Last year, US house prices rose by 13.2%. This market was echoed around the world as the pandemic ushered in an unprecedented seller’s market. But do you know what the term actually means?
There are pros and cons to this market either as a buyer or a seller. Read on as we discuss what a seller’s market is and how to navigate it.
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What Is a Seller’s Market?
A seller’s market is a term used to describe market characteristics when demand is high but the supply of goods is low. This puts the power into the hands of the person selling, who can put up prices and choose the markets they wish to supply. It is often used in real estate when there are few properties on the market, but lots of interest and people wanting to buy.
This can result in higher house prices in a particular region. In contrast, a buyers market is when there is an abundance of properties for sale, but little interest from consumers.
Sellers Market Examples
Imagine you have just acquired a job in a new town. The town is undergoing rapid development, and this is why you are moving there. However, many other people are doing the same.
One particular neighborhood is very popular. It has access to good schools and public transport links. For this reason, very few people want to move out.
However, due to the development, you now have an influx of people coming in. Thus, the neighborhood will have few houses for sale but lots of interest. It becomes a seller’s market.
Selling in the Market
If you are lucky enough to be selling a home in this market, you have the advantage. You can dictate terms, command higher prices, and even sell a house quickly. Below are a few tips to help you get the best sale.
Choose a Buyer Carefully
As you have lots of interest, you have the luxury of choosing a buyer carefully. This involves looking at factors other than who will pay the highest price.
Start by looking at who is most likely to be able to come up with the money. If a buyer is in a property chain, how long is it? Do they have a mortgage agreement in place or a pre-approval letter?
Finally, if someone has offered way over the odds their mortgage may not come through for it. The lender needs to do a check first to ascertain the value. Is the money offered indicative of the value of the property?
Get an Honest Estate Agent
When selling your property in this climate, buyers will not be the only ones trying to get your business. Estate agents also have very little property to sell, making you a target. They will probably offer the earth to get your business.
Speak to a few estate agents before signing. Negotiate fees and check contracts before you sign. Crucially, make sure you trust them and believe they can deliver what they promise.
Book a Conveyancing Attorney Early
Conveyancing is the process in which ownership of a property is transferred from the buyer to the seller. An attorney generally does this, as it has many legal facets. Typically, the process takes around eight weeks.
However, in a hot market, you may find conveyance attorneys get booked up. To ensure you have one in place, locate one as soon as you sign up with a real estate agent.
Be Prepared to Negotiate
Just because you have the upper hand, does not mean you should dismiss negotiations. While price does matter, you can also negotiate on terms. These should be given as much thought as the value offered, as they can often speed a sale up or make the process more secure.
Buying in a Sellers Market
Buying in this climate can be extremely frustrating. Finding a property you love is only half of the battle. You then have to compete with others in a frantic market to purchase it.
Always remember that buying a home is a big commitment, especially if it is going to be a family home for life. Don’t get frustrated and make concessions, or purchase a property you later regret.
Time is not something you have when you find a house for sale that you want. A seller’s market means others may be poised to make an offer, and if you leave it, it may already have been accepted.
When you do go in, it is not always a good idea to pursue a lower offer. Make a strong offer from the start to beat any competition that may be waiting in the wings.
A letter of pre-approval comes from a mortgage lender. It says that you have been qualified for a property up to a certain value before you actually find the property itself. It is extremely valuable as it shows to a seller that you have already been cleared for the loan to purchase the property.
Go in for properties that are around 10k below your pre-approval amount. This lets you up the price should you be in a bidding war. Keep in mind that the bank will want to check the property before actually giving them money, so going too high above the value could mean problems later down the line.
Get Ready for Bidding Wars
It is quite likely that you may end up in a bidding war. The trick is to use everything other than the price to win. A few ways to trump your competitors may be:
- Dropping contingencies
- Respond to as many seller requests as possible
- Including the deposit with your offer
- Leaving closing dates open
Either as a purchaser or someone looking to sell, realize a seller’s market does not last forever. Like anything, house prices go up and down. It all depends on your long-term goals and outcomes.
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