the cyber engineer from Seattle. Still, she’s convinced he can finally get a jump start on his home-selling project through what she calls “the power of 15 minutes.”

“Few of us have full hours of time to commit to an important project. But almost anyone can carve out 15-minute blocks of dedicated time each day by getting up a bit earlier or staying up a bit later. The key is to eliminate all distractions and work only on the task,” says James, the author of “Folding Time: How to Achieve Twice as Much in Half the Time.”

Stephanie Calahan, another productivity specialist and business coach, says integrating music into any major task -- such as household decluttering -- can enliven the spirit and increase the intensity of the work.

“Anything that gets a rhythm going adds momentum,” she says.

Though the cyber engineer favors funk music, Calahan says older home sellers often prefer classical for this purpose.

Here are a few pointers for home sellers:

— Recognize the import of a well-staged home.

Martha Webb, a professional organizer often credited with originating the home staging concept, explains why clearing a place of clutter is essential to a successful sale.

“Nobody wants to buy your chaos when they buy a house,” says Webb, author of “Dress Your House for Success.”

Even in the current inventory-tight market, cluttered homes can sit unsold for weeks or months. When they do sell, it’s often for a much-reduced price.

“Unless you hire a professional organizer, it doesn’t cost you anything to declutter. Yet you have a tremendous amount at stake,” Webb says.

A house crowded with possessions looks smaller than its true dimensions, which is one reason it’s devalued by home shoppers.

“I don’t care if you’ve got a house with 8,000 square feet. It’s still going to feel small,” she says.

-- Consider throwing a fest.

Calahan says decluttering can be more tolerable if the agony of it is infused with occasional amusement. She tells the true story of one insurance company manager whose many boxes of unsorted personal papers included countless old paid bills, medical statements and nearly every greeting card she’d ever received. After several weeks of tedious sorting, she announced a celebratory party to reward herself.

“Eight of my client’s friends came over for what we call a ‘shredding party.’ She asked each friend to bring along a paper shredder. She served wine and brunch and then everyone helped shred her excess papers. It was so much fun that later all her friends had their own shredding parties,” Calahan recalls.

Setting a party date is a good way to end inertia. It gives you a deadline. You know the work must be done by the time your friends come over.

-- Hasten your campaign with creative ideas.

Professional organizers routinely advise those immersed in decluttering projects to take a break every few hours. That helps prevent the beleaguered feeling that comes from trying to take on an entire room all at once or, worse, the whole house.

Calahan recommends preparing a comprehensive written plan that spells out a step-by-step approach. Or you could start with a single part of one room, using a flashlight to define how large an area you’ll tackle at a given time.

“In the midst of a big decluttering project, the flashlight allows you to focus mentally on a single area,” she says.

-- Think about doing a clutter-busting blitz if time is short.

If the home you’re planning to sell has bursting closets and disorder throughout, there’s no way a single person or couple can deal properly with the problem without devoting many days or even several weeks to the task, says Vicki Norris, a professional organizer who lectures nationally on the subject (restoringorder.com).

But one solution is to add extra hands to the task and then to conduct an all-out blitz. Many organizing firms can mobilize a team on short notice; you can find one in your area through the National Association of Productivity & Organizing Professionals (napo.net).

Alternatively, you may be able to recruit a team of friends or relatives. Whether you hire organizers or seek out volunteers, Norris says you should bring in no more than four to five people and designate a leader.

Obviously, if you’re energetic and have lots of time, you can handle the whole project yourself.

“The only difference with a blitz is that you blast through the house faster. This is basically decluttering on steroids,” she says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)