Lew Sichelman
If you’re selling your house, you’re not only competing with other sellers. You’re also competing with homebuilders and their shiny new model homes, buyer incentives and now-comparable prices.
Still, all is not lost. You can stress attributes builders can’t offer and adopt some of the sales techniques builders use.
After years in which new houses commanded price premiums – between 2010 and 2019, new homes cost an average of $66,000 more than existing ones – the gap has been dwindling. Now, things have flipped. As of June, the national median price for a new single-family house was $410,700 – $25,000 lower than the national median price of an existing home.
One reason new houses now cost less is that builders are putting up smaller places on tighter lots. Another is that many are cutting prices to the bone in order to dump unsold inventory. But perhaps a more important factor is that mortgage rate buydowns, free upgrades and other incentives are eating into their bottom lines.
What Deals Can You Offer?
As the seller of an existing home, you can’t give away free upgrades. But you certainly can offer to trim your buyer’s mortgage rate. Instead of cutting your asking price, suggests Stephen Steakley, a regional manager with CrossCountry Mortgage in Austin, Texas, use those same dollars to pay the buyer’s lender to reduce their rate for a year or two.
The key here is to bring down your buyer’s monthly payments to a manageable level, which a lower price won’t achieve. “It attacks the number buyers actually shop: the monthly payment,” writes Steakley on ActiveRain.com.
“A builder never leads with, ‘We cut the price $20,000.’ They lead with a monthly payment, because that’s the number a buyer feels on the first of every month,” he writes, calling a price cut “the least efficient dollar in real estate.”
A caveat, though: Depending on the kind of loan your buyer seeks, the deal has to be structured properly, and the lender has to be on the ball.
You can also offer to cover closing costs, just like builders do. Two out of every three builders these days cover lender fees, title costs and other closing charges, and so can you. “This isn’t a holiday-weekend promotion,” writes Steakley, “it’s the operating condition of the market.”
But this isn’t the only way to compete, adds Neil Brooks, a Phoenix-area agent.
“Builders spend substantial amounts attracting buyers to their model homes every weekend,” Brooks said, advising sellers to “capitalize on the traffic the builder is already creating” by adding directional signs to your own property.
Emphasize the Upgrades
Another way to challenge new construction is to stress the value your house has to offer.
For example, many resale houses come with upgrades that would cost homebuyers thousands to add. Items like window coverings, outdoor lighting, storage sheds and automatic garage door openers all add economic value.
All buyers, new and resale alike, spend money on these types of things. But if your place is already outfitted with these features, the difference in initial costs for your buyer will be even greater – meaning real savings to their bottom line.
Another advantage of resale houses is that buyers can typically move in sooner. It takes an average of around nine months to build a new house, but existing homebuyers can take occupancy as soon as the seller is ready to move on.
Furthermore, your buyer will be living in a neighborhood that’s complete. No more dirt, no more jackhammers banging away at 7 a.m., no more construction vehicles shaking houses to their bones. Just a nice, quiet community with mature landscaping and likely larger lots.
No HOA? You’re Ahead
If your property is not bound by the rules and obligations of a homeowners association, emphasize that, too. HOAs serve a real purpose, but they can be costly. Fees average $125 a month because they cover maintenance, insurance, amenities and sometimes even utilities. Most new projects these days come with HOAs, and the dues they charge can run three or four times the national average.
The taxes on your property are likely to be lower as well, at least until the local tax assessor catches up. You may also be closer to employment centers, shopping, schools, parks and entertainment venues.
Another possible selling point: your house’s character. Market its style and original materials, compared with builder-grade cabinets and appliances.
All builders guarantee their work for one or two years, and many offer 10-year warranties against structural defects. You can’t match that, but you can offer a one-year home warranty. If you are feeling really magnanimous, kick up the warranty for an extra year or two.
The key to all this is to compete on the total cost of owning your house compared with a new one. Often, yours will be a better value.
“The builder is playing a different game than you are,” said Steakley. “The good news: You can play it, too, and in a few ways, you can play it better.”
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
