Want stress? Try selling your home today.
Two years ago, home sellers had it all. Multiple offers drove record-high home prices ever higher. Buyer financing was little more than an afterthought. The world was a seller's oyster.
But the housing bust changed all that. In what has been termed a buyer's market without buyers, home sellers find themselves trapped in extended servitude to the place they once called home. Sellers must keep their homes spit-shined, sanitized and stripped of any personal effects that might turn off picky buyers.
Lengthening DOMs -- the Realtor shorthand for "days on market" -- might more appropriately be spelled "DOOM," as today's sellers choose from three equally unpleasant scenarios:
- Stick with your price and endure the grinding effects of keeping up a show-ready home.
- Lower your price and take the financial hit to sell.
- Pull the old homestead off the block until the market improves, which could take years.
Today's market has created unprecedented levels of seller stress that mirror symptoms of post-traumatic stress disorder, says Dr. Peter Lambrou, chair of psychology at Scripps Memorial Hospital in La Jolla, Calif.
"What's different is the uncertainty factor," he says. "In other times, when people decided they wanted to move, it was a fairly easy exit, usually because they had an intention or desire to move. They had positive expectation about where they were going.
“Sellers that are in fantasy have completely clouded themselves to what has really happened as far as prices.”
"But when people are in distress or upside-down in their house, they're not looking forward to moving, they're doing it to prevent further chaos in their life. So oftentimes, they're abandoning a home that they really had no intention of leaving. That's much different than the typical home sale that people usually experience."
Fantasy vs. realityTo further feed seller frustration, plummeting housing prices have forced many homeowners to sell at a time when tightening mortgage underwriting makes it more difficult for buyers to get financing.
In some cases, the mortgage company itself quashes the sale by underappraising the property value, leaving an intractable cash chasm between buyer and seller.
"The uncertainty of that becomes even more powerful because now, with every month that goes by, you're losing money," Lambrou says.
Realtor Gary Neubauer with Coldwell Banker in Fort Myers, Fla., has seen home prices in his market drop 21 percent to 35 percent in luxury gated communities and 50 percent overall during the past year. He says his sellers now live in one of two worlds: fantasy or reality.
"Sellers that are in fantasy have completely clouded themselves to what has really happened as far as prices," he says. "They keep complaining that they're on the market and nothing is happening. In reality, they're on the market but they're not in the market, because they're so ridiculously priced."
It has become equally tricky to avoid pricing a property too low in this unruly market, Neubauer says.
"It isn't just 'reduce the price to such a point that anybody would buy it.' Even that isn't working today," he says. "It has to be priced in such a way that a potential buyer will recognize that the price is a good price, but also realize that the property is still a smart thing to buy."
Michael Brodie, a luxury home specialist with Keller Williams Realty in Plano, Texas, says seller fantasies also are commonplace in his market.
In particular, "the high end is experiencing slow times right now," he says.
"I think a lot of high-end sellers are in denial," he says. "They won't accept the reality that obtaining jumbo loans is more difficult now, so there is not the trickle-up or buy-up from the market beneath them."
Sellers in Plano need to remain realistic and understand that buyers can afford to be choosy today, he says.
"This is not a time to test the market, hoping 'gosh, my house is so special that somebody will pay just whatever,'" Brodie says. "Buyers have a lot of choices out there and they're being very selective and aggressive."
After months in listing purgatory, what are most of his well-heeled clients inclined to do with a rancho grande?