The housing market is changing and it is more beneficial right now to home sellers than home buyers. With demand for new homes and existing homes out-stripping supply, the real estate market has been dubbed a “seller’s market”.
With home prices continuing to rise and the market heading towards a seller’s market, the question is how the current market conditions now affect home buyers.
What Is A Seller’s Market?
A seller’s market is when demand exceeds supply, which means there are more interested buyers than there are homes available. This makes it an advantageous situation for sellers.
In a seller’s market, homes sell faster, and buyers must compete with each other. These conditions make buyers willing to spend more on a home than they would otherwise. Sellers can raise their asking prices because of the increased interest in homes for sale. Furthermore, due to the lack of power buyers have in this kind of market, they are more likely to accept properties
Due to the shortage of housing in California, many buyers are willing to pay more than the asking price. Bidding wars arise when buyers make competing offers and drive up the price of a home.
How Did We Get a Seller’s Market?
In a seller’s market, homes or properties remain on the market for a short time and it is easier to sell them quickly. A number of factors contribute to a seller’s market including: low interest rates for house financing, job growth in the local economy, restrictions imposed by authorities which keep inventory low.
The city of San Francisco is becoming increasingly expensive. Why? One big reason is that a large number of high-paying technology jobs have opened up in the city, which has attracted thousands of tech workers to the area – some even commuting from as far away as Los Angeles! With more people employed and looking for homes than can be rented or purchased, the demand outweighs the supply – meaning prices are higher than ever before.
Even as the COVID-19 pandemic threatened to turn San Francisco’s seller’s market into a buyer’s market in 2020, buyers took advantage of record-low mortgage rates to make offers on the limited number of homes on the market.
What Are Some Techniques in Competing in a Seller’s Market?
A seller’s market is a real estate term that refers to a situation in which there are many potential home buyers but relatively few homes for sale. The result is a market where sellers generally set the terms of the sale, and buyers need to compete for the available properties.
In a seller’s market, you may have to compete against other buyers who are willing to pay more than the asking price. If you’re planning to sell your home in a seller’s market, you might want to start by getting your home in tip-top shape to get the highest price for it.
Here are a few extra tips for both buyers and sellers in a seller’s market:
Tips For Home Buyers (in a Seller’s Market)
Whenever there’s a limited supply of houses on the market and a wealth of interested buyers, time is of the essence. The longer you wait, the more likely it is that someone else will snap up your dream home.
Act fast: If you find your dream home during a seller’s market, it is in your best interest to act fast. You should get preapproved for a loan ahead of time so that financing is in order when you need it.
Know you’re at a disadvantage: When it comes to making an offer on a home, there are certain things you should keep in mind. First, you’re the party at a disadvantage because of the seller’s market. Instead of trying to get away with offering concessions or asking for repairs to be made, focus on what’s most important to you in your offer.
If you want to negotiate with a seller, make sure that you have a written contract. Be careful about stipulations that might be included in it because there is no guarantee that they will be in your best interest. An all-cash offer might be preferable.
Be patient: If you are a buyer, and you keep losing out on the homes you’re interested in, it’s important to be patient and not get discouraged. Many buyers end up suffering during a seller’s market because they get frustrated. Homebuyers who are inexperienced in the market can get caught up in bidding wars. They’ll often offer more money than a home is worth, just to get their dream home. That’s always a mistake.
Don’t settle: Essentially, buyers will often end up buying properties they would not have otherwise been interested in. This can be because of the “seller’s market” or because they are tired of losing out on good deals. Remember that any house is a large investment and often a 30-year commitment. Don’t settle on a home just because it’s cheaper. You should wait it out and resume your home search after the market cools down.
Need help? Buy Your Home With CJ
Tips For Home Sellers (in a Seller’s Market)
In a seller’s market, sellers must compete with each other to attract buyers. To do this, you must have your home in top condition and priced competitively.
Clean and organize: For starters, make sure that you have a clean, well-organized home before you begin marketing or showing the home.
Price fairly: Homes typically sell for more money in a seller’s market, but setting your home’s price too high becomes a deterrent for buyers. Pricing your listing at or slightly below fair market value tends to attract the most interested homebuyers. While some sellers choose to list their homes for slightly less than the assessed value in order to entice bidders, this approach can present an affordability issue for buyers because an artificially low listing price also represents lower profit potential for them.
Carefully consider offers: During a seller’s market, it’s more important than ever to carefully review the offers you receive. In such a competitive environment, sellers can become so focused on choosing the highest offer that they fail to examine the strength of any buyer’s offer. Just because someone might say they’ll pay a certain amount for your home doesn’t necessarily mean that they’ll have a lender willing to allow that buyer to borrow more than what is considered the assessed value of your home. This can be problematic for buyers who are already operating under tight restrictions when it comes to their maximum purchase price.
If you’re going with a traditional sale on your home, it’s always a good idea to get at least three comparable sales. The more comparable sales as a model, the more likely you can set an accurate asking price for your home in today’s market. The last thing you want is taking what could be an unrealistic offer and losing out on potential offers only because your home will not show well after being on the market for some time.
Ensure pre approval: Before any buyers can start purchasing a house, they need to be certain that they have the means to buy. There are two ways to guarantee a loan will be approved; verified and pre-approved. This way, borrowers must provide certain financial information, making it more likely that they’ll not only be able to purchase a house but get one for the amount of money they have planned on spending. Lenders also provide sellers with an estimate when providing pre-qualification; however, this is different because there is much less security than with verifying their finances and determining which type of loan fits within their means better.
Be aware of contingencies: Mortgage contingencies, home sale contingencies, appraisal contingencies and inspection contingencies are tools that real estate agents can use to protect buyers and sellers. Most of the time, these types of contingencies are a good thing because they provide buyers with some protection if something goes wrong during the process. For example, home insurance provides protection for potential purchasers who don’t want to risk being stuck with a home worth less than what it cost them to buy.
Need help? Sell Your Home With CJ
The Importance of Working with A Trusted Real Estate Agent in a Seller’s Market
Whether you’re selling or buying a home, you need to work with a trusted real estate agent who understands the real estate market in your region.
With years of experience helping home buyers and sellers in the Bay Area, I have extensive knowledge of the local real estate market and best neighborhoods for singles, families, retirees, and professionals.
Whether you want to sell or buy a home in Rose Garden, San Jose, Los Gatos, Campbell Willow Glen, San Jose, Morgan Hill, Gilroy, or Saratoga, I can provide you with tips to give you more negotiating power and leverage through a customized marketing plan.
For instance, if you’re a seller, I generally recommend staging, renovating outdated rooms, and other practices to generate as much interest as possible. And if you’re a buyer, I could help you negotiate the price down and enjoy the best terms on the deal.