Hope is not a strategy
Property values are in a state of correction. The Fed Chair Jerome Powell has not minced words when relaying the Federal Reserve’s intentions to basically give a 10-20% haircut on property values via interest rate hikes (that show no signs of stopping).
It needs to happen. The market could never sustain spikes in values going on forever — it’s unhealthy.
And none of that feels good or fair to a divorcing homeowner who can’t qualify for a buy-out because rates are so high, and they’re left with no other option but to sell. After all, where will they go? Rents are sky-high and interest rates make purchasing another house an impossibility for most.
I wish I had a silver bullet solution. Unfortunately, I don’t. The reality is that the best that we, as hired professionals, can do is to be as informed as possible and advise our clients on how to mitigate the damage.
What we do know is the house holds much of a family’s fortune, and tens of thousands of dollars can evaporate with a misstep. In a divorce, the resistance of one party to sell can have a big impact on its desirability, and therefore, its value. Tackling this market requires a strategic approach. I’m afraid that those who choose to deny the facts and hope things will get better soon will look back and wish they’d acted sooner. Here are five tips that will reduce the amount of equity lost during this market downturn:
List Sooner Rather than Later: The wheels of justice turn very slowly, and many cases are rife with delay tactics to list. In a market like this, time is money. This is the time to cut losses and get the house on the market before there are further rate hikes and we slip into a recession.
Be Realistic on Price: In a divorce, both parties have to agree on a list price (absent the Court making an order) which can be a struggle. In a changing market, price reductions are often necessary, which reopens the tense pricing conversations and requires possible hearings if they cannot agree. While the conflict is going on, the value continues to drop. Listings should be priced 2-3% below the lowest active comps in a declining market. The sooner that happens, the sooner the tourniquet can stop the bleeding.
Mind the Condition: When an in-spouse doesn’t want to sell, they are often not motivated to keep the house in “model-perfect” condition. Everything from smoking weed in the house and keeping it an unkempt mess, to having the other party’s belongings piled in the driveway getting rained on, “compromised condition” is a common occurrence in a divorce listing. These things only add to the deterioration of value. We need to be very clear about expectations of the property condition, because nowadays, buyers have a lot of options and usually buy what “feels” good. Properties that don’t feel good get low-ball offers.
Cooperate with Showings: Every single showing in today’s market is like a coveted treasure. In divorce listings, requests to show are often ignored or declined. This simply cannot happen. Our standard is 90% of all showing requests are to be approved within an hour of receiving the request. If showings are routinely declined, the listing should be placed on hold until the issue is rectified. Otherwise, days on market rack up and the house becomes stigmatized among the Realtor community.
Offer a Rate Buy-Down: These have made a comeback. A buyer who is quoted a 7% interest rate can benefit from a seller contributing funds to buy it down to 4 or 5% through different loan programs that some (not all) lenders offer. Sometimes these buy-downs only last a few years, but it can mean that a buyer can afford to pay more for the house to arrive at the payment they can afford. So if your client comes to you upset, and says, “My Realtor wants me to pay for the buyer’s interest rate,” know that this can be a very savvy negotiation tool, designed to ultimately save the clients money by preserving some of their equity.
Please keep me in mind if you are in the middle of a divorce and need expert assistance with your real estate.
Katina Farrell - Certified Divorce Real Estate Expert - 720-295-8848