Timing The Real Estate Market

Posted in Buyer Blog | 01/11/2012

Windsor Real Estate Agent

Windsor Real Estate Agent

Can we time the real estate market?  Is there some secret hocus pocus or formula that real estate pros use in order to determine when the best time to sell or buy really is?

In one word:  no.  If the pros are unable to do it, then chances are, no one else can as well.  But there is a way to use some of the techniques that real estate investors use, which is to buy low and sell high.  The number one step a buyer or seller should do is to ask what the real estate market is like in their city.  Here is a little Real Estate 101 to answer the most basic questions regarding buyer’s and seller’s markets.

Buyers Market:

This type of market is when there are more houses on the market than buyers.  Chances are, you have heard this phrase quite a bit in the past few years as we have been in a buyers market for several years.  In a nutshell, with all of the homes available, buyers have many homes to choose from, so not every house will sell.  If six months of inventory is on the market, then most experts say it is a buyer’s market.  Take under consideration that in this type of market, fewer buyers will result in fewer sales, which can distort median prices.

Seller’s Market:

Here, it’s just the opposite.  A seller’s market is when there are more buyers than houses.  When this occurs, homes sell quickly because there are so few available.  Bidding wars are quite common during this period.  Experts say if there is less than two months of available homes for sale, then we are in an extreme seller’s markets.

Neutral Market:

Basically, this is a balanced market.  Here, interest rates are usually affordable and the number of homes on the market and buyers are equal.  Usually, inventory is approximately four months.

Buying A Home In A Buyer’s Market:

This is the best time to buy a home if you are a buyer looking for a fantastic deal.  Why?

Lower Sales Price:  Sellers are more willing to negotiate because they understand they might not receive another offer.  With too many homes on the market, prices usually fall.

Buyers Want Concessions: Buyers are often able to ask the sellers to make concessions in their offer, such as paying their closing costs, paying for a home warranty, asking for furniture or making larger repairs.

Contingent Offers Are Expected: Sellers often agree to contingent offers, which means that a buyer must sell their current home.  The seller believes that one offer is better than no offer at all.

Repairs: Sellers will often make the necessary repairs or give the buyer credit when a home inspector finds issues with the home.

Buyers Often Have Control: Buyers often know that they have the upper hand and can ask for extended inspection periods, deadlines and request early possession.  In a seller’s market, the seller would normally reject this.

Buying In A Seller’s Market:

If a buyer is in no serious rush, then it’s not a good idea to buy in a seller’s market.  Here are a few reasons why:

Top Price:  A seller will be paying at the list price since multiple offers are common.

No Concessions: Since there are plenty of buyers, sellers have their pick and they are very reluctant to pay any buyer’s closing costs or inspections because chances are, there is another buyer that won’t make these demands.

No Contingent: It is rare during a seller’s market that contingent offers are accepted.  Sellers simply don’t want to wait for a buyer to sell their home.

Repairs Denied: Sellers will inform buyers that a home is being sold “as is.”  In a seller’s market, where demand is high, buyers will usually accept this.

Seller’s Have Control: Here, sellers will not stray far from the contract and usually make all of the calls.  Seller’s know they have control, and so do the buyers.

Selling In A Buyer’s Market:

If a seller does not need to sell, then there is usually no reason why they should put their home on the market.  Here’s why:

Lowball Offers: Sellers lose much wanted equity in a buyer’s market.  Buyers know this and will make low ball offers.

Buyers Want Concessions: Again, buyers will ask the sellers to pay for closing costs, again, lowering the price of the home.

Contingent Offers Are Risky: With many homes on the market, there is a good chance a buyer’s home will not sell, if this happens, and then the seller’s won’t either.

Sellers Have Less Control: Once again, buyers have control and can make the contract to their specifications, even including an “out” clause, which means they can simply walk away from the deal, even to closing.

Selling In A Seller’s Market:

This is when a homeowner should sell their home:

High Sales Price: Chances are, you will get top dollar for your home, maybe even more than what you are asking for it as there will be more buyers than homes.

Concessions?  Forget About It: Sellers won’t entertain concessions in a seller’s market. They have no reason to since there is a buyer for every home.

Contingent Offers Rare: Again, no reason for a seller to accept an offer with a contingency in a seller’s market.  They will simply go to the next buyer.

No Repairs: If you are selling a home that needs repairs, this is the time to do it.  While home inspections still happen, the request for repairs from a buyer is usually ignored.  There are too many buyers who will buy a home “as is.”

Sellers Have Control: Again, sellers will have all of the control, not the buyer, in a seller’s market.  They usually determine closing dates, inspection periods and waive contingencies.

So this is what real estate investors pay attention to: are we in a buyer’s or seller’s market.  Pros buy low and sell high. While timing the market is impossible, it is certainly worth paying attention to.  Contact your local Windsor real estate agent if you are considering buying or selling a home and see what the market is like in your area.

 

 

 

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