How To Sell A House In A Market Full Of Short Sales And Foreclosures

Melissa Gifford

Homeowners become a bit worried when they see that their neighbor's house down the street as a foreclosure notice tacked onto the door. When only a few houses in a neighborhood are on the market as a foreclosure or a short sale, this does not greatly affect the traditional home sales. However, what if you wanted to sell your home quickly, but you were one of the few in your neighborhood who was able to avoid foreclosure? If there are more foreclosures and short sales in your neighborhood than traditional sales, this can have serious ramifications on the marketing and sale of your own property.

About a decade prior, appraisers would not count the value of distressed properties against the value of your own home. However, after the housing bubble burst, more and more appraisers are distinctly aware of such concerns. When the neighborhood has only a few distressed sales, then appraisers tend to calculate the market value of your home based on the comparable prices of homes sold with equity. However in a local market dominated by foreclosures and short sales, unfortunately an appraiser will be forced to use these distressed properties as comparisons and thus lower the market price of your house, even if your home is in good standing.

What not to do.

If you are trying to sell your house quickly among a flood of distressed properties, now is not the time to be greedy or overzealous. Do not rush into marketing schemes or updating projects that you are unsure of the outcome. In this situation, appraisers do not give updates to your home as much credit as during a market without heavily distressed properties, so costly updates may only serve to devalue the property and alienate buyers who see the higher sales price. Do not make the most popular mistake among sellers which is to overprice your home. Many sellers follow the steps to selling a house in a rush thinking that the faster the house is listed, the sooner it can be sold, but fail to do the proper research when it comes to pricing their home. Creating expensive, but value-less updates and overpricing are two things that should not be done regardless of the housing market, but in this particular case, the market will not be forgiving. Your property may end up sitting on the market for months on end without any offers.

Where to start

Even though your home has equity, be prepared to accept that it may not be priced very much higher than the distressed properties in your neighborhood. When home buyers are looking at the comparable sales, they will be looking at price versus the value. If you are able to deliver, a good value for the price, then you will receive offers. Unfortunately, that may mean pricing your property within the price of the distressed sales.

First, determine the price of your own property by doing research on comparable sales. Pick homes that are within about a half mile area of your property and stay within your neighborhood division lines since prices can change drastically from one suburb to the next. Compare homes that have similar square footage (about 10% above or below yours), similar age, and amount of rooms.

Then determine what would make your property a better deal than the distressed ones in the area. Is it move-in ready? Are there particular amenities? Buyers may be willing to pay more for a home that requires no repair whatsoever versus a foreclosure sold as is. Knowing this, price your home slightly below the market to attract buyers who come for the price. Outbidding will ensue as multiple offers heighten the sales price as buyers will then negotiate for the deal.

 

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