This market is one of the deepest rooted buyer’s markets that I have seen in my 18 years of selling homes. The prices of homes are way down and interst rates are at all time lows. There hasn’t been a better time to buy or invest in real estate in decades! But when you ask anyone that is even remotely considering buying a house what is keeping them from buying a house today, they will almost always say that it is because they cannot sell their current home. The question I would fire back is, “cannot or will not?”
Most sellers know what is going to get their home sold. It is very basic, it is the price. Still, sellers will tell you all day long, “I won’t take less than___for my house.” Really what they are saying is “if I had the sell it for that price, I will just keep it.” And that sounds like that seller that is not willing to sell, not in this market.
Buyer markets are dull and at times down right horrible. Seller markets are fun, they are the popular kid at the party, we all want to hang out with that market! Whoo hoo! right? Well the way I look at it is, yeah, seller markets are fun. You get to price your investment pretty much anywhere in the ballpark and then sit back and watch that price get hit right over the fence. Sometimes in just a matter of hours! The difference in the listing price to what it actually sells for can be quite a large margin! Exciting, right! But, when the party is over and you have to go out and buy the replacement home, you are now on the other side of that fence. In a seller market, you will, no doubt have to also hit that seller’s price out of the ballpark in order to make a deal. If you are upgrading to a higher price range, that difference from list price to sales price will be even higher as the price ranges increase. Here is a very simplified example; You list your home in a seller’s market for $200,000 and the buyers pounce. A bidding war ensues and you actually are able to sell your home for $210,000! A margin of +5%, which is pretty normal in a seller’s market. You then go out to find your replacement home. If you upgrade, and why wouldn’t you? You just scored on the sale of your home, afterall, the margin of 5% makes a big difference. You find a home listed at $300,000, and because it is a seller’s market, other buyers pounce and you get into a bidding war. The typical margin applied here +5% works out to be $15,000. You settle on paying $315,000. What happened to your profit from the sale of your home? Gone and then some.
On the contrary, in a buyer’s market you list your home for $200,000 and beacuse it is a buyer’s market, buyers do not pounce, the buyers stick it to you and a deal is made for -5%; $190,000. But now you go out to find your replacement home, Yea! because now you get to stick it to that seller, just like the buyers did to you on your sale. You find one listed for $300,000 and stick it to the sellers and offer -5%, $285,000. What happened to the loss you incurred at your sale? It went away and you even got and extra $5,000 back in the bargain! That is why, the best investments are made at the time of purchase and not at sale.
So, when a seller says to me “I will not take less than___for my home,” I gently remind them of the above principle. They then ask themselves if they are truly committed to selling their home now or not. After some thought, most see the market in a different way and agree, that, yes they will take in the shorts when they sell their home, but can dish it right back on the purchase and actually do much better in the process. So, what market is better? is a matter of perception. I do know this, smart investors make great investments when they buy good, not when you sell good.
Happy selling, and even happier buying!