Tips for Selling in a Tight Mortgage Market
With interest rates on the rise, mortgages are becoming more expensive for buyers. That creates a challenge for sellers, as well. When buyers cannot secure financing they cannot complete their purchases. But solution-oriented Realtors can take advantage of the otherwise difficult situation. Those who know how to deal with this kind of market can distinguish themselves from the competition by being more effective listing and selling agents.
Many listings will gather dust waiting for the mortgage markets to change. But it could be years or even decades before rates again fall back to the historically low levels seen in recent years. Sellers will be frustrated, and agents will be blamed. But agents who have practical solutions to this widespread problem will be in big demand. They can turn the lemon of souring mortgage rates and home affordability into the lemonade of higher productivity. That means more sales, and an increased market share of satisfied clients.
Start on Day One
Problem solving in this kind of market should begin as soon as you meet your listing client or homeowner. You have to educate them about the challenges, so that their expectations are realistically aligned with the market. That is especially important during the off-season. If a listing that lacks curb appeal goes live in wintertime, it may not get any attention until springtime, and that delay costs homeowners. By the time it does get attention, mortgage rates may be much higher and it may be even harder to sell. Emphasize the necessity of techniques like staging the home and doing inexpensive cosmetic upgrades, to gain a competitive advantage.
Realistic Pricing is Essential
Try to convince homeowners to be smart about their pricing, by presenting them with compelling data and candid honesty. Or set a firm date for lowering the price after the home hasn’t sold for a prearranged period of time. Get homeowners to agree to lower the price as needed when the time comes. Then mark it on their calendar. When their home sells while others sit on the market for months, they’ll thank you for your insightful guidance and forward thinking. If you don’t get the listing because they insist on a price that is too unrealistic, it’s not a failure. Don’t be discouraged. You did nothing wrong. You succeeded in avoiding the headache and waste of time that comes from working with an unreasonable seller.
Be a Mortgage Finance Facilitator
One of the most common issues is that rates tick up, and that makes monthly payments rise just enough to disqualify the buyer. To bring the payment back down they need to come up with more cash. So consider ways to solve that. First of all, maintain a network of creative, flexible lenders. They may qualify the buyer even if they’ve been turned down by another lender. Or maybe the seller can pay some of the buyer’s closing costs, to help them free up cash to apply to the down payment. Lowering the price just enough to help the buyer qualify will translate into a faster and more certain sale. The money the seller saves by not paying taxes, insurance, utilities, and mortgage payments while the home remains unsold may help justify and counterbalance that price drop.
Owner financing is a great option when traditional mortgage options are limited. But this only works if the seller does not need to collect a large lump sum at closing. If they plan to sell and use the proceeds to buy another home, for example, owner financing won’t give them enough immediate cash to do that. But maybe they have a cash cushion and can afford to take incremental payments over a period of 10 years or so. In that case, owner financing with a sold down payment and a balloon payment due at the end of the schedule may be doable. It will certainly attract lots of buyers who are struggling to qualify for a mortgage loan. Just make sure that your client has a top-notch attorney with experience writing these kinds of owner-financing mortgage contracts. They also need to carefully screen buyers for credit worthiness, and have legal stipulations that enable them to foreclose in the event of default. Owner financing is complicated, and the seller needs to fully understand their risks. But for those who can justify the risk there can be legitimate rewards. It could result in an easier sale at a higher price, despite the headwinds of a tight mortgage market.
Leases are Bullish
Another option when all else fails is to lease the property. Once again, this only works for sellers who do not need to raise lots of cash through a sale. A lease can provide a way to continue paying the overhead until the mortgage market improves. Depending on the local real estate market, leasing also has the potential to generate substantial, steady income including a profit margin. Many regions are experiencing a sustained bull market for landlords. Meanwhile the underlying asset of the property may continue to appreciate in value. There are pros and cons to leasing, but many home sellers who decided to lease instead discovered that it worked out wonderfully for them. As a Realtor you can also make it work for you, if the homeowner hires you to manage the lease for a fixed fee. Then when they are ready to sell, you’ll be the one who gets the listing.