Not Even for a Car?
Mark and Elaine Hendricks recently offered their 2000 Mustang convertible as a freebie to anyone who would buy their Woodbridge house, but even that failed to distinguish it from the roughly 700 other homes for sale in their Zip code.
“We wanted to try something unusual, thinking maybe it might be crazy enough to bring somebody in,” Mark Hendricks said. “But with so many houses on the market, a free car doesn’t do the trick.”
Frustrated home sellers are adopting extreme tactics, with mixed results, as they try to stand out in a crowded market. They’re giving away prizes, sweetening commissions for agents, and trying to auction or raffle off their homes when all else fails.
These measures are another symptom of the fallout from the subprime mortgage crisis. In many cases, sellers are struggling to compete with the record supply of foreclosed homes listed at rock-bottom prices. In Prince William County, for instance, the number of single-family houses listed for sale for less than $200,000 shot up 15,000 percent last month compared with a year earlier — from 5 to 768. There was a 66 percent increase in listings under $500,000.
That’s what the Hendricks family was up against when they tried to give away their Mustang. At the time, at least 30 homes were for sale within a mile of their house, they said. One similar to theirs was listed for $199,000. They were asking $375,000.
“It was probably an extreme fixer-upper, and our house is not,” Mark Hendricks said. “But we had to do something. So we suggested the car idea to our agent. Why not try?”
The car failed to stir buyer interest, and they gave up on the idea after three weeks. Instead, they slashed their price a second time to $339,000.
So far, no offers, no foot traffic.
Many real estate agents say flashy giveaways are usually ineffective, and in fact, may complicate the appraisal process or give the impression that a home’s base price is inflated to make up for whatever perk is offered.
The most powerful draw in a down market is setting the right price, they say, keeping in mind that the value of a home is determined by what else people can buy for the same price when they’re ready to spend.
“Price is king,” said Mike Schmidle, a real estate agent at Real Estate by Owner in Arlington. “Sometimes you just have to reduce it until it hurts and then some.”
Al and Margaret Conte did that. They cut the $600,000 asking price on their Centreville home three times before accepting a $500,000 offer this week.
Their decision was dictated by the price of the house next door, they said. That house went on the market for $640,000. But within 60 days, their neighbor had cut the price to $550,000 and sold. The Contes felt they had little choice but to accept an offer much lower than what they wanted. They even kicked in $10,000 for closing costs.
“It’s the one and only offer I’ve received, and I have to act on it because chances are I will not get another one and I’m up against a deadline,” said Al Conte, who has signed a contract to purchase a home in Warrenton.
The Contes’ house had been on the market for six months.
John Lesniewski could not wait that long. So he decided to auction off two houses he owned.
Lesniewski, a real estate agent at Re/Max 100 in Suitland, acquired the homes from clients of his under a guaranteed sales program, meaning he agreed to buy the homes if they didn’t sell within a set time.
For each of the past 12 years, he has purchased about 7 percent of his clients’ homes that way, he said. But last year, prices dropped more quickly than he anticipated and he ended up with an unacceptable 13 percent of the homes, he said.
To avoid getting hammered again, he hired an auction house this year to sell one house he bought in Laurel and another in Beltsville. He received about $40,000 less than he wanted for the two combined, but he accepted the bids because he needed the money.
“It was a failed experiment,” Lesniewski said. “I don’t fault [the auction house]. I’m glad I tried it. But I may have been in better shape had I handled it myself and had more control of the process. I should have kept the one in Laurel and rented it out. . . . It was an act of desperation.”
The most desperate sellers tend to be those in lower-priced homes. They are the ones most likely to be competing with the growing number of foreclosures that once belonged to subprime borrowers, who were typically people with poor credit or little cash. The average subprime loan was about $200,000, according to Moody’s Economy.com.
Borrowers with those loans started defaulting at an alarming rate in late 2006, which led to huge disruptions in the mortgage market. The turmoil kept some potential buyers on the sidelines and left others in the lurch as lenders shut down, yanked away the loans they approved or altered the terms.
Karen Crawford said all of that contributed to her decision earlier this year to raffle a farmhouse near Hagerstown that she and her husband owned.
The couple bought the house just before the market soured and before they could sell their previous home. Soon they found themselves stuck with two houses.
The first did not sell, so they moved back into it because it was paid off and because they figured the farmhouse would be easier to offload. But it languished on the market for nearly two years.
“We were at our wits’ end,” Crawford said. “I felt like screaming. We had lowered our price several times. Nothing worked.”
After reading a newspaper story about an Ohio couple’s experience with a house raffle, Crawford decided to do the same with help from her agent, Cynthia Moler of Coldwell Banker. They contacted the San Mar Children’s Home in nearby Boonsboro.
Because only charities can raffle a house in Maryland, the home was sold to San Mar for its appraised value, $380,000. The charity then sold raffle tickets at $100 a pop to cover the cost.
The effort captured national media attention, which generated enough publicity to help raise the money needed plus an additional $214,000 for the charity.
Since March, the state has received another four applications for home raffles, plus plenty of inquiries, said Michael Schlein, an investigator at the Office of the Maryland Secretary of State.
“It’s been crazy,” he said.
Moler, the agent who helped orchestrate the event, donated her commission to San Mar.
“I find myself doing all sorts of crazy things these days because homes are not moving like they used to,” Moler said.
The next crazy thing? The winner of the farmhouse, Dennis Weaver, got hit with a hefty income tax for his prize, she said. Now he wants her to put the house up for auction.