Tips for Navigating through the ebb and flow of Seller’s Markets and Buyer’s Markets. What YOU as a homebuyer can expect in either market…
Determine Whether it’s a Sellers Market or Buyer’s Market?
There are many factors that determine whether the market is in a Seller’s Market or Buyer’s Market. When the economy is good and interest rates are low, people are more apt to buy a new house. When there are more buyers than sellers, prices tend to increase because inventories are low. Seller’s have the advantage when there are not as many choices for the buyer. Homes sell quicker and for more money. THIS IS A SELLER’S MARKET!
It’s great for sellers because they usually get top dollar – and sometimes multiple offers for their property. And buyers are less ‘picky’ when it comes to the condition of the home. They simply have fewer choices.
Even though we’ve had a seller’s market for quite a few years now – the time of year also makes a difference. For instance, if you’re selling a lake home…the best time to sell is in the spring. Come fall, it’s a bit harder to sell. BUT, if you’re a buyer, fall and winter is a perfect time to buy a waterfront home for this very reason!
A general rule that you can follow is 6 months inventory. Below a 6-month absorption rate, it’s considered a Seller’s Market. Above this figure, it will be a Buyer’s Market. IF you take a look at my market reports, you’ll see charts showing how much inventory is currently on the market in Middle Tennessee.
Buying a House in a Seller’s Market
How to Position Yourself when Buying a House in a Seller’s Market!
- First of all – if you need any financing, get it lined up FIRST! This will not only determine what price you will be looking for – but also prove to the seller that you can actually buy the property. The seller’s agent will want to see a pre-approval letter from your lending institution.
- Know WHERE you want to live. Narrow down your preferred location and learn all you can about it beforehand.
- Know WHAT you are looking for. The size, number of bedrooms/bathrooms, style, price range, and any ‘must-have’ features.
- Then be prepared to make a quick decision when you find the right home. Hesitating can prevent you from getting the house because someone else might be writing an offer while you are thinking about it. Choice properties go fast!
- Sometimes you have to offer more than they are asking! Yes, it happens all the time. If you find yourself in a bidding war, it almost seems like an auction – and the highest or best offer wins!
- Some things that could be important to the seller would be if you are flexible on taking possession – or if you agree to do some or all of the repairs yourself – and sometimes…do they like you?
- Last but certainly not least – find yourself a hard-working Realtor to help you find and negotiate for the best possible price! The right Realtor will absolutely be your best friend throughout this process. He/she should be knowledgeable on the market, be willing to show you a listing on very short notice – and walk you through the entire transaction. If you are out of town, your Realtor should be ready to preview any home that is of interest to you – and give their true opinion of the property. He/she should also make sure you have all available data, including disclosures, flood maps, plat maps, and market history of the house. Choose carefully, because the wrong Realtor can make or break your deal.
- Many people are foregoing a home inspection, but it’s always best to have one conducted. Some people write it as a ‘pass/fail’ inspection. In this case, any costs that amount to over a specified amount would cause the inspection to fail. You and your agent have to figure out what amount you’re going to limit it to.
If you’re in a tight situation and really want the house – you might try writing a letter to the seller. Maybe include a photo of your family. Explain what you like about the house – and how much your family would enjoy living there. Most likely, that seller has improved and loved the house during the time they’ve been there, and would like to know that you love it as well. And would like to know that you appreciate the hard work and love they have put into it! Write the strongest offer that you possibly can, and ask your Realtor to include comps to back up your offer price. If you’ve done your homework and have everything lined up to purchase, chances are good that you will win the bid!
Use anything you can think of that would be a benefit to the seller…and it just might make the difference! Just make sure you have all your questions answered so you can make a quick, informed decision!
What is a Buyer’s Market?
Just the opposite of a Seller’s Market! For whatever reason, the market has had a turning point. Perhaps the economy is slowing and credit tightens, interest rates go up and it’s harder to qualify for the homes people want. Home sales slow down, which causes more homes to be on the market…and more inventory creates A BUYER’S MARKET! People have more choices, and the urgency to make a quick decision is no longer an issue. Sellers must make more of an effort to get their homes ready for the market. Deferred maintenance is going to be a no-no! Buyer’s have more power at this point, and they will want more for their money.
A few things a seller can do during this Buyer’s Market:
- First of all, make sure it’s priced right! Do an in-depth market analysis to make sure it’s not over-priced.
- Take care of all deferred maintenance
- Do a pre-home inspection and take care of any major concerns.
- Make sure the house is clean and shows well to any buyers.
- Check that ‘curb appeal’. Is the landscaping all it can be?
- If the roof is aging, it might be a good idea to have it cleaned.
- If it could use some staging – let your Realtor be your guide!
Think of anything you might do to ‘sweeten’ the deal. Could you leave your refrigerator or washer/dryer? Could you offer to put on a new roof? Could you offer to have the house professionally painted? Could you offer a 1-year home warranty? Or pre-paid HOA fees? You know best, so put on your thinking cap!
How to Buy a House in a Buyer’s Market?
You’ll want to do all the things you would if it were a Seller’s Market…most of which is due diligence. But, you might think about a few other things as well:
- Interest rates might be higher, so you will most likely be able to afford a lower-priced home – but the home prices might be going down as well. Could it be a wash?
- Take a closer look at the house you want to buy – look for any red flags. You might not think about this – but staging can many times cover up a problem area.
The object of staging is to make the house look its’ best. So, don’t do like most people and buy what you see. Take a closer look! Under that rug, for instance.
- I know that beadboard is beautiful on a ceiling – but I’ve also seen people install it to cover up leaks or other problems.
- Know that listing agents do their best – but can make mistakes. Check and double-check anything on that listing sheet that is a make or break issue for you.
Whether it’s a Seller’s Market or Buyer’s Market, I’m here to help you find the right approach.