April 14th, 2017 12:49 PM by Gregg Mower
Some of you are hearing that we are in a “Seller’s Market”, but have no idea what that really means. It is interesting times right now and every Real Estate Market in America is different. I am writing this article from Northern California in the Greater Sacramento area, but the definition of a “Seller’s Market” is good for any market. The factors that make a Seller’s Market are many but the biggest factor is the lack of supply of housing for sale in the affordability range. The affordability will differ from town to town is based on the average income for the particular area. In in Northern California You can see the highest priced Real Estate Market in the world with Silicon Valley and the San Francisco Peninsula and drive 2 hours to the east and see some the most affordable housing in California in the Stockton and Central Valley. Real Estate markets are driven by supply and demand with a higher supply of housing the lower the pricing and the lower the supply the higher the price becomes with the same amount of demand.
Although the rules of supply and demand work in any market place, in Real Estate it is especially prevalent as people generally don’t have choice to buy or rent they always need a place to live. With most goods and services people have a choice as to purchase and item or not based on price, but if your job is in a Real Estate Market that has a low supply of housing and a high demand for that housing you will be forced to take housing at elevated prices. Even if you are renter you will be forced to pay higher rents in markets with a low supply of housing. Some markets with high demand for housing have implemented rent control to try to keep rents low in certain areas so people can afford to live there. This concept, although with good intentions for potential renters, is a horrible way to try and combat high rents as it will force corruption and landlords that can’t get market rents will tend to not do the necessary maintenance that would be necessary in an uncontrolled market to save money. You have seen this in areas in major cities that have tried this and what you end up with are areas that are run down and crime ridden. The solution is a supply problem and if you can build more housing and move the jobs away from high concentration areas you will fix the problem.
As for a “Seller’s Market” in Real Estate market you will generally have a high demand for housing and low inventory to choose from. Here in the Greater Sacramento area we are experiencing just such a market. What this does for a seller of Real Estate is insure that they will get the highest price possible for their Real Estate. As for buyers in this market they will be forced to make full price offers or even above full price offers to get the seller to sell to them. As a buyer, it becomes frustrating to look for a home to buy and every house you see in your price range has multiple offers and some are cash offers. If you are a Veteran and want to try to use your benefits you will have a very tough time to purchase, as if a seller takes a VA loan offer on their home they will have to clear the termite report and take the house to VA standards. If a seller has multiple offers on a house they will generally take the path of least resistance to them and the highest price. For example, if a seller has 3 offers to purchase their home and one is a cash offer (meaning they are not seeking a loan) and one is a conventional loan, and one is a VA loan and even if the VA loan is offered at more than the asking price the seller will look at the type of buyer that they will make the most off the sale from. With the cash offer, with no repairs being asked for verses a conventional loan buyer that may have no repairs requested either at the same price and a VA loan buyer offered above the asking price with repairs, it would generally be the cash offer that wins every time as it would be known that the cash buyer can perform whereas the conventional loan still has to go through the process and the VA loan buyer just becomes more of a hassle. Thus, putting the seller in control of who they sell their house to.
With the seller in control of who they sell their house to it becomes an art for a Buyer’s Agent to make an offer that will get accepted. Here at MAE Capital Real Estate and Loan our Agents are trained in the art of deal making and have special ways to convince a seller to accept the offer we provide. We are one of only a few Real Estate firms that can bundle our services thus sweetening the offer we can make to a seller. If we work with you on your home loan and represent you in the Real Estate Transaction we can reduce our fees and make the seller’s bottom line sweeter where other Agents will not have this as an option to help potential buyers. If you are a seller in this market and we list and sell your home and bundle our services with the purchase of the next house or home loan or both we can really save you thousands of dollars.
Back to what a seller can expect in this market when selling their home. Since the seller is in the driver’s seat, so to speak, they will be able to take the highest and best offers presented. Some techniques that are happening in this market is to set a date where the offers will be reviewed by a seller so the seller can pick the best one. Generally, when the house is listed on the MLS there will be a note to other Agents stating that offers will be reviewed on a certain date usually 7 days after it is put into the system. So if a house is listed on a Friday the Agent may suggest to the seller that the following Friday evening they will get back together to go over all the offers received during the week. If some of the offers are the same the Agent will suggest doing a “Multiple-Offer Counter Offer” where the Agent will send to all offers one final chance to send a higher or better offer than they originally sent in. Once those are back the seller will then pick the best offer out of the bunch. This technique is good for a seller but potential home buyers get really frustrated with this type situation as they find out that they didn’t get the house and they offered the highest they could. This should be explained to all potential buyers prior to even going to look at homes so they are prepared to battle for what they really want.
Another problem that arises in a Seller’s Market is the lack of tolerance from a seller. Although, it should be a given to be as courteous as possible in a Real Estate transaction a Seller doesn’t really have to be tolerant of the home buyer’s problems. So if a home buyer’s lender has requested that they want the seller to comply with work or to participate in closing costs, the seller might not have the tolerance for that and cancel the transaction and move to the next buyer and if a few weeks have passed then they might be able to sell the house for even more. This is especially prevalent with builders as they are professional sellers and have zero tolerance. In fact, most big builders have their own lending institution so they will steer you to their lender by offering incentives to use their lender as they make money from the sale and the loan. This is illegal per the Consumer Finance Protection Bureau (CFPB), but it is still common practice with builders.
So bottom line, if you intend to sell your home or property in the next 6 months to a year in a “Seller’s Market” picking your Agent is the most important part of the transaction as they will pay for their services over and over not just from keeping it legal but getting the best price and you not having the hassle of showing your home and answering all the buyer’s questions. MAE Capital Real Estate and Loan is here to help you list and sell your home, Land, or Commercial property. We can also bundle our Real estate Services with our Loan services to save you big dollars so weather you are a seller or a Buyer we are here to save you money. Give us a call at 916-672-6130 or click here to email us.