If you need to sell your home while mortgage rates are high, you’ll face challenges, but the task is not impossible; millions of homes have sold during the current conditions, and even when rates were higher. With strategic pricing, targeted marketing, and a flexible approach, you can get your house sold and move into a new one.
Why Mortgage Rates Are Still High
Since you’re watching the economy closely, you’re probably wondering why mortgage rates are still high even though inflation is moderating. Multiple factors are involved:
- Lenders build premiums into their mortgage rates during times of economic uncertainty. They do this to protect themselves from potential losses that could come from recessions, job losses, or continued volatility.
- Mortgage rates tend to climb more quickly than they fall. Even after the Federal Reserve indicates that it will be lowering rates, mortgage rates typically stay higher until inflation truly subsides.
- Business drops off for lenders when rates are high, especially in refinancing. To maintain profitability, lenders sometimes increase rates.
Numerous other forces, both domestic and international, play a role in why mortgage rates are still high. These forces often lag behind local economic indicators.
The High Mortgage Rates Seller’s Dilemma: Hanging on or Jumping Off
Many homeowners are waiting to sell homes due to high mortgage rates. This has created what economists call the high mortgage rates seller’s dilemma: the decision of whether to sell and give up a low-rate mortgage, or stay and delay the changes they’ve been planning.
The high mortgage rates seller’s dilemma affects the entire market, creating a unique dynamic. All at once, millions of current homeowners with low-rate mortgages face much higher rates if they sell. That causes multitudes of homeowners to feel locked into their current properties even though they have compelling reasons for moving.
When you look at the actual numbers, the high mortgage rates seller’s dilemma makes sense; on a $400,000 mortgage, the difference between a 3% loan and a 7% loan is approximately $1,100 per month or $13,200 annually. That’s a good reason to stick with your current home and your current mortgage.
However, homeowners waiting to sell their homes due to high interest rates need to think about the whole picture. Some things to consider:
- Every month you stay in a home that doesn’t meet your needs costs you something, whether that’s a longer commute, inadequate space, distance from your family, or not being able to move on with your life.
- Rates may stay high for a while. If you’re putting your life on hold waiting for them to drop, you could be waiting for years.
- Home prices could rise while you wait. If you were planning to upsize or move to a more expensive area, the homes you’re interested in could appreciate in value. Even if you get a better mortgage rate, you might be financing a significantly more expensive house.
- When interest rates are high, there’s less inventory, and that means less competition for the home you want.
- You can refinance later if interest rates drop enough to justify the refinancing costs.
If you’re facing the high mortgage rates seller’s dilemma, balance your financial goals with your life goals; it’s rarely an all-or-nothing situation.
How to Sell Your Home When Rates Are High
If you decide to sell despite high mortgage rates, improve your chances of success with these key strategies:
Price Aggressively and Realistically
In a high-interest-rate environment, people don’t have as much purchasing power. A buyer who could afford $400,000 at 3% might not qualify for a loan that size at 6%. Price your home based on the current market, not what it would sell for if rates were lower.
Work with an experienced real estate agent who knows your market intimately. They can advise you on what comparable homes have sold for over the past 30 to 60 days and help you with a pricing strategy. Although you might be tempted to test the market by overpricing, this strategy can easily backfire. If your house winds up sitting on the market for too long, buyers start to wonder if there’s something wrong with the property.
Offer a Rate Buydown or Seller Concessions
One way out of the high mortgage rates seller’s dilemma is to offer buyers a rate buydown. With a rate buydown, the seller contributes funds to an escrow account that effectively lowers the buyer’s mortgage payments for a fixed period of time, typically one to three years. This mitigates the impact of high interest rates for the buyer. You can also offer seller concessions, like paying the closing costs for the buyer.
These strategies do cost money, but they’re a strong signal to buyers that you’re flexible and ready to sell. That can make the difference between selling your house in 30 days and having it sit on the market for months while you make repeated price reductions.
Market to Buyers Less Affected by High Interest Rates
Not all buyers are equally affected by high mortgage rates. Some potential buyers you can target are:
- Cash buyers, including investors.
- First-time buyers who qualify for assistance programs and who want to enter the market regardless of interest rates.
- Buyers who are relocating with employer support.
- Buyers who might qualify to assume your mortgage.
To market to specific types of buyers:
- Highlight features that appeal to that group, such as low HOA fees (for first-time buyers), walk-in showers (for retirees), and proximity to big corporate headquarters (for buyers relocating for work).
- Use marketing channels that the group prefers, such as online platforms, investor forums, and LinkedIn. Contact corporate relocation companies directly.
- Offer incentives that matter to them, such as a quick closing and as-is terms (for investors), closing cost help (for first-time buyers), and flexible closing time (for corporate relocators).
Work with your real estate agent to identify the most promising marketing angles and tweak your listing to attract the right kind of buyer.
Make Your Home Showing-Ready
Standing out from the competition is particularly important when interest rates are high because buyer traffic will be lower.
- Declutter, deep clean, and depersonalize the home. Stage it professionally if it’s vacant. Address any necessary maintenance and minor repairs.
- Hire a professional real estate photographer. Most buyers begin their search online, and high-quality photos will stop buyers from scrolling past your listing.
- Be ready for showings at any time. The more potential buyers you get through the door in the first few weeks, the better your chances of selling and avoiding a stale listing.
- Be flexible with terms. Accommodate closing dates, financing timelines, and offer seller concessions wherever possible. This can make all the difference to a buyer.
The High Mortgage Rate Seller’s Dilemma
The high mortgage rates seller’s dilemma is real, but you don’t have to stay stuck in a home that’s not working for you. With the right strategy, timing, and a great real estate agent, you can be on to your next chapter with your sanity intact and some extra cash in your pocket!
