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When everyone seems to be talking about the “r” word — recession — it can make homeowners nervous, especially if they’re not sure whether they want to move in the next couple of years or not. But because recessions are cyclical, we know a few things about the best options to take for both buyers or sellers when one is looming.
If selling your house might be an option for you and you have some flexibility over when, exactly, you want to move, here is some guidance about what to expect about selling a home during a recession.
Recessions are a buyer’s market
The truth for sellers is that recessions are much better for buyers. Home prices tend to stagnate or even fall, and depending on what the economy is doing, fewer people may have the financial wherewithal to buy a home at all during a recession. Most people are tightening their belts, not looking to spend a lot of money on a house, and so that means the buyers who are qualified and ready to take immediate action on a sale are few and far between.
There’s still a lot you can do to maximize your home’s appeal during a recession, but the first and most primary truth of the matter is that a recession is not a great time to sell if you have any choice in the matter.
Timing is everything
So when is the best time to sell a house? This is where it gets tricky because oftentimes the very best time to sell a house is before a recession. Home values can fall during a recession, but they’re usually at a peak right before the recession hits, so if you can, it’s smart to sell high and buy low.
Of course, it’s not easy to accurately predict exactly when home prices are going to start turning more toward a buyer’s market than a seller’s market — if it were, then everybody would be investing in real estate with abandon. So if you want to list your house before a recession, feel free to do so, but remember that it can be a dangerous game with no guaranteed payout.
Less desirable homes will drop more in value
Of course, any seller thinks that their house is one of the best homes in the neighborhood, but if you’re realistic about where you live, then you know that there are probably nicer homes and probably homes that are not quite as nice as yours. But do you know what buyers are looking for on your street and the street around yours?
It seems like an obvious truth, but it bears emphasizing that homes that buyers don’t want quite as much are going to drop more in value than homes that are more desirable for buyers. This might mean that a certain number of bedrooms or bathrooms is at a premium in your neighborhood, or it could mean that buyers are prioritizing certain lot sizes or square footage in their home search.
How can you find out how desirable your home is in the current market, and how to make it more desirable? The best way is to talk to a real estate agent who’s active in your area so that you can get a sense of what homes they see receiving multiple offers and even starting a bidding war versus the homes that linger on the market like an afterthought.
Take care of any upgrades you can
Some sellers think that selling before a recession means they can avoid sprucing up their house for a buyer at all, but in fact, the opposite is true. Selling your home before a recession means that you’re working within a window of time that might close tomorrow, so you don’t really have time to get hung up in the inspection or appraisal process.
Some sellers decide to hire an inspector before they list their home so they can identify most of the possible issues and address them before any buyers ever step foot inside. This can be a very smart strategy for sellers before a recession to show they are motivated and serious, which will in turn attract the most qualified buyers to make offers on your lovely house.
Price it fairly
Speed is of the essence if a recession is looming on the horizon, which means you really don’t have time to test the market with a fantasy price that you hope will fly with some uneducated but desperate buyers out there. In a worst-case scenario, the recession could hit while you’re haggling back and forth with a buyer who originally offered a price you were happy to take ... and then that bird in the hand who would have happily bought your house a couple of weeks ago will suddenly find themselves in the candy store of a buyer’s market and most likely tell you to go negotiate with somebody else.
What constitutes a fair price? A real estate agent can tell you if you’re unsure, so ask yours what they think your house could sell for tomorrow, then adjust accordingly.
Don’t forget, recessions are cyclical — if you miss this one, another one will come along in a few years. Sellers who have the flexibility to time their home sales according to the economy are in a prime position to take advantage of the ups and downs of home values, but it’s important to be careful not to get too confident and try to time things too close to the peak.