You need to sell a property when interest rates are on the rise. Which sales strategy do you employ? Sell as-is, or renovate?
Before we jump in to discuss what to do, let’s take a look at the current financial climate.
The Federal Reserve has repeatedly increased interest rates in the past few months. This has increased the cost of borrowing money to finance real estate, which has triggered a decline in real estate prices.
Some non-investor purchasers that not long ago were in the market are now priced out with the higher interest rates, and others can no longer afford to buy what they were hoping to buy and decide to wait. Many others fear losing their jobs and decide to wait as well.
Many investors with low borrowing costs now realize that their costs have increased and may not be willing to risk purchasing, renovating, and re-selling in a few months in an unpredictably declining market.
Other investors that wish to buy, rent, and hold, may be worried about rents dropping and decide to wait for prices to reach the bottom before they purchase again.
The bottom line is that there are suddenly fewer buyers.
The supply of homes is not yet rapidly increasing, but if mass layoffs arrive, that could also happen.
For now, fewer buyers and a steady number of sellers are likely to push prices further down.
And with declining prices, those buyers that are still active need to protect themselves.
To buy today, they, therefore, need to buy below comps. And when they buy below comps, this creates a new lower-priced comp that brings the neighborhood’s values even lower.
What to do if you need to sell a real property?
Sell it as quickly as possible. List it below the current comps to ensure multiple offers and a quick sale.
Is renovating a home prior to sale, which could take 2-3 months, out of the question?
If a home is not habitable or not suitable for owner-occupants given its as-is condition, then only investors would be interested. Remember that investors will do their calculation, and in addition to accounting for the cost of renovations, holding costs, and commissions, they would also now account for a percentage decline in value for the time period while renovations are taking place. This means that these investors would have to purchase your listing at a major discount (below comps in move-in condition). In this case, you can employ a renovate strategy and utilize Geffen Real Estate’s services to renovate and stage. If the trust or estate lacks funds to pay for these services, payment may be made at the close of escrow. This allows the beneficiaries to reap the awards investors would otherwise enjoy should the as-is sales strategy be selected. If selling a fixer in as-is condition, it would need to be priced accordingly to generate a multiple offer situation with investor buyers and we are happy to help you with this as well.