There are 3 types of markets:
- Buyer Market – A buyer’s market it what happens when we see too much inventory or a major event in the economy. 2008 was a strange year for real estate. It will most likely not happen like that again for a very long time. When it is a buyer’s market you will see sellers dropping their price, more days on the market and trending lower sale prices. This is also when investors start to get much more aggressive with purchasing homes. Buyers can usually get away with more requests for inspection items, a lower offer price, longer deadlines and a contingent offer on the sale of another property.
- Seller Market – Seller markets can be very stressful for both buyers and sellers. People might think the sellers must love putting their home on the market, getting multiple offers the first weekend and being under contract in 48 hours. Well that would be great until you consider what the seller is going to need to do now. The first step (unless this is the seller’s second home) is for them to find a home to get under contract. Keep in mind this is a seller market so most sellers are not going to accept an offer contingent on a sale of home that isn’t already under contract. The seller now needs to identify, make an offer and get a home closed in the same time frame as the one they are selling. Now this is a seller market and now the seller is a buyer.
- Flat Market – A flat market usually doesn’t last very long. Flat markets are nice. No one has the ability to strong arm the other person.
Zillow Zestimate Says My $200,000 Cabin is Worth $600,000 and That is How Much I Want!
There are about 5000 things wrong with that above heading. For starters a Zestimate is one of the least accurate devices of our time. There is a reason why banks will always call an appraiser and not just look at an algorithm to determine value of a home. There might be one good reason to use a Zestimate, that is to determine overall direction of a market. A Zestimate should never, every be used to price a home. To really get an accurate home value a person (not a computer algorithm) needs to walk through your home. Or at the very least look at many detailed photos. Then take all the comparables and make adjustments based on hundreds of different variables. This needs to be done either by an appraiser or a real estate agent.
There is also something else in the headline that is very irrelevant. The fact that a seller “wants” or “needs” a certain amount of money out of selling their home. The market does not concern itself with the fact a seller needs to get a certain amount out of the sale. Not many buyers are going to offer you 8% higher than the property value because you want that much. There are also appraisals to worry about. The bank isn’t going to approve the loan on a home that is overpriced.
It is very important to listen to the remarks your real estate broker gives you in regards to pricing your home. It is their job and most price homes all day long. They have the tools and data to help you price your home accordingly.
How is your home priced?
A Realtor will come to your home and give you their pitch. At that point they should look around your home, take notes and some pics. They will go back to the office and run numbers. They will look at home that are comparable to the subject property. They will make adjustments in value based on a bunch of different parameters.
At that point the real estate agent should have a range of value. At this point what I would explain to the sellers that if you price your home at the tip end of the range you will see longer days on market than if you were to price at the lower end of the range. It is very important to price your home within the range.
Pricing Your Home in a Buyer Market
In a buyer’s market there is a lot more competition out there. Yes there is competition in the real estate market. Any home in your area in the same pricepoint is your completion. In a buyer market it is important to know your competition. You need to price yourself in a competitive way. You don’t necessarily be the cheapest price but you need to be very close in price if the homes are similar.
Even in a seller market you need to price your home accordingly. If it is a great property there will be multiple offers driving up the price anyways. Even in a seller market, buyers are smart and the home still needs to appraise.