One year ago, it took about six weeks to sell a house. Today, it takes at least nine weeks. That's because credit is tighter, there are more houses on the market, and sellers like Kyle and Elissa Mostransky are still trying to hold out for their price.
The Mostranskys bought their home about a year ago, when the housing market was near its peak, for $422,500. They then spent about $50,000 to renovate it. Not long after moving in, they decided to buy a bigger house but didn't want to be saddled with two mortgages, so they put their house on the market with a real-estate broker.
After a few months without finding a qualified buyer, they took the home off the market and tried the "for sale, by owner" route. When that didn't work, they wondered what to do next.
That's when ABC called and put the Mostranskys in touch with George Cappony, a proponent of a method called the "fast action home sale."
Let the Bidding Begin
"I've assisted people who have had their homes on the market for two, three, four years and are just tired," said Cappony. Cappony's alternative? A very quick home sale, similar to an auction, that the sellers conduct themselves.
Using Cappony's method, the Mostranskys placed ads in local papers and on the Internet. The ads stated there would be an open house and the home would be sold that weekend to the highest bidder. In effect, the Mostranskys are turning the traditional home sale method on its head: Instead of setting a high price and expecting the buyers to negotiate lower, they are setting a low starting bid and expecting buyers to outbid each other. There's a caveat, however. The Mostranskys have a minimum price they want to sell the house for, and the bidders don't know what it is. If the highest bidder doesn't reach their minimum price, the Mostranskys reserve the right not to sell. Likewise, the bidders can walk away at any moment.
How low is this starting bid? $299,500, or about 63 percent of what the Mostranskys had invested in the home. The idea is to create a bidding war. "You start artificially low, and you allow the market forces to drive the price. Who really sets the price? The buyers," Cappony said.
The signs and ads paid off. "We had over 100 people at our house," Kyle Mostransky said. "In this type of market … we have to force them to come to our house, and this process did that."
Many of the people who came to the open house were just what Cappony calls "looky-loos" -- onlookers who were curious to see the home being sold in such an unusual way. But by the end of the open house, about a dozen people had left serious bids for the house.
The Waiting Game
After ending the bidding, the Mostranskys played their own version of "Let's Make a Deal." They called every bidder, trying to get them to raise their bids. But they couldn't get the highest bidder to go any higher than $400,000, and taking that bid would mean a $70,000 loss, much more than the Mostranskys were willing to take.
"I felt like people were coming in expecting to get a deep discount," said Elissa Mostransky, "or way below market value. And we can't afford to do that."
So the Mostranskys have decided to ride out this rough market by renting out their home, at least temporarily. While they ultimately didn't sell their home using Cappony's method, his selling method helped the Mostranskys conclude that for right now, the prices potential home buyers are willing to pay are so low, it just doesn't make sense for them to sell. It's a hard pill for the Mostranskys to swallow, but it is the reality of this down market.