Smart Moves

When the pandemic hit in 2020, an ER nurse and her engineer husband -- in their early 30s and recently married --vowed not to let COVID slow their life plan down. They wanted at least two kids, and they had identified a child-friendly neighborhood with exceptional schools as their ideal place to live.

“The neighborhood was extremely pricy. But we were determined to get our foot in the door. So, we bought a little bungalow we could afford in this area. Then in quick succession, we had our two little boys. All that’s great, but now we feel really crowded in our tiny house,” the nurse says.

Currently, just two years after buying their bungalow, the couple is intent on obtaining a much bigger place in the same neighborhood. So, now they plan to trade up and have put their house on the market.

“The great news is that we acquired our starter home at just the right moment, before the big pandemic price surge. Our house has now been appraised for more than $150,000 above what we paid for it since then,” the nurse says.

What’s next for this young family?

“With proceeds from our sale, along with help from our parents, we can afford to buy a much larger house that’s also brand new. Because we adore this area, this next place will be our forever house,” she says.

As this true story illustrates, getting the timing right on your real estate transactions can make a major difference in the fulfillment of your housing goals.

“The correct timing of a home sale involves the combination of good luck and excellent planning. That’s especially true now with the economy possibly heading into recession,” says Sid Davis, the author of “A Survival Guide to Selling a Home.”

Davis, a longtime Utah real estate broker, says all too many homeowners delay the time-consuming process of decluttering in advance of a sale.

“It seems overwhelming. But you don’t want razor-edge timing when you have so much at stake,” he says.

Here are a few pointers for sellers:

-- Line up a listing agent as early as possible.

“I get into a lot of panicky situations with 11th-hour home sellers. Sometimes I feel like a firefighter,” Davis says.

When he first entered the real estate field more than two decades ago, he recalls how clients would typically call for help at least three months before they needed to sell. Now, he says many wait until just a few weeks before they intend to move.

Once you know you’re definitely going to move, Davis says it’s prudent to begin interviewing prospective listing agents and then to promptly select the one you want to represent you.

An agent with ample notice of your selling plans can better determine the steps you should take to achieve the best possible outcome, whether this means replacing your kitchen appliances or painting your front door. The agent can also exercise more care in selecting the right listing date.

“Arranging for contractors on a nonemergency basis can save you cash, and careful pricing can mean more proceeds at the bottom line,” Davis says.

-- Request statistics on selling times.

Suppose you’ve accepted an out-of-state job offer, but you have several months to relocate. How can you estimate the time needed to go from list to sale?

Dorcas Helfant, a former president of the National Association of Realtors (nar.realtor), recommends you ask your agent for statistics on selling times for homes in your community.

“The only numbers that count are the ones for your immediate neighborhood. Beyond that, the statistics aren’t relevant,” Helfant says.

Take these numbers, known as “days on market,” and chart them over a three- to six-month period. If selling times are lengthening, this could indicate a cooling of demand and should signal caution to prospective sellers.

“Assuming the market is chillier than before, you’ll want to allow yourself at least one extra month beyond the average selling time to ensure a smooth transition,” Helfant says.

George Ratiu, manager of economic research for Realtor.com, the home listing firm, stresses the uncertainties now rampant in real estate markets -- but says sellers still have reason for optimism.

“Homeowners trying to decide if now is the time to list are still in a good position in many markets, as a decade of rising home prices gives them a substantial equity cushion, and homes continue to move quickly,” Ratiu says.

-- Pack up your belongings promptly.

Though he has no scientific basis for the statement, Davis contends that 99% of home sellers procrastinate on the property prep process.

“Even when they have extra time, it’s human nature to wait until the final inning to mobilize. Most of us rely on deadlines to get going,” he says.

Besides painting and repairs, nearly all homes need a thorough purging to show well. Your first step, Davis says, should be to remove any excess furnishings that crowd your interior space. Then box up smaller items and place them in your garage or a rented storage unit.

“By beginning as early as possible ... you enhance your chances of fully completing this task before your place goes up for sale. Trust me, you won’t miss all that stuff, even if it’s stored away for months,” Davis says.

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

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.)