Oct
2
Buyer’s Market Buy
Posted by Carlie Back under For Buyers, For Realty Professionals, For Sellers, General Information
Buyer’s Market/ Seller’s Market
Good Market /Bad Market
In 2005 we were bombarded with news reports of the great Seller’s Market. They reported record appreciation in home values. Sellers and investors were selling properties for inflated prices in record time. The news media was positive for the most part reporting the real estate market was great! Prices were going up and sellers and investors were making more money than they dreamed of! In a Seller’s Market there are a limited number of homes available for sale, (low supply) and an abundance of motivated buyers (high demand). The media portrayed 2005 as a great time to get into the real estate market; after all it was a great market! Was it a great market for Sellers or buyers or both? The message of a great real estate market was a general statement and was interpreted by many as a great time to invest in real estate. The problem here is the media reports events that have already happened, they do not predict the future. There were headlines that read something similar to When Will the Real Estate Bubble Burst, buyers and investors were hearing that the real estate market was great and continuing to invest in it. We know that historically the real estate market is cyclical and has ups and downs. No one could predict how long this Seller’s Market would last, we knew it could not go on forever and eventually would correct itself. While the media was reporting about the great real estate market the market shifted from a sellers market to a buyers market and the shift was quick! It reminded me of the media hype of the dot com investors getting rich investing in dot com companies, by the time it was being reported this was a great investment the dot com companies were experiencing a rapid shift and were no longer the way to get rich quick, after all everyone knew or believed they were a great investment. Markets shift and good investors are studying the markets and buying and selling in all kinds of markets. It becomes dangerous when investors use the media to make investing decisions because they report they do not predict markets and by the time the time they report the event has already happened and conditions could be shifting!
Let’s look at a real life example of a transaction in the height of the Seller’s Market. We listed a 1600 square foot, three bedroom, and two bath home in a typical neighborhood built in the late 1990’s. The market value of the home at the time we took the listing was $225,000. Normally we look at sales in the neighborhood of similar homes that have sold to determine the asking price. We would make adjustments for condition of the home, upgrades and location to determine price. During this time prices were rising because of the lack of homes available and the number of buyers wanting to invest in a home. As a result many homes were bid above market price. In our pricing strategy we would list a home for more than market value to allow for these market conditions. In the above example we listed for an asking price of $250,000 which at the time was $10,000 over the last similar home sold in this neighborhood. We received 28 offers for this home and ended selling it for $300,000! The Sellers were delighted however when you look at it from the buyer’s perspective it was a different story.
Buyers at this point in time wanted to invest in a home badly, and everything they read and heard enforced the fact that buying a home was a great investment. Their agents were checking the multiple listing several times a day to see what new listings had come on to the market. Buyers were hurrying to view the homes and get their offers in before the probable bidding began. Many buyers wrote offers on several homes and did not secure a home during this time. If they were lucky enough to get a contract accepted it was under tough circumstances. It was commonplace that the buyer would agree to waive inspections, waive and pay substantially more than the appraised value or of the home. Buyers were happy to get homes however they had little or no variety to choose from, and when they found a home that was acceptable or close to acceptable they would pay more than appraised value to secure it. These conditions were not the best to buy a home in from a buyer’s point of view in what was reported to be a great market! Great for the sellers not the buyers!
The market we are experiencing now is being reported as a terrible declining real estate market. We hear daily reports that the inventory of homes on the market is at an all time high, homes are not selling and that prices are dropping, and foreclosures are on the rise. This is not great news to Sellers however take a look at the market from a buyer’s point of view. In this reported terrible market buyers have a huge selection of homes to choose from. They do not have to compete with other buyers in bidding wars on homes. They actually have the luxury of taking their time to make a decision and do not have to snap up the first home that comes on to the market. They are doing inspections and appraisals to insure the soundness and value of the home. Sellers more than ever are now offering incentives and are aware that their home has to stand out in the crowd and are offering great prices and are getting their homes into condition in order to stand out by cleaning, painting and upgrading their homes so that they will be the one that sells. How can the market be so bad when buyers have such great conditions to buy, and interest rates are still low!
The news reports after an event has happened, if you are thinking of buying a home the conditions are prime right now! We are in a strong economy, our unemployment is low and people are continuing to move here for our great weather and lifestyle! Take advantage of being a buyer while we are experiencing the best buyer’s market in history! Don’t wait for the news to say it is a good market; it is a buyer’s market and a great market to buy real estate!
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