Top 7 Tips To Take The Headache Out of Selling Property in Lean Economic Times

Selling your property at any time is challenging. Much more so during an economic downturn. If it were easy, there would never have been any need for property agents. In a recession, markets go soft and depressed. Therein lies the rub.

As we look to 2023 and beyond, it is evident that, at both a national and global level, an economic recession is looming. There has been a multiplicity of factors that have made selling property, particularly, very challenging during the last 3 years. And the onslaught seems unabated.

Traits of an Economic Recession

Typically, these traits would serve as a good indication that a recession is nigh:

• Multiple external and internal economic shocks (Covid-19 pandemic, Ukraine War, Elections, massive external debt repayments due)
• Massive job losses and diminishing sources of income
• Stock market decline
• Rising inflation and her torturous twin sisters rising unemployment and increased cost of living
• Decline in value of the currency (KES has lost more than 20% of its value against the USD between 2019 and 2022).
• Massive external and internal borrowing by the government and high borrowing and lending interest rates (IFB issues by GoK on November 2021 recorded 13.93%!)

Certainly, in December 2022, how many of you would say that these traits seem at all unfamiliar about Kenya today?

The Challenge of Selling During a Recession

The challenge ceases, initially, to be about selling and it becomes all about the generation and qualification of leads. Positioning your offer so that you can get it in front of the right eyeballs and understanding what the market is likely to respond to is the trick.

When selling property during a recession, the principles remain the same as with any other time in any market. But conventional approaches are unlikely to hold up to the test. The condition of the market is erratic and unpredictable so what needs to change, and what is more determinable is your strategy and approach.

Seasoned property agents will also be a lot more astute about the clients they opt to work with.

Tip #1: Make Your Offer Stand Out

This isn’t just about a good script for your offer or an amazing set of property photos and videos. No. It’s the full package. You can’t just list on every property listing platform either, or select ten different agents to work with.

No. You’ll need to go the extra mile. Attract prospects by ensuring your property is looking its swankiest whenever it is shown. A dirty, forlorn-looking property that is visually flat and unkempt won’t cut it. Trim the lawns, cut the bushes – go all out to impress.

Declutter the property. It Is an unattractive proposition for any agent to show a house that is brimming with junk lying all over and makes selling property needlessly difficult.

A clutter-free space is warm and inviting and gives a mental feeling of being habitable. Clutter is a big put-off. If you can afford it, pay for professional staging and ensure your photos carry the professional polish to make prospects look twice in your direction.

Get in on the act – put together a presentable social media kit and choose strategically which agent(s) to work with.

Again, consider seriously putting some money into the marketing of your offer. Ads are a great way to diversify away from just property agents. You can work with an experienced agent on this, or choose to go it alone – up to you.

Tip #2: Familiarize yourself with the market and strategize around this knowledge

Decisions around pricing can accelerate the speed with which you can exit from the market. But how would you know where to establish an ideal price point if you are uninformed about the market in which your offer subsists?

How will you price effectively if you have no idea of who is offering what and where those offers outdo yours? If you are selling your property, do you know what other similar properties are selling for? How about how much they are renting for?

If you met a prospect and didn’t have this information and perhaps that prospect was considering the property as an income investment, what will you offer them to estimate their returns? You would have nothing to say. Selling property is aided where comprehensive information is available.

Despite the gloomy outlook of the market, there is almost always a prospect who may be considering exactly what you have to offer – but you have to position your offer to connect with them. You cannot do this if you are completely clueless about the market.

Tip #3: PRICE IS CRITICAL – Price right and qualify your leads

During a recession, the few buyers in the market tend to be more informed than the average buyer. They smell blood in the water they will only pursue a bargain. However, this shouldn’t be confused with advice to price at the bottom of the market.

As the number of distressed homeowners rises with rising loss of livelihoods and increased inflation, distress will often culminate in the loss of homes. Selling property in these conditions can be fraught with lots of anxiety. As a seller, you want to get ahead of that curve – the worst of all possible outcomes.

The right price point, at least one that invites offers, is advisable. Of all the decisions that you need to consider when selling property in a recession, the pricing decision is the most critical. You need to decide what your most comfortable exit point is – not your ideal. You want to communicate that price to the market in such a way that allows you to call attention to your offer but still exit without underselling.

Research comparable offers and make sure to qualify only those leads that present as serious prospects from the offers they present.  Qualified leads tend to understand the market and will ask questions they can confirm from available market information. They will rarely make offers that are well outside of the range of market availability unless they sense very high levels of desperation in the seller. Sure, they will want to strike a bargain. But if they are committed, they will also want to ensure that their offer sounds reasonable in order to get to a close.

Tip #4: Upgrading your property

If you are on a shoestring budget, as most sellers in a recession may be, then you want to direct any money you spend on making the property sellable to just the most critical factors.

First, any upgrades that would distinguish your offer from others within earshot are welcome only if you can afford them. What you want to make sure of is that your property meets all standards of health, safety, security and environment (HSSE).

No uncollected hazardous litter, no vermin and pests lurking in overgrown bushes, and no structural faults that could cause electrocution or personal injury. The most basic of these should be attended to first. Thereafter, go ahead and spoil your prospects with upgrades of the more elaborate kind if you can afford them – especially if they add value that exceeds their cost.

Selling property that is well-maintained is definitely more appealing.

Tip #5: Manage your expectations as you work towards the goal

Many sellers get very frustrated with the process of engaging with prospects in this kind of market. Understand that there will be very few prospects and a lot more tentativeness even among the few you will find.

Prospects are likely to be spoilt for choice given the desperation in the market. Access to credit facilities is a lot more muted in a recession too which can lead to prolonged timelines for closing even when a prospect turns into a buyer.

Within reason, sellers can navigate the market much better if they have a keener understanding of these issues as expectations.

Tip #6: Get trusted help – and be sure to take it if you ask for it.

Get the assistance of people more experienced with handling the market than you may be. There is no point in seeking help though if you are unwilling to take it.

If you are working with property agents, listen keenly for the things said and the ones unspoken. They can offer you a clear window to see the market vividly and advise you on your next moves.

Perhaps seek more to pick up the cues they will offer, rather than to merely instructing them on what to do or what your expectations are. Selling property by collaborating closely with your agents will be .

Tip #7: Don’t Miss The Exit Ramp  

It’s easy to get enamoured with the possibility that you could do better. After all, you could never go wrong with real estate, right? Capital gains were assured, they told you, right?

And, you possibly could. Don’t get me wrong.

What truly begs an answer in these market conditions isn’t whether you could do better or not, but whether you see a path to exit gracefully, even if the option before you does not present the most ideal off-ramp.

More so if you desperately need to unshackle yourself from a transaction that is weighing you down.

To illustrate, here is an experience I had in 2020/2021. I was approached by a seller who gave instructions to dispose of an apartment she owned. Four months into marketing the property we secured her an offer which she promptly rejected on price, even though it was a cash sale.

The offeror had offered a price that was slightly higher than the Forced Sale Value (FSV) price of a similar apartment in the same complex, but, naturally, significantly lower than the property’s valuation. In Kenya, the Forced Sale Value is 75% of the property’s valuation.

Let me clarify. Say a property is valued at 10 million, then its FSV would be 7.5 million – the lowest price demanded for the property at auction. In this scenario, my seller, who was already in default on her mortgage, was offered the equivalent of 87.5% on the valuation. Obviously not ideal until you consider the alternative.

The prospective buyer was market-savvy. He had elicited information that helped him determine that there were at least 3 other units in the same building that were already in foreclosure. He was willing to negotiate a higher price for my seller’s unit based on the information he had because he preferred it.

My seller flatly disengaged only to revert 4 months later with the intent of re-engaging the prospect on the terms he offered when the gravity of market conditions finally dawned on her. However, the prospect had since moved on and two years on the unit eventually went into foreclosure.

Conclusion

There is little going on in the market that can be described as normal during a recession. The idea that your capital gains are assured can quickly become the stuff of myth.

If you can hold out for a lot longer, more power to you. But if you need to, find the nearest exit for a graceful retreat at the earliest opportunity.