So, I've got some exciting news to share with you. My buddy Stephen Freudenberg, a real estate agent, recently helped out this really eager homeowner in Atlanta who wanted to sell their property. You won't believe it, but there was a similar property that just got sold for a whopping $320,000! Can you imagine that?

““Most sellers would want to start at $325,000,” he says. But he advised his clients against it for one simple reason: Mortgage rates were high, with the 30-year fixed-rate mortgage just below 7%.”

You know, sellers usually don't pay much attention to rates, but I really think it's important for my client to consider them.

““Changes in rates bring changes in buyers’ buying power,”

“Every dollar counts.”

”

— Stephen Freudenberg

So, instead of aiming really high, Freudenberg managed to convince his client to list their property at a modest price of $315,000. And guess what? They ended up receiving a whole bunch of offers! Eventually, they accepted an offer for $325,000, and the entire process from listing to closing was wrapped up in less than six weeks. Impressive, right?

““If we had listed for $340,000, it would have sat for months and we would have reduced the price and probably eventually gotten $325,000, but it would have been super stressful for the seller,”

“As a seller, yes, you have the luxury of not thinking about [rates]. But if you’re smart, you should be sensitive to higher rates. They shrink your buyer pool.””

— Stephen Freudenberg

What high interest rates mean for home sellers

So, you know how mortgage rates last year shot up to over 7%? Well, turns out they've hung around at those higher levels for quite a bit longer than the experts predicted. Bummer, right? Especially for folks looking to buy a home. Not only do they have to deal with limited options and ridiculously high prices, but now they also have to contend with these stubbornly elevated mortgage rates. Tough luck, huh?

So, here's the thing. When it comes to selling your home, you might not be as concerned about interest rates as the buyers are. But hold up! That doesn't mean you can completely ignore the challenges that buyers are currently dealing with in the housing market.

Well, here's the thing. If sellers are thinking about buying a new house while selling their current one, they might find themselves stuck with a mortgage at these crazy high rates. But even if they're not planning to buy right away, they should still consider those steep rates when figuring out how much to ask for their own house. It could make a big difference in the end, you know?

So, get this. According to Danielle Hale, the Chief Economist at Realtor.com®, the average monthly mortgage payment for a house in May 2023 is nearly double what it was two years ago. Can you believe it? Back then, folks were paying around $1,262 per month, but now it's zoomed up to $2,216. And this all happened before the interest rates started skyrocketing. Crazy, right?

So basically, between mid-2016 and the end of 2019, the amount of money people were paying for their mortgages every month compared to their income was around 21.3%. But when interest rates went up, those monthly payments became a lot higher, more than 36% of what people were earning (this calculation takes into consideration the listing prices on Realtor.com).

““higher mortgage rates are one of the big reasons that home sales are sluggish right now. Higher mortgage rates not only drive up costs for potential buyers, they change the calculation for existing homeowners hoping to use a mortgage to trade up. As a result, higher mortgage rates have dampened both supply and demand in today’s housing market.””

— Realtor.com® Chief Economist Danielle Hale

So what does all this mean for home sellers?

““It’s good context for sellers to think about what their asking price works out to in a monthly payment,”

“I don’t know if sellers need to have empathy, but they may want to have some context.”

”

— Realtor.com® Chief Economist Danielle Hale

The risks of pricing too high

Pamela Grunstein, an agent with the Francie Malina Team in New York's Westchester County, explains that when deciding on the perfect price for a home, there are a bunch of things to consider. These can range from the quality of schools nearby, the size of the house, the number of rooms available, and even whether the property is located on a busy street or in a flood-prone zone.

So, this real estate expert named Jane, says that even though the housing market is super hot right now, homeowners should definitely pay attention to financing costs when selling their homes. I know, it seems like the last thing on your mind when there's so much demand, but it's actually really important.

““Absolutely the discussion about mortgages comes into the conversation with sellers,”

“Sometimes they listen, but sometimes they just really focus on the price they want.””

— Pamela Grunstein

If you price your home too high right now, you probably won't get many, if any, offers. And once you've missed the chance to sell when the market is hot, it's going to be harder to sell it later.

““Buyers are accustomed to seeing properties get offers within three days,”

“If that doesn’t happen, they wonder what’s wrong with the house.””

— Pamela Grunstein

How to price a house

Just like how buyers are told to check their buying power when mortgage rates change, sellers should also see how rate fluctuations impact their home's monthly mortgage payment at the price they want. You can easily crunch those numbers using an online mortgage calculator.

So here's the scoop: picture yourself selling your home, ya know? Well, here's something cool to consider: if you choose a certain interest rate and asking price, there's this magical point where your monthly payment goes from $2,090 to $3,050. And get this—it turns out this little tidbit might be enough to make a few potential buyers change their minds and start looking elsewhere. It's pretty wild, right?

““We always try to make sure sellers are aware of what the monthly cost will be,””

— Pamela Grunstein

If you're looking to sell your house, here's a tip from Julie Chang, a top-notch real estate agent from Pacific Sotheby's International Realty in sunny San Diego. She suggests putting yourself in the shoes of potential buyers and being aware of their high mortgage rates. It might sound simple, but being mindful and empathetic towards homebuyers could actually be the key to selling your house faster in the long run.

““There is lots of data showing that if you price at market, or even under, you will drive demand because you look reasonable,”

“It’s all about optics. Then you let the market take the house where it’s going to go. If you price high and you turn people off, there are going to be people who won’t come look at your property because they think you’re greedy.””

— Julie Chang

In a situation where interest rates are high, Chang suggests that sellers should think about providing concessions like a rate buy-down. This could end up being just as beneficial for the seller, but it might be even more attractive to buyers compared to a price reduction.

If you're looking for other choices, you could also think about chipping in for the closing costs. Or better yet, you might consider offering seller financing to let your buyer dodge the sky-high mortgage rates of today, all while earning yourself a steady income for the long run.

When interest rates are high, sellers need to be flexible when it comes to repairs too.

““When you consider that buyers are so stretched, they probably won’t have any cash for repairs once they close,”

“If you’re not willing to work with a qualified buyer who is pointing out that there’s something wrong with the roof, for example, if you choose not to be reasonable and offer a concession, you might lose one of the few qualified buyers out there. You have to act like you’re aiming for a win-win. Or you can take your chances, push hard for the highest price you can, and risk falling out of escrow.””

— Julie Chang

If you're open to giving buyers a few choices to help them deal with those pesky high-interest rates, just make sure to highlight that in your listing. It could really make a difference for potential buyers!