- The market is booming for sellers and the vast majority of homeowners are in a positive equity position. Still, inventory remains low.
- Many homeowners are unsure if they have enough equity to sell their home, pay for closing costs and move “up” to a nicer residence.
- By planning ahead and working with a local expert, many of today’s homeowners can take advantage of the sellers’ market to sell their current residence and upgrade to a newer home.
Explaining low equity in a 2017 market
During the market downturn, foreclosures and short sales were common because so many homeowners were in a negative equity position — that is, their home was worth less than what they owed on their mortgage. In 2012, 17 percent of Minnesota homeowners were in a negative equity position.
Today, with a booming market that benefits sellers, just 4 percent of homeowners across Minnesota and 7 percent of homeowners across Wisconsin have negative equity. (CoreLogic Q1 2017 Equity Report)
Due to rising prices over the last several years, most homeowners are in their best equity position since before the Great Recession hit.
If equity is so high, why is inventory so low?
Despite this increase in equity, homeowners across Minnesota and western Wisconsin aren’t selling. Inventory remains low as homeowners hold out on listing their homes for sale. But why?
First, many homeowners have positive equity, but they still don’t have enough to cover the selling costs on their current home and to put a down payment on a “move up” dream residence. This problem is especially true for starter home owners who purchased at the height of the market.
In some cases, homeowners who have enough equity to justify a move are also staying put. This could be because these wannabe sellers are reading the headlines; they know that while their home’s value has gone up, so have the values of the homes they’d like to purchase. They may wonder how much of an upgrade they’ll be able to get, given the tight inventory and high buyer competition in the marketplace.
What should homeowners do to make a smart selling decision?
Staying on the fence forever isn’t the solution. Here are three main ways that hesitant sellers can protect themselves when listing their homes for sale today.
1. Get a customized, personal home value estimate
When you see your home’s value displayed online, it’s the result of a computer algorithm that’s using county records (which can be up to two years old), recent home sales and pricing data to determine a general range for your property.
This is a starting point, but it does not consider your home's exact location or condition. By asking a local expert to evaluate your home in person, you will get a true market analysis that goes beyond aggregated data.
Need a hand? Edina Realty has 2,500 local experts who offer free (no obligation) home value estimates in every neighborhood across Minnesota and western Wisconsin. Reach out today to get one scheduled.
2. Add a reverse contingency to your purchase agreement
Today’s market, as you know, favors sellers. That means that if you do place your home on the market, you have some leverage to ensure the transaction works in your favor — from start to finish.
If you’re worried that your home will sell quickly, but you won’t be able to find a new residence by the date of closing, you and your REALTOR®can add a reverse contingency to the purchase agreement. In short, you can request that your home sale be contingent on you and your family finding another home to purchase.
3. Consider short-term or transitional housing
If a reverse contingency isn’t an option but you’d still like to sell, you can also consider short-term or transitional housing options. This would allow you to take your time looking for the right house instead of settling for a less-than-perfect new residence.
Short-term housing options include:
- Short-term rental properties (including single family homes, townhouses and apartments)
- Residing in an extended stay hotel or inn
- Staying with friends or family members with extra space
Wondering what comes next?
Whether you have enough money to purchase a new home free and clear, or are wondering if you’re finally out of the red, it can help to talk with a no-pressure selling expert.
Reach out to our customer care team to be matched with a local specialist who can explain the current market and help determine where you stand.
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