Five Tips for U.S. Home Sellers

Analysis

To say that these are trying times for U.S. home sellers would be an understatement.

The U.S. economy is growing at a tepid rate. The U.S. unemployment rate is high, at 9.2 percent, and it appears job growth has hit a soft patch. And now the Democrats and Republicans appear to be 'going down to the wire' regarding negotiations to cut the budget deficit and increase the debt ceiling -- brinksmanship that could result in a tragic U.S. Government default on its bonds, and loans.

Against that backdrop, it's no wonder that houses aren't selling at a robust rate. The National Association of Realtors reported that June U.S. existing home sales unexpectedly fell 0.8% to a seasonally-adjusted annual rate of 4.8 million units, down from May's 5.23-million-unit rate. A Bloomberg survey had expected existing home sales to rise to a 4.9-million-unit rate in June.

Equally significant, home inventories rose to an eye-sore 9.5-month supply in June at the current sales pace, up from May's 9.1-month supply. A healthy housing market typically has a 3-5 month supply of existing homes. Further, the median U.S. price of a single-family homes was statistically flat, up just 0.6% in June to $182,600.

The new homes market's stats are almost as stark: a 319,000-unit sales pace in May, down 2.1 percent from April, a 6.2-month supply of news home in May, and a median sales price of $222,600, up 5.6 percent from April.

The data represent tell-tale stats. Still, are there any ways U.S. home sellers can increase the likelihood of selling their home in what amounts to a buyer's market?

Indeed there are, and listed below are 5 tips that should better-position your home for a sale.

1. Incentives - In this market, it's all about distinguishing your home from the pack, in a good-kind-of-way.

You have a 3-bedroom $600,000 home in suburban Boston? Consider throwing in 4 choice box seats to two Boston Red Sox games at Fenway Park or a night or two at the Boston Pops. Another option: 5 dinners-for-two at any of Boston's many, superior restaurants.

You'd be amazed at how many potential buyers will attend your open house, just due to the incentives.

2. Enhanced Marketing - If you haven't already, now is the time to get acquainted with online social networks, especially Facebook. Those over age 40 generally are not as social-media savvy as the younger crowd, so have your teen/college age son or daughter set it up, if that's possible. The social media presence will enhance your real estate agent's marketing operation.

3. Self-finance - This obviously is not an option for all home sellers, but consider floating a note - i.e. being willing to issue a short-term loan at a reduced interest rate to the buyer, for a 3-year or 5-year period. The loan should specify that if the buyer fails to qualify for a conventional, fixed-rate mortgage at the end of the note or otherwise defaults, you re-take possession of the home.

Mortgage rates are low, averaging about 4.53 percent for a 30-year, fixed rate mortgage, but if you take a note for 3% or 2.5% for 5 years, you'll make more prospective home buyers eligible to buy your home.

4. Lease It - Again, for some home sellers, this is not practical, but if you can, consider leasing the home for 1 year or longer. The advantage is obvious enough: leasing extends your home sales window, and when the lease expires, U.S. housing market conditions may have improved. Some sellers are leasing their home for even less than their monthly mortgage payment: in the long run, if home sales rebound, they should recoup their month-to-month loss.

5. Lower the Price - Obviously consult your realtor -- and an experienced attorney who knows your local real estate market -- before considering this step. But be careful: lowering your price signals additional market softness to prospective home buyers, who may wait even more, to get a better deal.

In other words, buyers don't tend to buy when prices are dropping: when they drop, they tend to wait to see if prices will decline more. The uptick in buyers occurs when home prices start rising, as buyers then sense a price bottom may have formed, and conclude that buying nowe may save them money on the home transaction.

Housing Analysis: There's no way to sugar-coat -- the U.S. housing market, with a few local exceptions, remains a decidedly 'buyer's market,' and it will take at least four quarters -- and probably longer -- for home sales to rise enough to give some leverage back to home sellers.

But if you offer incentives, social market, consider offering a short-term loan, or decide to lease your home, all other factors being equal, you'll better-position yourself in today's challenging U.S. housing market.