Despite rising home prices, not every prospective seller is suited for this market. In fact, it doesn’t make sense for a lot of homeowners to sell right now. How do you know if you should be a seller? You first have to know who is buying and then determine if you own the housing that fits their needs. I’ll bring you up to speed.
I've been in the Baltimore real estate industry since 2008. I specialize in representing home sellers in the Baltimore Area and showing them how to sell quickly and earn the most profit possible.
It’s the fall, a time of year when I currently see home sale activity slow down a bit amidst back-to-school and the holidays. In addition, the average 30-year fixed mortgage interest rate is currently 7.8% which certainly plays a part in sales activity. So, should you be selling, and if so, who’s the likely end buyer? Let’s start with who’s buying and back our way into who should be selling.
Who’s not buying in the Baltimore Area currently?
Seasoned homeowners. A June 2023 Inman article reported that 82% of American homeowners have a mortgage interest rate of 5% or lower. Today, in mid-September 2023 the average 30-year fixed mortgage interest rate is 7.8%. So why would a homeowner with a 5% mortgage interest rate on their current home pick up and move to a new home where their mortgage interest rate will be significantly higher at 7.8%? The answer, for the most part is, they wouldn’t. Generally, unless these seasoned homeowners are facing a major life change - marriage, divorce, expanding their families, becoming empty nesters, or moving due to a job, they are staying put.
Who is buying in the Baltimore Area currently?
First-time homebuyers. 67% of my listings in 2023 sold to first-time homebuyers wanting to quit renting and earn equity. Unlike seasoned homeowners, they don’t currently own homes, so they aren’t giving up a lower interest rate to make the move. Many of the first-time homebuyers I’ve sold to simply don’t want to continue to pay their landlord’s mortgage; they’d rather pay their own.
Who should consider selling in the Baltimore Area currently?
As stated, many seasoned homeowners are staying put. So, who is selling? Or, who should be selling? 75% of my listings in 2023 were not primary residences – they were investment properties (many times former rentals) or additional homes. It makes sense – inventory is low and sales prices are up, so why not sell now? According to the Bright MLS data (Bright MLS is where all Realtors enter listings and record sales), for August 2023, new listings in the Baltimore Metro Area were down 24.5% from August of last year, and the median sales price was up 4.6% from last year. The amount of homes for buyers to choose from is down significantly, so when a home is well-presented, it is selling quickly, often times at or above the listing price. How quickly? The August 2023 Bright MLS data reports that the median days on market in the Baltimore Metro Area is just 7.
My average sales price in 2023 is about $300K, so it makes sense that 75% of my listings in 2023 attracted, and ultimately sold to, first-time homebuyers. In my experience, I typically see first-time homebuyers shopping for a home below $500K. Once I list above the $500K price point, first-time homebuyer activity seems to trail off. So, if you have a home with a value of $500K or less and you list it, you’ll be on the radar of first-time homebuyers, but you need to appeal to this kind of buyer to ultimately get a sale done. Let me help.
3 Surefire Ways To Execute Sales To First-Time Homebuyers
With an asset worth $500K or less in the Baltimore Area, you’ve got the product that’s in demand; now you need to appeal to the probable customer.
#1 – Make It Turnkey
Consider these two points : 1) First-time homebuyers are likely coming from renting or living with family or friends. It’s likely they have not had to pay for repairs in their current housing. They may be unfamiliar with what repairs cost and inexperienced with vetting contractors. 2) First-time homebuyers don’t have a home to sell. Unlike many homeowners that are sitting on equity, they aren’t going to have a nice payday to fund the purchase of their new home. They’ve had to save to get to this point to pay for their down payment and closing costs. What you may encounter – first-time homebuyers may be less attracted to homes that need work and require immediate cash out of their pockets. Presenting your home with even minor cosmetic damage like towel bars falling out of the wall, loose railings, doors off the hinges, appliances that don’t work, or even a home with funky paint colors will cause your home to be passed over for one that is move-in ready.
#2 – Make Repairs
Four out of five of my most recent sales received multiple offers. Even with the competition, none of the buyers waived a home inspection. Buyers today may get competitive on price, forgo requests for seller concessions, and close early, but for the most part, they want to perform an inspection. Yes, the 2021 market is gone. No home is perfect, so the inspection will result in findings. Be prepared to make repairs. And I do mean repairs – while you can offer a credit in lieu of repairs, most first-time homebuyers I have sold to this year preferred that the repairs be done prior to move-in. This saves the buyer from having to compile quotes from contractors and dive into projects once they receive the keys. It also saves them from researching if the credit you are offering is even sufficient to cover the costs they are going to occur should they take on the repairs themselves post-closing.
Sidebar : Make sure you understand how the home inspection process is meant to work. To be able to do a home inspection, the buyer must include a home inspection contingency in the offer. This is a form document that clearly states that the purpose of the inspection is to discover unsatisfactory conditions and that the inspection is not to guarantee future performance, address cosmetic findings, or require routine maintenance. In other words, the scope is not meant to require the seller to upgrade systems that work today, address cosmetic issues, or perform maintenance work such as changing furnace filters, clearing leaves from gutters, etc. Be careful not to get caught up negotiating on these items which fall outside of the intended purpose of the inspection process and will cost you money unnecessarily.
#3 – Keep Home Warranties In Your Back Pocket
Because the inspection process is not meant for upgrading systems that are working today, buyers may become nervous if the inspector indicates that the functioning roof, HVAC system, or water heater are getting toward the end of their expected lifespan. While you’re not required to replace these, you also likely don’t want your buyer to walk from the contract. Let the buyer know that a home warranty can be purchased which would significantly benefit the buyer if and when those systems do break down. A home warranty usually costs about $600 per year, a bit more if you can get one that covers the roof. If the buyer can’t pay for it, consider chipping in for one to put the buyer at ease. It will likely be less expensive than replacing an operating system today and prevents your deal from falling apart.
If you are selling in the Baltimore Area and the buyer is concerned about the future performance of the supply or drain lines to the house, educate the buyer on HomeServe. With HomeServe, for a monthly fee, the buyer can get protection on future plumbing repairs.
Know The Market, Appeal To The Customer
The real estate market in the Baltimore Metro Area is ever-changing. You have to know what kinds of buyers are shopping to determine if you’re a seller. If you’ve got a product that could appeal to first-time homebuyers, list it, that inventory is in demand. Make your house turnkey, be prepared to make repairs at the inspection phase, and discuss the benefits of home warranties, if needed.