Tips On Today’s Market

In real estate you have two seasons, Buyer’s market and Seller’s market.

A buyer’s market occurs when supply exceeds demand. In other words, real estate inventory is high, and there are plenty of homes for sale, but there’s a shortage of interested buyers. These conditions give buyers leverage over sellers because when supply is higher and demand lower, the market is forced to respond.

In a buyer’s market, real estate prices decrease, and homes linger on the market longer. So, sellers must compete with each other in order to attract buyers. Typically, sellers will drop their asking prices to gain an advantage in the market. Furthermore, they are much more willing to negotiate offers to prevent buyers from walking away.

A seller’s market on the other hand is  when demand exceeds supply. In other words, there are many interested buyers, but the real estate inventory is low. Since there are fewer homes available, sellers are at an advantage.

In a seller’s market, homes sell faster, and buyers must compete with each other in order to score a property. These market conditions often make buyers willing to spend more on a home than they would otherwise. Therefore, sellers can raise their asking prices. Furthermore, the increased interest means that buyers rarely have the power to negotiate and are more willing to accept properties as-is.

Due to the shortage of housing, these conditions often lead to bidding wars. During bidding wars, buyers will make competing offers and drive up the price, typically above what the seller initially asked for.

Act fast: If you find your dream home during a seller’s market, it will behoove you to act fast. If you hem and haw over a house you know you want to buy, you may find that it’s no longer available by the time you wish to make an offer. You should get preapproved for a loan ahead of time, so your financing is in order when you need it.

Know you’re at a disadvantage: When it comes to making an offer, keep in mind that you’re the one at a disadvantage. A seller’s market is not the time to try to push contingencies, concessions, specific closing dates or repairs. Focus your attention on what’s most important to you. If there are certain stipulations you want written into the contract, think hard about whether they’re worth losing the property over. If you can make an all-cash offer, you should. Sellers prefer buyers who are willing to pay in cash because they don’t have to worry about the deal falling through due to issues with financing.

Be patient: If you find that you keep losing out on the homes you’re interested in, it’s crucial to be patient and not get discouraged. Many buyers end up suffering during a seller’s market because they get frustrated. Inexperienced buyers caught up in bidding wars will often offer more money than a home is actually worth – or they feel comfortable spending – in order to get the home they want. That’s always a mistake.

Don’t settle: On the flip side, some buyers will end up making offers on homes they otherwise wouldn’t be interested in because they’re tired of losing out. Remember, buying any property is a huge investment and often a 30-year commitment. Don’t settle on a home just because it’s cheaper. Unless you have to move immediately, it’s a much better idea to wait it out and resume your home search after the market cools down.

Clean and organize: To begin, make sure that your home is in good condition and has been cleaned and organized before you market or show the property.

Price fairly: Even though homes tend to sell for more money in a seller’s market, it still helps to price your home fairly. If you set your asking price at or slightly below fair market value you’re likely to attract more interested buyers. Some sellers choose to list their homes for slightly less than the assessed value in order to encourage a bidding war.

Carefully consider offers: It’s even more important during a seller’s market that you carefully review the offers you receive. Sellers are often so focused on choosing the highest offer that they fail to examine the financial strength of each buyer. Just because buyers say they’ll pay a certain amount for your home doesn’t guarantee they’ll actually be able to obtain those funds. Lenders will not allow buyers to borrow more than the assessed value of your home.

The last thing you want is to accept an unrealistic offer and be forced to put your home back on the market when the deal falls through. The longer your home is on the market, the more questionable it will seem to buyers, and the more power they will have when negotiating.

Ensure preapproval: For any buyers who require financing, you should ensure that they have been preapproved for a loan. Preapproval requires that buyers’ finances and credit history are verified, making it far more likely they’ll ultimately be able to obtain a loan for a specific amount of money. Prequalification, on the other hand, is just an estimate of buyers’ finances.

Be aware of contingencies: Also, be on the lookout for offers that include contingencies. Offers that include stipulations, like mortgage contingencies, home sale contingencies, appraisal contingencies and inspection contingencies, enable buyers to back out of sales contracts if certain conditions aren’t met.

No matter if you are a seller or buyer, in a buyer’s or seller’s market, hiring a real estate agent is the best way to navigate the housing market. Whether the market is strong or weak, you’ll want to have a leg up on the competition, and real estate agents have the knowledge and skills necessary to ensure that you do. If you’re looking to buy a home, timing is often a major concern. In the midst of a seller’s market, you’ll find that homes disappear as soon as they hit the market. Instead of leaving your financing to the end, you should get preapproved as soon as possible, so you don’t lose out on what could be your dream home. Get in contact with me, your realtor, Sonja Black, to assist with all your housing needs.