Lots of Showings, Reduced Price, Still No Offers...What Can Be Done?

Dave,

I have my house on the market since January 2, 2019. Lots of showings but the potential buyers do not stay long 5 or 10 minutes then they leave. My home needs masonry work in the basement and floors are sloping. My home is 100 years old but I sunk plenty of money into the house, new bathroom, new kitchen. I reduced the price by $15,000 and still no offers. The feedback is too small, sloping floors. I asked my listing agent if she knows any contractors as I want to unload my home asap. I want to relocate and I am not getting any offers at all. What can be done?

Linda     

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Linda,

I am going to break this down almost line by line. There is a lot of meat on this bone, so let’s get right to it!  First, patience is the one thing this time of year requires. Remember that you listed in what is traditionally considered the slowest (from a sales perspective) time of year and it is always hard to interpret showing traffic and feedback so moving with a bit of caution might be prudent. “Lots of showings” is somewhat relative and can depend on your definition of “lots”, but nationwide statistics on the number of showings before you should have an offer is somewhere between 8 & 13 depending on the market, time of year, etc!  Clearly this is not an exact number or science, but it does provide one statistical guideline to have some guardrails that will help keep you on the road! Along that line, there really is no typical length of showings.

From years of experience I would say that the average showing is somewhere around 20 minutes, but keep in mind that is an average, meaning some look quicker and some take longer! As a Realtor, everyone loves the buyer who is a quick looker, but some people need to look in and under every nook and cranny, even if they know they are not interested! Much depends on how large the home is etc. I have seen statistics and studies over the years that indicate that a buyer will internally “know” if the house is a contender within a minute or two, which shows that the final determining factor has a lot to do with having a gut feeling. All that to say that 5-10 minutes is probably a bit light. I even wonder if they are there long enough to get to the basement to see the area in need of masonry work? 

“Regardless of if they are making it to the basement or not they are bailing quickly and the reason is most likely the sloping floors. They should be aware of the size before they come to see and the fact that you have had showings tells me that the sloping floors are expediting their exit.”

Regardless of if they are making it to the basement or not they are bailing quickly and the reason is most likely the sloping floors. They should be aware of the size before they come to see and the fact that you have had showings tells me that the sloping floors are expediting their exit. These two issues are even outweighing your kitchen and bathroom updates, which I am sure makes it more disheartening.  Remember sometimes it takes patience to find the right butt for the saddle. Finding that butt can take longer when you have significant hurdles and a sloping floor would check the significant hurdle box. To overcome significant hurdles it generally takes one of three things, time, just the right buyer or price reduction(s).

Your price reduction of $15,000 is a significant move in the right direction. It’s not clear when you made the price reduction, but you need to give it at least 2-4 weeks to season and see if it brings any new buyers to the table. If this price change does not bring in serious new lookers then you will need to decide between time and money! Sounds like time is very important, so you may need to keep adjusting your price until you find the right value that makes accepting the sloping floors an attractive choice for a buyer. With every significant hurdle, there is a price that makes a buyer believe it is an acceptable risk. You will likely need to find that price if you need to sell asap. Your other option is to evaluate what needs to be done to correct the problem and get it fixed! This would significantly increase your buyer pool and appeal.

For your average buyer, the cost to correct sloping floors would loom large in the decision making process because fixing it would require cash they would likely choose to spend elsewhere and expertise that most don’t have. Fixing it would be a great option, depending on cost and timeline to correct. With every home sale there are two lines (price and time) that start off parallel and eventually meet. Adjusting your price is your quickest (notice I did necessarily say best) solution to speeding up the process! Sorry I don’t have a magic bullet, but these options should help you sort it out…best of luck!

Dave Kimbrough
The Kimbrough Team

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Refinancing Your House: Adjustable vs. Fixed Rates

Dear Dave,

We’re considering refinancing our house and have gotten lots of advice on the type of loan we should go with. What is your opinion on adjustable rate mortgages these days? I have heard adamant opinions both ways. We would really like to hear your take on this.

Thanks -

Steve and Lynne - Grand Junction, CO

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Steve and Lynne,

Well, amazingly enough the interest rates are still incredible and we are seeing 30 year fixed rates just over 4.25%, 15 year fixed rates at about 3.75 % and 5/1 adjustable rates hovering right around 3.875%. These are all fantastic interest rates, regardless of if you choose a fixed rate or an adjustable one. 

Adjustable rates are quite attractive as they are set for a specific number of years, in the case of a 5/1 ARM it is set for the first 5 years at a low or “teaser” rate that is very attractive and generally lower than a fixed mortgage, however after the initial “fixed” rate time frame it will periodically adjust in response to the treasury bill rate or the prime rate. The initial low rate is a very attractive and that incentive provides the “teaser” for the potentially higher rate to come as it potentially adjusts and increases your monthly payment. Generally these adjustable rate mortgages have a “ceiling rate” that would be the maximum rate it could achieve and that offers some protection against a potential run away upswing in interest rates. 

In my opinion Adjustable Rate Mortgages only make sense, in our current low fixed rate climate, if you are positive you will only have the mortgage for less than the initial fixed rate time frame. If you believe you will remain in the house for the long term, go with the fixed rate and enjoy the benefits of what is again, near historical low rates and not have to worry about potential market fluctuations. 

Dave Kimbrough
The Kimbrough Team

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Are Open Houses Effective in the Winter Months?

Dear Dave,

Our house has been for sale for about 2 months now.  It is in a higher price bracket and we aren’t having many showings at all.  What is your opinion on open houses this time of year?  Are they worth the work and the hassle for us and our Realtor? 

We would appreciate your opinion.

Thanks,

Bob - Montrose, CO

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Bob,

I believe this to be our first question from Montrose, thus I can’t resist a quick answer. Open houses are not a significant part of our marketing efforts, not because we don’t want to sell houses, but because they are not statistically effective at selling houses. Open houses are a very good place for real estate agents to meet new home buyers and sellers and add them to their client list, however they are low on the impact meter for directly impacting home sales.

“Open houses are a very good place for real estate agents to meet new home buyers and sellers and add them to their client list, however they are low on the impact meter for directly impacting home sales.”

In summary, it is my opinion that open houses are overall fairly benign as a marketing tool. If you and your agent want to have one then you should have one, as any activity is at least “activity”… you know the blind hog theory? To that end, I would advise you to not hold your breath while you are away from home that Sunday afternoon, as it is statistically not probable to produce a sale, but it may help get you more traffic through you home if traffic is what you are looking to achieve. Realize the open house is another tool to potentially sell and advertise your home, however like most marketing methods it will not be the silver bullet you are likely wanting it to be. Try to be patient, we are just about to enter prime selling season…Winter is almost in the rear view mirror!

Dave Kimbrough
The Kimbrough Team

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What happens when a home appraisal comes in low?

Dave,

We sold our home last year and during the process our appraisal went by without a hitch, actually everything went as well as we could have hoped for. However, recently it was brought up in a discussion between my wife and I—what happens if the appraisal on a home comes back less than what the buyer offered? Are the buyers able to change their offer accordingly or are they contractually obligated to continue through and purchase the home with their original offer? Like I said, the appraisal on our house was smooth as silk, but it just got us curious about what the options would have been if things had not gone so smoothly.

Thank you for taking the time to answer our question!

Sarah and John, Grand Junction

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Sarah and John,

Congratulations on your smooth transaction last year! It’s always a blessing when all aspects of a sale go smooth and without any significant speed bumps. As I am sure you are aware, speed bumps are just part of the process and a low appraisal can be one of the most significant speed bumps one can encounter on the road to closing! 

Low appraisals become more common when a market gets very active and rapidly appreciating prices are hard to substantiate with past sales. It can also be an issue, like it was here in 2011 & 2012 when the large number of foreclosures cloud the data and keep an artificial lid on potentially rising market values. Luckily on the Western Slope we have been seeing very sustainable and verifiable appreciation levels and although we occasionally see low appraisals, it is the exception not the rule. When an appraisal does come in low, there are several options, but all the options generally lead to give and take from both parties involved in the sale.

Unless the buyer waives their right to an appraisal, there is an appraisal provision in every Colorado contract to buy and sell that provides the buyer an escape clause if the home they have under contract does not appraise at the contracted price. There is no contractual obligation to purchase any property that does not appraise. In fact, Colorado real estate contracts are designed with the intent to protect the consumer. Remember, if the appraisal comes back low, you still have options.

“The first most logical option would be to get a second appraisal, if both parties agree that the first one was, for one reason or another, not as accurate as it could have been. ”

The first most logical option would be to get a second appraisal, if both parties agree that the first one was, for one reason or another, not as accurate as it could have been. If the lender will allow a second appraisal, then this is a reasonable choice and both parties can hope that the value comes in at the contracted price.

The next option is to amend the purchase price down to the appraised value. This is not a very popular option for sellers, however very popular with buyers! Funny how it works out that way. On the flip side, the next option is to keep the agreed upon purchase price and have the buyer make up the difference between the appraised price and purchase price in cash at the time of closing. Funny how this is a very popular option for the seller, however not very popular with buyers. Another option, and by far the most popular, is they meet in the middle. Say the appraisal comes in $6k low, the seller lowers the price $3k and the buyer brings an extra $3k to the closing table to bridge the gap and get the deal to the closing table. 

Ultimately a low appraisal generally comes down to how bad the buyer wants to buy and how bad the seller wants to sell and thus the reason that the “meet in the middle” option is the most popular! There are far too many scenarios to go over here, as a low appraisal can have other, more far reaching impacts.  More often than not it just takes everyone coming to the conclusion that a win/win is better than a loss!  Count your blessings and I hope this gives some simple insight into a complicated and very unwanted situation!  

Dave Kimbrough
The Kimbrough Team

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