Are your selling fears keeping you a prisoner in your own home?

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Published Date 10/13/2023

It’s no secret that a huge reason real estate numbers are so dead in the water (apart from interest rates) is not just a hesitation, but an out-and-out fear on the parts of home sellers who prefer to stay put rather than dip a toe in the unknown.

“Selling a house can be a stressful process, particularly in today’s rapidly changing market,” says Realtor.com’s Kimberly Dawn Neumann. “Although sellers enjoyed a strong seller’s market throughout much of the COVID-19-fueled housing boom rich with bidding wars and record-high prices, rising interest rates have shifted these power dynamics to the point that many prospective sellers might feel downright paralyzed by home-selling ‘what ifs.’”

A few are — What if I sell now, but then home prices rise? What if I sell now, but then can’t find a new house? And — Will I regret selling so soon, or regret not selling soon enough?

Anyone possessing the crystal ball that can offer indisputable clarity on these answers would be wildly wealthy by now. Sellers hesitating to put their homes on the market is a huge part of the reason the number of new homes entering the market has been down for well over a year.

So if you’re a homeowner paralyzed by indecision, Neumann offers to help you play out the various semi-Shakespearean scenes — “to sell or not to sell” – and lists a few questions floating around today, plus a reality check weighted with expert forecasts rather than hearsay or fear.

“I love my interest rate” is a big one. A recent Opendoor survey found that out of all housing market issues, 77% of homebuyers and sellers are most concerned about high-interest rates. As a result, many potential sellers are postponing their moves for fear of future affordability woes.

“According to the FHFA national mortgage database, 90%-plus of outstanding mortgages have interest rates less than 6%,” says Amit Arora, vice president of investments for Opendoor. “So there isn’t a huge motivation for many sellers to list.”

This tracks, since nearly three-quarters of sellers also plan to go out and buy a new house, and with current interest rates hovering around 7%, many sellers are afraid to give up their lower interest rate when they sell to then repurchase their next home.

A reality check tells us there are a few ways around this: (1) an all-cash purchase (if you have a ton of equity in your home by now), or (2) snagging a lower rate by buying down the interest rate with the lender. Yet one more option would be an assumable mortgage — where you qualify to “take over,” the mortgage of the home you’re buying—as well as its low interest rate.

Another is FOMO (fear of missing out). Some sellers might hesitate to list their homes right now thinking that their property might appreciate even more in the near future—and then they’ll be sorry they sold it for less. The thing is, right now escalation has seemingly slowed from pandemic times. Realtor.com® predicts only a modest decline in prices of just 0.6% for 2023 as a whole.

Yes. You could wait; but you’re not really going to make that much more than if you sold now. “That’s because most sellers are likely selling one house and using the funds from that sale to purchase another house,” says Neumann. “In this scenario, it is not as important to ‘time’ the market to sell at the peak.”

Interest rates might go down. Floating somewhere in there is a deal for the Brooklyn Bridge. Oh. Sorry. Yes. They might come down. But homeowners likely to sell in the near future are waiting on the sidelines for this. They actually believe that if a buyer is able to get a lower interest rate, they will be willing to pay more for the house. Truth: it’s a pipe dream. Supply and demand play a big role in determining home values, and this might not play out the way you’d imagine.

An interest rate decline will no doubt trigger a flood of new listings, and an increase in supply typically results in a reduction of prices. “At the moment, however, data shows that there is still limited inventory and great demand for housing, which is why prices have continued to increase despite the higher interest rates,” says Neumann.

”What about my own ability to buy another house?” is also on the minds of sellers. Of course, this really comes down to the reason you are selling. Interest rates do not determine if you are going to sell or buy a new home. What drives your move is much more elementary — such as needing more space, the need for a better school district, a new job or job relocation, being closer to family, or just plain downsizing when the kids are gone and you want your life contained on the lower level of your home.

Whether the rate is in the 6% or 7% range doesn’t really matter relative to your quality of life and family needs, and while affordability is a big issue, it is often trumped by lifestyle needs.

”What if I list my home, it sells right away, and now I need more time to buy a new property?” The ‘what ifs’ are now off the chart. “Homes spend an average of 46 days on the market,” says Neumann. “That’s about two weeks longer than last year, but still shorter than before the pandemic. Since homes are selling faster in general, you need to make sure you aren’t thrown for a loop if you list your home and immediately get offers. But if you think you’ll need even more time, there are ways to negotiate with a buyer.” By this she means including a contingency clause that allows you to find a home before completing the sale. Or — another genius move? A long escrow — longer than the usual 30 days to give you more time to find a new residence. Almost forgotten is the “rent-back” agreement, where you stay in your house as a tenant after the buyer closes escrow. Most lenders will allow a buyer to offer up to 60 days for the seller to lease back the property after the sale is complete.

Other what-ifs your Realtor can go over with you are your ability to make repairs before selling (or selling “as-is”), and not getting the price you want for your home. It’s all in the mix. So consider a bit of rolling with the punches if you have any compunction to sell your home. Fear isn’t, after all, a good look on you.

Realtor, TBWS

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