How’s the market?”
Real estate agents get asked this question all the time.
Our response: Who are you? Seller? Buyer? Both seller and buyer? Owner? An agent? The market is different for each of these players.
The market is close to nirvana for owners. Homes have been appreciating at a compound rate of 10% per year since 2012. The average single-family home that sold for $270k in January 2012 fetched a price of $480k in December 2017. And no … a bubble is not developing in our opinion.
Ditto for people that just need to sell a property without replacing it. Except for certain higher price ranges or isolated geographic areas, market conditions are close to ideal.
On the other hand, buyers face significant, but not unmanageable, challenges. Inventory is limited. You’ll be competing against multiple offers most of the time. You typically have to offer on several houses before snagging one.
The agent’s job has never been more demanding. Since every real estate transaction requires a buyer and a seller, odds are that half of an agent’s clients each year are buyers. In addition, anywhere from 20% to 40% of the agent’s sellers may also be buyers … clients looking to get rid of one property and replace it with another.
This means that six or seven of every ten clients has a buying need, with all the attendant extra work required to assist a buyer in today’s market. Agents work harder than ever in the current residential real estate environment.
How do you thrive in this market environment if you are a seller or a buyer?
It’s straightforward for sellers. It’s easy to sell but it is also easy to sell in a way that leaves money on the table that should be in your pocket. More than ever, you need a strong agent with the right strategies on pricing, staging, marketing and, most importantly, strong negotiating skills to get absolute top dollar in this current environment.
Buyers can benefit from the following:
- An absolutely complete and rock-solid loan pre-approval, not just a pre-qualification. A pre-qualification can be done in a few minutes by supplying basic information on your income and debts to a loan officer. A pre-qualification is next to worthless. You want to select a lender and get a full underwriting approval. This can take ten days to three weeks. A good agent is not going to let you look at homes without this. Your odds of winning a multiple offer situation without a strong pre-approval are essentially nil.
- Have your loan officer call the seller’s agent when you submit an offer and assure the agent that the loan is completely underwritten, and you’ll have no issues going to the closing table. This is only going to happen if you work with a local lender that your agent knows and trusts. The online lending outfits CANNOT provide this valuable service.
- Make strategic concessions on inspection rights. A good agent is indispensable here and will know how to make it look like you are giving up a lot without putting you at risk. At CHR, we have a “take it or leave it” inspection provision that reassures sellers that they won’t get nickeled and dimed by a buyer, while still providing the absolute right for the buyer to walk away if the buyer uncovers any inspection concerns. Used properly, there is even a way to still get a seller to correct major property defects.
- Make strategic concession on appraisals. The value of a property is what a buyer will pay. We have many situations where several buyers offer more than the value an appraiser can justify. In those situations, the real value is not the appraised value … it’s the value that multiple buyers offered in excess of that. Well worded appraisal provisions can make a buyer’s offer attractive to a seller and still giving the buyer the right to cancel the deal if the appraisal comes back totally out of whack.
- Offer to let the seller stay in the property after closing for up to 60 days under favorable terms, perhaps even at no cost. Many sellers are looking for this benefit as they transition to their next property.
Buyers looking to upsize, downsize or move around … those that want to replace a current house with a different property … have additional strategies available:
- Try to buy your replacement property first. Get the harder part of the deal done first. You may think you can’t do this because you need the cash from the current home to buy the next one. However, there are lending strategies available that can make this happen. For example, you can buy the replacement property for as little as 10% down using a first and second mortgage for the purchase. The second mortgage is for the amount you expect to receive from selling your current house. After your current house sells, you pay off the second mortgage and you are left with the first mortgage that works for your long-term ownership. Timed properly, you’ll never have a month where you make double payments on both the current and replacement home.
- If you are buying in a fairly high price range, you may find that it is a buyer’s market at that price point. This makes it easier to sell first since it is likely that acquiring the replacement property is not as problematic as it is in lower price ranges.
- If selling first, get as much time as possible for finding the replacement home by leveraging your seller advantages. Multiple buyers are likely to want your current home and you can almost always find one that will let you stay up to 60 days after closing. Build in a couple months from the day you go under contract to the date of closing and you’ve created up to four months to find that next home.
Seller. Buyer. Seller and buyer. The strategies listed above (and others known and practiced by exceptional agents) can help you thrive in the current market environment.