Can Offering Price Protection Help Sell Your Home?

Home prices are still dropping at a rate that many buyers may be scared off from purchasing. Home prices have fallen by more than 30 percent since their peak in mid-2006, and although the decline is slowing, they continue to fall.

Some buyers are notPrice protection buying now, thinking they may still get a better deal in 6 months or so. But the Sedona real estate market needs stability and this can be achieved by sellers offering incentives and valuable reasons to buy now. Sellers can reassure wary buyers by offering a price guarantee: "If this house is worth less than you paid for it in a year, I'll refund the difference."

This may in fact help sellers sell their home quicker and with more confidence, and it wouldn't necessarily cost them very much. Sellers could commit to reimbursing their buyers for any fall in the average value of homes in their area in the year following a sale. This can offer buyers confidence that their home will not depreciate after their purchase even if the market falls slightly more. This can be the confidence that buyers need in order to buy now.

Because buyers gain confidence the market won't fall and sellers won't have to pay.

The way this would work is simple: At the time of closing, 10 percent of the purchase price might be placed in escrow for 12 months (with the remaining 90 percent going to the seller). If the median sales price in the city falls in the 12 months after the sale, then the drop in value would be returned from the escrow account to the buyer—with any remainder in the account being released to the seller. If housing prices don't fall (or go up), the seller would recover all of the escrow. Then the buyers be confident that they did not overpay for the home.

This set up is not ideal for some sellers though. If the seller doesn't have much equity built up in the home, they will need all of the buyer's money at closing merely to pay off their existing mortgages. Also, some sellers will need that extra 10% to make a down payment on their next home.

These are all issues that could easily be worked out between the buyer and seller. In many cases this is a win/win situation for all parties. Buyers get to move in, sellers get to move on, and the housing market and economy in general benefit from a more stable market.

For more information on if this situation would work for your Sedona real estate, contact us today. We can help market your home in a way that is most appealing to today's buyers!