From builders not building enough homes to baby boomers refusing to move, there is blame plenty to go around for the über-tight inventory problem. Some of it is rightfully placed (hey, builders!) but blaming one homeowner demographic is just plain foolish. Here are some reasons people aren’t selling their homes and tips on solving this issue.
Gen X isn’t selling and millennials that own homes aren’t selling either. Even if they want to sell, they have fears about the process, about losing money, and about the hassles of home sales that real estate agents are so fond of mentioning.
We did some unofficial research and have found three reasons people aren’t selling their homes that are pretty common among homeowners when they entertain thoughts of selling. You may recognize them. But do you deal with them?
1. The repair dilemma
Repairs definitely top the list when it comes to reasons people aren’t selling their homes.
“My house needs repairs that I don’t really want to spend the money on now,” Wendy H. from Keller, Texas tells an unnamed writer at DaveRamsey.com.
While Wendy doesn’t “want” to spend the money, many homeowners flat-out just don’t have the budget for major repairs or replacements. Especially if they are buying another home – their wallets are just as squeaky as their buyers’.
Many homeowners don’t have a clue about the true condition of their homes. Additionally, they’re clueless about which repairs are, if not attended to, potential deal breakers and which aren’t that important.
Get the homeowner to deal in reality, not assumptions and then you can get busy clearing up the misconceptions.
Yank them into reality by suggesting a pre-sale home inspection. And quit it with the typical argument against this inspection: “We’ll need to disclose what is found.” The chances are pretty good that the same problems will be disclosed on the buyer’s home inspection report.
Unless you love surprises and being reactive instead of proactive, urge clients who know there are problems with the home to get his or her own home inspection.
When the report comes in, discuss options with the sellers. Let them know that the buyers’ lender may not go through with the loan if certain repairs (health and safety stuff) aren’t made. Those are the true deal breakers and must be attended to.
Then, prioritize the rest of the problems. Those that might keep buyers from making offers should go at the top. The small stuff at the bottom.
If the sellers are truly cash-poor and can’t make repairs, explain to them that they’ll need to compensate for that with a list price that reflects the need for work.
2. The fear of being a buyer in this market
“It’s 2000 square feet. I would love to sell it, but downsizing to 600 square feet would mean paying a giant Bay Area mortgage and a tripling of my taxes,” bemoans a gentleman at NerdWallet.com.
He has a point. It may be a hot sellers’ market, but potential sellers understand that a market that is hot for one group of people is the pits for the other group. A group they will be joining when the home sells. And that’s one of the most common reasons people aren’t selling their homes.
They read the news. They understand that, with supply diminished, demand for homes is driving prices sky-high. Why not wait out the market, hope that they can maintain their equity so that it will go further in a saner housing market?
Your job here is to remind them how futile it is to try to time the market. Remind them as well that by the time they’ve figured out that the market is getting “better,” it’s already happened and they may have missed the optimum time. For more info on how to help discuss market turbulence, check out this article.
Then, point to current mortgage rates (if they remain low). Rates like this may can help compensate for higher home prices.
3. Rate concerns
On February 24 of this year (2020), we experienced “the second-lowest 30-year rate in history,” according to Peter Miller at TheMortgageReports.com.
It’s a well-known fact that when mortgage rates rise, homeowners don’t budge. “Over the last three years, the interest rate on outstanding mortgages averaged 3.9%,” according to Holden Lewis, citing a Department of Commerce study, at NerdWallet.com.
As mentioned earlier, rates are super low right now — 3.34 percent. How long we can enjoy this is unknown, but Miller expects that “… this is a short, rare window of sub-3.5% rates.”
If they go higher than the 3.9 percent comfort zone, rate concerns will definitely contribute to reasons people aren’t selling their homes. Homeowners will be reluctant to move and there is little you can say to convince them otherwise.
So, strike now while rates are attractive enough to get them off the sidelines.
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