Strategies for Todays Buyers and Sellers
The real estate market is a quite different environment than it was eight to 10 months ago. The so called bubble burst that was predicted by the mainstream media never happened. Homes continue to appreciate in value however not at the surging rates of 40 and 50 percent.
At the peak of the real estate surge, buyers were getting up early to look at any new home offered on the market. They were competing with other buyers for the same properties and bidding prices well above the market value. Buyers were waiving appraisals and inspections to better their position while competing with sellers sending out multiple counter offers to anxious buyers. Those days are over and we are experiencing a transitional market.
Here are some strategies for buyers and sellers to implement to help them succeed during this transition:
Right now is one of the best times for a buyer to be looking for a home. The number of properties on the market to choose from is fantastic. According to Arizona Multiple Listing Service there were 8,598 homes on the market in April, 2005. In April of 2006 there were 38,206. Homes are staying on the market longer as well–with the average days on market now at 57.5 compared to last July at 24.4. This means buyers do not have to make snap decisions and have the luxury of choosing among many attractive homes. The buyers are unlikely to have to worry about competing with other buyers for the same home. Sellers are also more likely to offer contributions to buyers closing costs and down payment.
Last year many first time home buyers and buyers without substantial cash were not even able to play the real estate game for two reasons. First, the sellers did not have to offer incentives such as paying for down payment and closing costs. Secondly, when appraisals were being waived, the buyer was expected to come up with the cash difference between the contract price and the appraised value. Most offers I am seeing today include buyers asking sellers for contributions. A strategy common during the crazed sellers market was that sellers would counter on several offers they had received with a multiple counter offer. This informed the buyers that the seller has made one or more counter offers and that the buyer’s acceptance did not deem final execution until it was subsequently signed by the seller and delivered to the buyer. However, the strategy for today’s buyers has been reversed. A buyer now has the luxury of choosing, for instance, the five best properties on the market and making multiple offers to different sellers. On the offer they would state to the sellers that they have made multiple offers to purchase and that the seller’s acceptance would not constitute final execution until the buyer subsequently signs and delivers it back to the seller of their choice. This allows the buyers to evaluate which of their top picks they can get the best price and terms on. It also makes the sellers think twice about counter offering in fear that they may lose the buyer to another seller. The table has turned.
Interest rates continue to be low, and new home builders are offering fantastic incentives for buyers to purchase their homes, such as paying closing costs, including pools and appliances and introductory interest rates of 1.8 percent interest. It is an opportune time for buyers to buy a home.
The news from a seller’s standpoint is not the doom and gloom as reported in the media either. The game has just changed. In a typical market, value is determined by looking at the last comparable homes that have sold. Last year, value was determined by taking the homes with pending contracts on them and adding more to the asking price.
Today, the best strategy is positioning.
With so much inventory on the market, a seller needs to position their home to stand out from the crowd. This can be done in different ways. Pricing the home is the most important. The seller should look at all of the homes they will be competing with, the other similar active homes on the market–and I mean physically look at them. Here is the important part: Look at them through the eyes of a buyer. Honestly analyze how your home measures up to the competition. Consider the upgrades or lack thereof, the condition of the home, and more importantly, the price. The idea is to price your home below the others and have it in tip top condition. What we are trying to accomplish is to have the nicer home priced less than the other less-desirable homes. It may sound funny, but the idea is to cause buyers to have that funny felling in their stomach that this home is a deal compared to everything else on the market and that they better make an offer before someone else realizes it and makes one.
In other words, we are positioning the seller’s house so that the other homes on the market help sell it for us.
Buying a home is emotional, it is important in this market that sellers stage their homes to the buyer’s emotions. Clean the house impeccably, remove clutter and personal items, make sure the home smells nice, open blinds to lighten up the house and play soft music. Professional stagers are available for a small fee. Concentrate on the three most important areas: the front yard, the front door, and the foyer. These are the places that first impressions are made. If you lose the buyer at the door it won’t matter how nice the rest of the house is. First impressions are difficult to overcome.
Remember that home values are not decreasing. The appreciation craze is over but the good news is prices are not dropping. The game has just changed, with different strategies.