Selling a house in this market can be tricky with high mortgage interest rates and steep prices, but patience can help.
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Selling a home for a good price in this housing market can be challenging but not impossible.
The real estate market is in an unusual spot where both the supply and the demand are low. As a result, prices have remained high. What's more, mortgage interest rates remain high compared to several years ago but have dropped slightly recently.
As a family of four, we wanted to upgrade our location and school district for our two daughters. But in this economy, it made little financial sense to give up a 3.5% mortgage interest rate for a 6% to 7% loan in the same market unless we were going to downsize a lot or get lucky.
We got a little bit of both.
Our family was able to sell our Austin home for full price in under two months with some homework, a little elbow grease, and a lot of patience. Here's how we did it and what we learned along the way.
My wife and I had been studying the Austin housing market before we listed our home, so we knew what to expect in terms of the challenges we faced and the possible price for our home.
We found an affordable house for rent closer to my wife's work in downtown Austin and in a top school district for our two daughters. And while many people like to upsize their housing situation, we wanted the opposite. Now that our daughters are entering their teens, they are no longer wild horses that need playrooms and large backyards with playscapes.
The new house is only temporary, but the rent is well below the going rate for houses in Austin. It also gives us a chance to play both sides of the market: we sold our old residence before a potential downturn and we may get a chance to buy back in later on if prices drop.
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Additionally, the first real-estate agent we interviewed in August warned us about a possible impending downturn in the local housing market and suggested we list the house for about 15% below what similar houses had sold for in previous months. We stood firm on our original price of $750,000.
However, we knew a drop in housing prices in the Austin area was possible and even likely. Realtor.com projected a 12% drop in housing prices for the area in 2024.
To be sure, prices were still 55% above prepandemic levels. We were confident it was too early to panic even though it was taking houses longer to sell and, recently, there's been an increase in listings with price cuts. In October, 6.9% of homes for sale had a price drop, the highest percentage they had ever recorded, up from 6.5% in September and 5.8% in August, according to Redfin.
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The agent we eventually hired shared our confidence. We had a good house that had been renovated in the pandemic and was in the family-friendly suburbs near good schools.
We also knew that while demand was down, inventory was still low in Austin, where the city is behind on its affordable housing goals.
While the number of buyers has dwindled, we knew it wasn't zero.
We also knew people still wanted to live in Austin, one of the "blue island" cities where younger people get the lifestyles they crave along with job opportunities.
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We were also in a situation where we could be patient, which was a huge advantage.
When we first put the house on the market in October, the average listing in Austin took two months to sell. We were warned by several real estate agents that two months might be a best-case scenario and we should be prepared to wait as long as six.
Meanwhile, some potential buyers are finding creative ways to avoid high interest rates and purchase homes. For example, the millennial family who eventually purchased our house used a 2-1 buydown mortgage. They were able to lower their interest rate to 5% for the first year and 6% in the second year before the mortgage reverts to a more standard rate. This can be a good strategy if you are confident interest rates will fall and you can refinance the mortgage in the first few years.
While nothing is guaranteed with interest rates, this is exactly what the Fed is projected to do, holding interest rates steady in the first part of 2024 before starting to lower rates later in the year.
In addition to being patient, we took some steps to ensure the house stood out from others on the market. We staged it, a technique that helps potential buyers envision how different parts of the house can be used.
The staging cost us about $2,000, but we think it was worth it. According to a National Association of Realtors survey, staged homes sell faster and for more money than non-staged homes.
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We also hired a landscaper to ensure the curb appeal was in top condition, and we did many minor repairs to avoid any potential inspection issues.
This added a few thousand dollars to our upfront costs, but we hoped it would give us a better chance of selling the house at our asking price.
To be sure, we were in a very fortunate position to be able to wait for the right buyer and to afford cosmetic updates. Not every family is in a similar position and might have to take lower-than-desired offers.
The one thing we weren't prepared for was the lowball offers we got when the house went on the market.
In the first few weeks, we received multiple offers in the neighborhood of about half the selling price. It was clear some investors were hoping to find desperate sellers.
That was not us.
After less than two months on the market, we received a full-price offer with one condition: that we replace the two air conditioning units.
The units still worked great, but we also knew they were older than their life expectancy, and we would probably make the same demand if we bought the house. We replaced them with the $10,000 cost coming out of our proceeds from the sale. We went into the sale cautiously but it went even better than we envisioned.
Not everybody will be as lucky as we were, but a little homework, some upfront costs to increase the house's appeal, and not being in a hurry can increase your chances of making a worthwhile deal.
