Sellers market with a buyers market mentality?
Yup, there is still confusion among buyers. Many still believe it's a buyers market due to market conditions and declining values on the news and on TV. The idea of low balling a listing or purchasing a property well below market value was great.. 2 years ago. Times have changed, and only the agents/buyers/sellers that are in the trenches can comprehend this. Seeing is believing and not all can see. Once you put in offers and lose them a few times my point will become crystal clear. Its easy to think you are correct. Its different when you try and fail.
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Basic economics is based on supply and demand, which many of us learned in high school and college(of course that is if you made it to class that day). It's pretty boring unless you enjoy that kind of stuff, so I will keep it very simple. Limited supply = increasing values, low demand=decreasing values. The less you have of something, the more it's wanted, the higher it's value goes. Pretty simple concept and basically the way many economies work. Problem is, prices have been dropping and have dropped over 50% the past 3 years. This makes us believe we are still in a buyers market due to the indicator , in this case was price. The problem was, and still is, that the immediate shortage of homes has drastically turned the market into a sellers market. Anything less than 4 months of inventory is considered a sellers market. We are currently at 2.2 months of inventory based on the statistics. There are not enough homes for the current amount of buyers. But this has occurred after values have dropped which is a bit confusing. If prices are dropping then it's a buyers market right? Not this time. The supply has shifted to a shortage of inventory. A shortage will create a higher value for the home. The fact it has happened so quick is what is confusing the average buyers looking for a deal/home. Most agents and buyers that have been in the trench's will tell you homes are going for list price and sometimes over list price. Of course many homes are priced below market value to obtain a quick offer on the short sale/distressed property. So list price is not a true indicator of value all the time. Many feel their offer needs to be below asking price. This is due to our thought process that paying at or above what someone wants is not smart. If a house if worth $100,000 the buyer wants it for $90,000. If that same house is listed at $85,000 and the buyer knows it's worth $100,000 they will still want to offer less than asking, meaning below the $85,000. Market value is what somebody is willing to pay for a home. You have to ignore the list price. I can list one of my listings at $50,000 even though I know it's worth $100,000. That doesn't mean that will be the sale price. You have to ask your agent what is the value of this property. The banks in any transaction will hire a 3rd party real estate agent to give them the value of the property also known as a BPO. This is what the banks use as their benchmark for value and have a variance from that figure to work with. Therefore, an overpriced or under priced listing will hopefully be corrected by the BPO. Its like a check and balance for the value of the home. You cannot over pay for a home in this market as long as you are obtaining a loan. You can in a cash offer since there is no appraisal or BPO required since there is not a lender. Your lender will not loan you above what the home is worth protecting you from overpaying. If the BPO comes back above the offer price/list price, then the back will most likely counter (within a certain range) the buyer to that amount. So all a buyer really has to do is ask their agent for a CMA. You want to know what the 3 most similar sold and active comparables, within 1 mile of the property, sold for. This is roughly what the BPO will come back at, which is what the banks will want for the home. Do not try to out think the process. You will not steal a home from the bank.
Buyers need to just concentrate on which home they want, and leave the negotiating and offers to their agents as that is the reason you hired us in the first place. From my experience properly priced homes sell within 21 days on market. If it's over 30 days on market it's probably overpriced or in fair to poor condition. If it's under priced it usually sells in days. This is a common tactic in this market as agents need to present the banks with an offer to obtain a response. Over pricing a listing is worse than under pricing as you will not get any action. Under pricing a listing usually pisses off the buyer and bank which is also not good. Regardless, buyers need to understand that this is historically one of the best time to buy a home based on rates and affordability index. Homes are already priced at their discounted rates. Most deals
As the market dries up and inventory levels drop buyers will begin to realize that it has changed and is a sellers market as it once was in the past. We just have to understand it and react accordingly. Darwinism for buyers is in effect.
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Posted in Real Estate Post Date 05/04/2016