The Least Worst Time to Sell a Home

Whether it’s a short sale or a traditional home sale, anyone thinking of selling their house within the next year should make the move now. The market isn’t going to get any better.

That sounds self-serving, since we’re in the business of selling houses, but it isn’t. We have all the business we can handle right now, so this advice isn’t for our sake. It’s for the benefit of sellers, who need to act before an avalanche of foreclosures hits. With foreclosed homes flooding the market, the downward pressure on prices is going to be huge.

We’re not the only ones making this observation. The laws of supply and demand still apply, and it’s a straightforward equation: A greater supply of houses on the market means lower prices. What it will feel like is a really slow-motion reverse auction.

For homeowners involved in short sales, where the home is sold for less than the amount owned on the loan, this downward price pressure may be a little less of a concern. So long as a short seller’s lender agrees to the price offered, that’s the most important factor. The short seller is going to walk away without any proceeds from the sale anyway, but at least with a less-damaged credit history.

It’s the traditional seller, trying not just to sell the home, but to get the best price possible to maximize their cash, who will be hurt the most by the glut of foreclosed houses.  These sellers may continue to close deals that let them pay off the mortgage and walk away with some proceeds, but it won’t be as much money as they would have had otherwise.

On top of all this, as the glut of foreclosed homes depresses property values, homeowners who may be on the edge of being under water now will end up in that uncomfortable position because of forces far beyond their control.

This is why we advise acting now if you are even remotely thinking you might sell. Some industry experts still see an 18-month window before the effects of the foreclosure wave are fully felt. We think 12 months is more realistic.

In the long term, we will all dig ourselves out of this hole, and values will start to go back up. Unfortunately, there’s a lot of pain to be felt before that happens.

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