As unemployment claims reach record-breaking numbers, stock markets experience historic losses, and consumer confidence continues to drop in the wake of the coronavirus pandemic, the United States — and the rest of the globe — is in for a long road to economic recovery. “The world is almost certainly ensnared in a devastating recession,” reported The New York Times on the first day of April.
While analysts are optimistic that the housing market will remain resilient and that a repeat of 2008 is unlikely, the robust seller’s market that dominated much of the country in recent years will probably soften. And those considering a property sale in the near future will need to adapt their strategy in response to this new environment — the likes of which we really haven’t seen in quite some time.
Selling a house during a recession is certainly possible, and with the right approach, you can still be satisfied with the outcome in the end. It’s been awhile since the economy was anything but roses, though, so we asked two top real estate agents — who each have transacted real estate for over a decade and navigated different market conditions — for their advice on:
- How to decide whether to sell during a recession or wait it out
- Tips on how you can maximize your resources and home value
- Best practices for marketing and negotiating when you have less leverage as a seller
Should you sell during a recession? Ask yourself these questions
If you’re thinking about putting your home on the market soon, or anticipate that you may end up having to sell during these less-than-ideal times, these questions can bring you clarity on your next steps:
1. Am I planning to buy a house at the same time?
While a recession may not offer the most favorable conditions for sellers, buying during a recession can be an attractive prospect. If you’re looking to purchase a new home following the sale of your current property, a bargain price on your next investment may help to sweeten the bitterness of a not-so-perfect deal on the one you’re leaving behind.
2. Can I afford to sell?
It costs money to sell your home. A willingness to accept a lower profit margin is one thing, but the ability to cover your expenses is another. A real estate agent will help you determine a fair listing price for your house if you decide to move forward with the sales process, but it’s important to have a concept of how your net proceeds may shake out in relation to the costs of selling. Consider common selling fees, including:
- Agent commission (average 5.8% nationally)
- Closing costs (plan on at least 1%-3%)
- Market preparation (start with a 1% estimate)
- Home inspection repairs (varies)
- Seller concessions (varies)
- The remaining balance on your mortgage loan
You use HomeLight’s Simple Net Proceeds calculator if math isn’t your favorite. If a quick look at initial numbers reveals that you may be in for a loss to sell your home during a recession, you should hold off it if you can wait. However, this isn’t always feasible and if you’re in a situation where you absolutely must sell regardless of loss, your agent can help you navigate your options.
3. What’s my opportunity cost?
Is there a new job on the line? If you’re living in Tulsa with a job offer in Chicago, a market downturn may be more of an inconvenience than a deterrent.
Are you running out of room? Motivation to sell is often quite high when a family grows beyond the comforts of a two-bedroom home.
Are you downsizing? Hoping to move closer to your parents? Looking to trade your city center condo for a suburban home to pursue your gardening passions?
Sometimes, the ability to seize a good opportunity outweighs the downsides of selling your home for potentially less than it could fetch in healthy market conditions. Ultimately, only you can determine the answer to the question of opportunity cost.
You’ve decided to sell. Now what?
Your next steps are to make sure that your house is as ready for the market as possible.
Though this may feel like a daunting task if you’re already on a tight budget, there are several ways to make the most of your time and finances to help your house stand out when selling in a recession.
Give your house a quick cosmetic facelift, and avoid expensive projects
“You want to walk through [your house] and find some cheap things where you’re going to get a return on investment,” says Dan Logan, a top-selling agent who’s licensed in Delaware, Pennsylvania, and Maryland. “People say, ‘well, how about I put in new windows?’ and I look at them and I go, ‘no, you’re not going to get your money back on this.’”
So, what’s something more worthwhile you can do to prepare your home for sale during a recession? Sometimes it’s as simple as giving your house a deep clean — which, according to agent insights from the first quarter of 2019, can yield a 935% ROI.
Don’t forget about curb appeal
“Wash the front door,” recommends Logan, leaning into the importance of a good first impression. “People are already making up their mind as they walk up to a house, and if they’re walking in and the storm door is covered with fingerprints and dirt… I mean, it’s the small things you can do that don’t cost a lot of money.”
Nearly 95% of agents report that curb appeal adds value to a seller’s bottom line, but this doesn’t mean there’s a need to spend thousands on lavish landscaping.
Boosting your home’s curb appeal can be as simple as minding the front door, as Logan suggested; as well as sweeping away cobwebs from exterior lighting fixtures, making sure house numbers are clean and visible, and giving your driveway or walkway a once-over to clear away weeds, debris, and stains.
Try to look at your house from the perspective of someone seeing it for the first time. If your eye is drawn to flaking paint, overgrown hedges, or disused lawn furniture, spend some time improving curb appeal to give your property an edge in the market.
You can’t fix everything—and that’s OK!
Zach Kirchoff, a Minneapolis-based agent with over 16 years experience, agrees that focus should be on the visuals when it comes to selling in a recession.
“I would not pick up a hammer, I would pick up a paintbrush,” says Kirchoff. “Whether it’s painting the cabinets white, touching up paint in other areas, taking care of that little section of flooring — I would focus on three or four really dollar-sensitive fixes that will give you a strong return and help sell your house faster.”
Finally, take the time to declutter. While most folks can overlook a few toys in the corner or scattered shirts in the laundry room, the less intrusive your belongings, the easier it is for a potential buyer to envision their own furniture and decor in the home.
Set your listing price and amp up your marketing
Here’s where it’s key to manage your expectations, work with an agent you trust, and use timing to your advantage as much as possible once you’ve committed to selling.
“I would put your home on the market as soon as this virus is over, even if prices do drop,” advises Kirchoff.
“Historically, it takes 6 to 12 months for the real estate market to follow the other financial markets, so I think we’ll see a narrow window where sellers can still get top dollar and there will still be a lot of buyers out there.”
Technology can be an effective way to draw those curious buyers to your property. While great photos are expected, they’re just one aspect of a stand-out listing.
“Do you have your 3-D tour? Are you having drone photography and videos done? Maybe do a video of the interior,” suggests Kirchoff. “It’s something we do a lot that gets a ton of traction.”
Kirchoff doesn’t believe we’re heading into round two of the 2008 market crash. Reassuringly, he also doesn’t think a recession calls for drastic marketing and sales measures.
“It’s nothing creative, it’s just about checking all the boxes. We didn’t have some crazy marketing plan [in 2008] and I don’t think we’re going to have one coming up here, where we have to bring in a wild tiger to sell a condo or a house,” says Kirchoff.
“I think we’re good to go back to the fundamentals again — delivering a product that is really, really solid.”
Negotiate shrewdly without making any rash concessions
With effective home preparation, a reasonable listing price, and smart marketing, you’ll — hopefully — find yourself in negotiations with a buyer sooner than later. But you’ll need to be realistic about how much leverage you have.
“If you’re in a recession, you’ve got to come to the conclusion that you’re not going to walk out with the kind of money that you think you may walk out with,” says Logan.
That being said, there’s no need to give away the cart with the horse.
Logan advises against going straight to buyer discounts when it comes to would-be home improvements. For example, if you know the downstairs carpet could stand to be replaced, avoid the temptation to offer a specified credit toward the purchase of new carpet.
“If we’re selling at $200,000 and we offer a $3,000 discount towards new carpet; if I’m the other agent, guess what? I’ve just started negotiating at $197,000. Offer nothing until they ask for it,” cautions Logan.
Remember that tensions are running high during a negotiation even in the best of times, so it’s especially important to keep a level head when considering the terms of a deal in a shaky market. Follow your agent’s lead and stay strong, but be willing to compromise.
With the right agent, you can sell your house in any type of market
Selling a house during a recession doesn’t have to involve complex marketing tricks or a willingness to sacrifice all semblance of your home’s value, but it does take tenacity and understanding.
An experienced real estate agent will be your best resource for moving your property in a market downturn. With the right price, the right motivation, and a little patience, your path to a “sold” sign in your yard may be shorter than you think.
Header Image Source: (fran hogan / Unsplash)