It’s hardly a secret that sellers have had the run of things recently in the real estate market. Seemingly, sellers can sell without regard to the area, time of year or price point. What if I told you that was a bit of a myth? Sure, there are instances where people pay insane amounts and waive all contingencies in order to secure property. However, I tell my clients all the time “Every market has its limits” and this one is no different. Now, I’m not saying that sellers no longer have leverage in this market. In some markets they most certainly do. But any market is not a monolith either locally or nationally. There are really hot areas and some where it is still 2017. The way some sellers approach this market has me concerned…here’s why:
Certain Markets Will Soften Sooner than Others – As I mentioned above, no market is the same across the board. Some areas will ride out any downturn due to its geography, schools, local businesses and larger community. These are larger metro areas with diversified economies. Others are going to be the first to see the effects of a cooling market. (This trend is already happening in certain sectors) Keep in mind, some analysts were watching the markets of FL, AZ, TX & OR in order to anticipate softening in more established markets such as the ATL-BOS 95 corridor. This is smart. A good tell-tale sign of whether you’re sitting in one of those markets, either in a small neighborhood or even an entire city/state, is if home prices and general real estate activities have gone bonkers. The old saying, “the higher they go, the harder they fall” is something to keep in mind. If a market is way up in a short amount of time, then logic (and history) dictate it will descend from grace… it’s just a matter of how far.
Waiting Too Long – Many sellers I talk to have said “I don’t think we’re at the top yet.” Really? What’s your reasoning? The country at large is in year 12 of its longest economic expansion. I’m not saying that we are on the brink of collapse or another housing bubble burst is imminent, however the economy will most surely correct at some point. The difference between waiting and acting could be several thousand dollars up to tens of thousands. My broker often states, “Pigs get fed, hogs get slaughtered.” I think this is good advice. The idea of predicting exactly where they are in an housing cycle is usually a fool’s errand. See 2008 as reference. Many thought continued growth was inevitable until it wasn’t. If you need to sell in the next 12-18 months, my advice is get that process started in case there is a more acute change in the market. Making repairs (contractors are really backed up), consulting with a realtor and keeping an ongoing discussion with professionals who are watching the market is a good idea.
Overpricing Their Homes – I can show everyone reading this article in a matter of minutes that you can absolutely overprice your home in this market. A startling tidbit of real estate is when you do, you usually end up with less money at settlement. Buyers can be quirky and in this market, I’ve had them walk into a house and say “I’m gonna find out what’s wrong with this house because it should already be sold.” That house was on the market for 12 days in a really desirable market. This can be seen as an eternity in 2021. That house ended up selling 30 days later for less than market price because there was no bidding war. The buyer was able to inspect and negotiated inspection repairs. Ouch. The correct strategy in my humble opinion in many cases is to list at market and allow a bidding war to float the price up. This takes advantage of the buyer demand and gets their competitive juices flowing which can translate to waived inspections and appraisals. This strategy is also a good way to ride out any softening market. One last tip is keeping in mind the $25,000 increments for pricing. What this means is don’t list your home at $426,000. List it at $425,000. Lenders often tell their borrowers they can search up to a maximum of such and such a number. Often it is to the tune of $400,000, $425,000, $450,000, etc. In the above example, anyone who has a max buying range of $425,000 won’t see the house if they’re sticking to their filters.
After all this, I must remind everyone reading this article that buyer demand is still strong, interest rates are low and bidding wars are just occurring. I’m not telling people to hit the panic button by any means. And while no one is in agreement about when the market will start slanting back toward buyers, there is almost unanimous agreement that it will at some point (many thinking within the next 12 months). So best to be prepared in case you gotta get out of dodge.