Seller Options When Home Isn't Selling

Home Sellers Options when house isn’t selling

(Jeff) In this video we will be talking about Home Sellers and their options when their house is not selling in this changed market.

(Jeff) Hey, it’s Jeff Chubb I am a retired investment banker turned real estate agent that has sold more then a 1,000 homes and am here with (Sammy) and I am Sammy Illiopoulos, I am one of the top 300 loan officers in the United States and work with Guaranteed Rate. 

(Sammy) Jeff, the market has changed a lot in the last 6 months of 2022. Seller’s went from being at the party and having an amazing time to well… Having the dreaded next day hangover. 

(Jeff) Sammy, it’s true. Sellers are having to adapt to the new marketplace. It’s a market where buyers hold the upper hand in a lot of cases. 

(Sammy) I was reading an article about how seller’s are starting to have to toss in the Kitchen sink and more in order to get their house sold. Jeff, what has your experience been? 

(Jeff) The market has definitely slowed. What I am seeing is that the homes that are in good condition and priced right are selling. The ones that are overpriced and not in the greatest of conditions are either sitting or selling at BIG discounts. 

(Sammy) That makes sense as the article I was reading mentioned that 42% of recent sellers have offered at least one concession to home buyers. 

(Jeff) Sammy, that is a great point and what we are going to talk about. What are those concessions that sellers are offering and what are a seller’s options when it comes to selling their home. 

(Sammy) Alright, so what are those concessions that a seller can offer?

(Jeff) Typically a seller is offering a concession in the form of a cash credit for things like repairs. Or a closing cost credit. And with rates increasing like they have, we have seen more and more seller’s offering concessions to buy down a buyer's mortgage rate. 

(Sammy) People often get lost in the weeds on the buying down the rate and how that works…

(Jeff) Well that’s why we have you! 

(Jeff) But first, offering a credit for repairs is a great solution if there is a defect on the property that may be hard to get to while living there. Think worn hardwood floors or older carpet. It can be a real pain in the back side to do those improvements when you live in the space and have furniture. While these credits are great and buyers do appreciate them, you don’t get the increased value benefit that you would if they have already been done. 

(Sammy) That all makes sense and I see that all the time. I also am seeing more and more Closing cost concessions. 

(Jeff) Absolutely. And buyers are loving it.  Sammy, on average how much would you say the closing costs on a house are? 

(Sammy) I would say about one and a half to two percent of the purchase price. But keep in mind that percentage will change from state to state. 

(Jeff) Exactly, I always use a state like Delaware as an example. The transfer tax for a buyer is 1.5% alone… That is before all the lender and insurance closing costs. 

(Jeff) So on a $500,000 house here in Massachusetts, then I could expect the closing costs to be in the ballpark of $7,500 to $10,000. This will also include pre-funded escrows and insurance.

(Sammy) That sounds about right. And buyers should keep in mind that this is on top of their down payment. I can’t tell you how many times people will get in trouble because they say I have X to put down as the down payment then don’t factor in those closing costs. 

(Jeff) That’s why I like people working with you Sammy. I know you always take the time to explain that. We recently had one client that was adamant on putting $150,000 down. It took many conversations to get them to understand that they couldn’t put all $150,000 down as you would need to use some of that to go towards the down payment. 

(Sammy) Yes, I believe in their case it was $135,000 down and $15,000 that went towards closing costs. 

(Jeff) Well that was a quick tangent. But a good one! So closing cost assistance would be a seller paying for the buyer’s closing costs. So in the $500,000 example, then a seller would be offering the closing cost credit of $7,500. Thereby limiting the buyers all in expenses. 

(Sammy) A quick side note and a piece of caution for a seller is that a seller does have to worry about the house appraising and covering those closing costs. 

(Jeff) Absolutely. And there are ways that a good agent will offer some protection in there for their seller client. 

(Jeff) Okay Sammy. Let’s talk about the complicated one that has come back with a vengeance. What does it mean when a seller buys down a buyer's rate. And how does it work 

(Sammy) Ultimately you are using those seller credits that we just mentioned, but applying to the bank where they can reduce the mortgage rate for a period of two years. 

(Jeff) So tell me if my math and thought process is correct here. Say mortgage rates are 6.5% (six and a half percent) and a seller agrees to buy down my rate for two years, then in year 1 my mortgage rate might be 4.5% (four and a half percent), in year 2 (two) my mortgage rate might be 5.5% (five and a half percent) and in year 3 (three) it would be the original note of 6.5% (six and a half percent).

(Sammy) Real quick, another thing that I am seeing around the country is that a lot of builders are offering bonuses to the buyer agents, giving upgrade credits and closing cost credits to home buyers. 

(Jeff) I have also seen a builder offer 5 years of pre-paid condo fees. Offering bonuses to agents, upgrade credits and pre-paid condo fees are some great ways to separate you from your competition. 

(Sammy) Builders have a need to sell which is why they are going to be so darn competitive. 

(Jeff) You know Sammy, that is a great point. They have a need. 

(Jeff) If you are a seller and you don’t NEED to sell, then maybe this isn’t the right time to sell.

(Jeff) I will say that if you are a move up buyer, then taking it a little on the chin on a smaller less expensive asset might be worth it to get the better discount on the more expensive one. 

(Sammy) What do you mean Jeff? 

(Jeff) Let’s use a 10% (ten percent) discount as an example to make my math and life easy. Let’s say I am selling a $500k (five hundred thousand) house and having to give that 10% (ten percent) discount. Then it’s going to cost me $50k (fifty thousand). But let's say I am buying a $1 million dollar house. Well that's a 10% (ten percent) discount on the buy or a $100,000 (hundred thousand). That’s a net benefit to the move-up buyer of $50 grand!

(Sammy) Jeff, talk to me a little about condition when it comes to a seller and selling a home.

(Jeff) As I mentioned earlier, the houses that are priced right and in good condition are still selling. So in this competitive market it is about getting your house in that optimal selling condition.  

(Sammy) The issue becomes people having the resources to do the repairs though. 

(Jeff) That is exactly right. And this is why my company has partnered with another company that will do the work during the pre-listing stage. And that could be light work like painting to redoing floors to redoing Baths and Kitchens. 

(Jeff) And then the seller lists their property and sells it. The owner pays the construction company back once the property has sold. 

(Sammy) So even if you don’t have the funds, then you can still get your house in the optimal condition. 

(Jeff) Exactly. When there is a will, then there is a way. 

(Sammy) Well Jeff, I think we did it. Those are some of the things that a seller can do in order to make their house more competitive. 

(Sammy) If you are thinking about making a move in Massachusetts, then be sure to reach out to this guy (pointing to Jeff). He is one of the top agents in the state and will take great care of you. I can’t begin to tell you how much experience matters and finding a quality agent will make the difference between a good experience and a miserable one. 

(Jeff) And if you are buying a home in MA or really anywhere in the country, then Sammy can help you! He works for the #2 lender in the country and is one of their top 10 brokers in the company. I have worked with a lot of mortgage brokers in the past… I say this, not because he is standing next to me… But he is the best in the business. You won’t regret reaching out to Sammy. 

(Jeff) Our contact info is below, so let us know if you have any questions and until next time!