With a very, very low inventory of homes for sale, especially in higher demand areas, it is important for buyers to have a good understanding of the current market in order to have any chance at succeeding in the buying process right now.
I’ve been telling the buyers that I’m working with that there are currently only 2 types of properties for sale right now. Actually there are 3 – so let me give you what each of those are and how you have to approach them as a buyer.
#1 – Priced Well and Sells Fast
In the current seller’s market there is a real shortage of homes for sale in most areas. When one comes on the market at a fair price it is common to see it go under contract in a short period of time and often with multiple offers having been submitted.
If you are interested on one of these properties you and your agent will need to be fully prepared to ‘win’ against other competing buyers. To be successful, you as the buyer will need to be fully prepared – your financing will have to be completely lined up, you will need to be able to make a decision quickly and you will need to have the time available to complete the paperwork for submitting an offer. Your agent will need to determine if the property is priced fairly for its location, condition and features to make sure this is a Category #1 property.
If you are uncertain about the property being the right one for you, if you feel based on comparable sales that it is significantly overpriced or for some other reason do not feel totally confident in proceeding with an offer then you shouldn’t, and you should move on to other properties.
There are ways to win in the current market and I have several different methods to help you inch ahead of your competition when you find a property in this category that you really want.
#2 – Overpriced for the Current Market
Some agents and some property owners think that a seller’s market gives a seller to ask whatever they want for their property and that buyers will pay that amount. If the amount they are asking is fair for their property then they are right. But if they are too much above the fair market value, even in a market like this one with a drought of homes for sale, buyers will not pay more than what they feel a property is worth.
Currently a high percentage of the homes for sale in the MLS are ones that are overpriced and having been sitting unsold for a while or are overpriced and will be sitting unsold for a while. After the market tanked several years back and prices fell, there was going to have to be a recovery in prices at some point and over the past couple years we have been seeing that. But now we are seeing prices hitting up against an affordability barrier and so any property that is overpriced causes buyers to hesitate.
The problem that sellers don’t grasp – when they list too high with the idea that they can just drop the price later – is that price drops and a longer period of time on the market is viewed by buyers as an indication of problems with the property. This makes buyers more hesitant to purchase this property which causes it to stay on the market longer and have more price drops. Pricing to get the best possible sale price is a smart strategy for a seller. Pricing to get what they want when it is too far above what the current market will bear is neither smart nor a strategy.
The advantage for buyers with some Category #2 properties is that their sellers are commonly a little more negotiable then those with a Category #1 property, and you typically aren’t pressured due to competing buyers. In a market like our current one, sometimes these will be the best ones to go after and can be the ones where you will get the most value for your money. It will all depend on how long it has been on the market and how motivated the seller is now.
#3 – Unusual
There aren’t a lot of these but since there are some I need to at least include this third category.
Some properties seem to be priced well but don’t sell fast at all. They are in a higher demand area, are in good condition, have features that are in demand, looked to be priced fairly – but are still for sale 30, 60 or 90 days after going on the market. There doesn’t appear to be anything wrong with them but you think there must be since it should have sold already.
In some cases the issue is that the property had gone under contract fairly quickly but then came back on the market due to buyer circumstances that were not related to the condition or desirability of the property. Then when it comes back on the market buyers get concerned there must be something wrong with it and so don’t jump on it. There can be all sorts of reasons – the photos don’t show it as well as it looks in person, it is not easy to get a showing appointment, etc., etc. But for whatever reason it doesn’t fit in either of the first 2 categories and so is put into this third one.
This is another opportunity that buyers should not overlook. Sometimes the one that everyone overlooks is the one that you have the best chance of getting and at a fair price – if it is something that fits your needs.
Knowing the categories of available properties in the current market and being able to classify any property you have interest in will be helpful in understand what your approach to it should be.
It can get frustrating when you are a buyer in a seller’s market where there is very little inventory – but you should not give up.
One thing I know from having done this for a long time is that There is a Way!