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Interest rates have been at historic lows for several years now. However, that appears to be ending. In a rare display of unanimity, economists across the board are predicting that rates will rise. The huge federal deficit and an improving economy are the culprits. And nudges from the federal reserve are starting the upward trend. (Mortgage interest rates, which usually follow the 1 year Treasury security, have also begun notching upward.) What no one seems to know is when the big surge will occur, or how high rates will eventually go. If you're selling your home, rising interest rates should be of concern to you. Higher rates mean it's more expensive for buyers to purchase and, as a result, there will be fewer qualified buyers out there. (Interestingly, interest rates most directly impact low- to moderate-income buyers. These are the people who are struggling to qualify for mortgage payments. High-income buyers often have more spendable cash to put down as well as use for payments. Thus interest rate changes are less likely to influence the upper end of the market.) So, if you're selling a low to moderate priced house "by owner," rising interest rates probably means there may be fewer qualified buyers for you. On the other hand, in a tightening market, you could have the advantage, if you play your cards right. Most of those who sell "by owner" are doing so in order to save the large commission. If the house sells for $350,000 and there's a 6 percent commission, that's $21,000 they hope to save. On the other hand, when the market tightens because of rising interest rates and fewer houses are being sold, the "by owner" seller still has the option of getting a faster sale, by in effect "splitting" the saved commission with the buyer. "SPLITTING" THE COMMISSION No, you can't pay a commission to the buyer. Only a licensed real estate agent can receive a commission. On the other hand, you can reduce the price of your home equivalent to say, half a commission. For example, if the market value of your home is $350,000, you could cut the price by $10,000 (still saving $11,000 on a 6 percent commission you would otherwise pay). Now your home listed with yourself is for sale at $290,000, substantially below market. Nearby similar homes that are listed will probably be for sale at the market price of $300,000. If you were a buyer, where would you look first - the home that's priced at market? Or the home that's priced below market? If you want to get a really fast sale, you could reduce the price by the amount you'd otherwise pay in a full commission. Although most "by owner" sellers with whom I've talked really don't like the sound of that, it usually works. As interest rates rise and as the market tightens, "splitting" the commission is an avenue that may be worth pursuing. It offers the possibility of a faster sale, particularly when other homes are languishing without offers. TIP Be sure that buyers who come through looking are aware that your home is priced below market. Have a list of recent sales (comparables) to show as well as a list of every other similar home in the area and its price. Although you always run the risk of getting low-balled, buyers who are aware that a home is fairly priced will often come in with good offers. Remember, buyers are price sensitive and nothing attracts them more than the thought of getting a bargain. |
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