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Stacey KelleherContributing Author
Who could have imagined that a global pandemic would be a catalyst for one of the most dramatic upswings the real estate industry has seen in recent years.
As of Q1 2021, a staggering 97% of real estate agents participating in HomeLight’s quarterly agent insight report said they were experiencing a seller’s market. That’s the highest percentage since we began tracking this metric.
As homes became our office spaces, classrooms, and mask-free sanctuaries, many Americans realized they needed a new setup. This hyper-focus paired with record-low mortgage rates inspired many buyers to step into the market — far exceeding the available inventory of homes.
Still, even with skyrocketing demand, homeowners selling in a seller’s market should do their due diligence to ensure they’re selling their home for the best price possible. With help from a top-sellling real estate agent, we’ll share seven tips to make the most of today’s hot seller’s market.
High buyer demand and low housing inventory create a seller’s market. As mentioned above, several factors have inspired the current housing sales boom:
A seller’s market often means bidding wars, higher prices, and faster sales for homeowners. And while this is all good news for sellers, you’ll still need to be strategic if you want to sell your home for the most money possible. For expert tips on selling your home in a seller’s market, we spoke with top Atlanta real estate agent, Shannon Watkins, who works with 81% more single-family homes than her competitors.
In seller’s markets, Watkins encounters many clients who overinvest in getting their home “market-ready.” With fewer properties to choose from, eager buyers are more willing to overlook outdated interiors and cosmetic issues than they would in a buyer’s market where beautiful homes are a dime a dozen.
“Don’t spend the money,” Watkins advises. “If you insist on making any updates, go for carpet and paint because they are the cheapest repairs you can do to yield the most value for the price. If you put in a brand new kitchen, for example, you’re not going to increase your sales price by $10,000 because you renovated it.”
Here are some quick and easy ways to make your home more inviting without spending a lot of cash:
In a seller’s market, homeowners are often pleasantly surprised to find their property sells much quicker than anticipated. NAR reports in the four weeks ending April 11, 2021, properties stayed on the market for an average of just 22 days compared to 35 days the year before.
When making plans to list your home, prepare for your next move at the same time. Pre-pack whatever you’re taking to your next home, and donate, sell, or toss whatever you don’t want. Clearing out the clutter will open up your room and make your home appear more spacious too!
You should also begin searching for your next home as soon as you’re ready to sell. If you haven’t started looking for your next home, have a backup plan in place in case your home sells quickly.
You may consider renting for a bit so you can take your time finding the right property. You can also negotiate a seller rent-back so you can remain in your home as a renter after you sell it.
Even in a seller’s market where bidding wars are common, you need a nuanced pricing strategy to ensure you sell your home for the most money possible.
While it’s tempting to reach for the stars with a high listing price, note that overpricing your home could turn off informed buyers and leave your home sitting on the market. And even if a buyer agrees to a sky-high price, they may not be able to close if the appraisal comes in low since lenders won’t typically approve a loan larger than a property’s appraised value.
On the flip side, if you price your home too low, you might not sell your house for as much as you could given the hot market.
The goal is to find the sweet spot: a price that reflects a home’s fair market value based on the size, floor plan, and condition. Your real estate agent will round up recently sold comparable homes, or “comps,” in Competitive Market Analysis (CMA) to determine how much your home is worth in the current market.
When the market is moving especially fast, you’ll also want to know what homes in escrow are selling for — it could be more than the recently sold comps. Your real estate agent can reach out to the agents managing these home sales for insight so they can include sales prices for pending home sales in their CMA.
Listing a home at around $10,000 to $15,000 below fair market value is a common strategy in a seller’s market to create a bidding war. It’s a good way to generate lots of offers and get a fast sale at or over the listed price. The San Francisco Bay Area market is a great example of this strategy in action. In February 2021, the list-to-sale price ratio in the area was 104.3% — a sure sign of a seller’s market.
Buyers sense they are getting a good deal and are willing to put their hat in the ring, especially in a competitive seller’s market where there are fewer options to choose from. Just don’t go any lower than a price you would be willing to accept if you hypothetically only received one offer.
Bidding wars are common in a seller’s market. With fewer options to choose from, buyers flock to desirable properties that check most of their boxes. As a seller, you’ll need to evaluate your offers and respond carefully to leverage the best deal possible.
The National Association of Realtors (NAR) outlines three ways to handle a multiple offer situation:
Thankfully, you don’t have to determine the best response on your own — your real estate agent will be by your side to help. Watkins shares the art of evaluating multiple offers:
“My job is to call every one of those lenders to find out how far along the buyer is in the process, how quickly are they going to close, how much cash do they have on hand, etcetera. There is a ton of research that goes into every multiple offer situation.”
Most sellers gravitate towards the highest offer. But Watkins cautions her clients that the highest offer is not always the best offer. Here are the main components of a strong offer in a seller’s market:
Even if a cash offer is not the highest, it can still be the best for a few reasons. When a buyer pays in cash, they don’t need to prove the home’s value to a lender, taking the appraisal out of the equation. Skipping this step is beneficial in a hot seller’s market where prices are rising faster than appraisers are willing to recognize — you don’t need to worry about a low-appraisal threatening the deal.
A cash offer also tends to speed up the sale. Ellie Mae estimates it takes an average of 46 days to close on a home loan. If you sell to a cash buyer, you can expedite your closing date a month or more.
According to a study by NAR and Experian, the average homebuyer made a 12% down payment on home sales between July 2018 and June 2019. First-time homebuyers financed an even larger portion of the sale, putting down an average of only 6%. As a seller, note that the higher the buyer’s down payment, the better. A buyer with a large down payment has to borrow less, reducing the risk they won’t qualify for their loan.
In real estate, a contingency is a requirement outlined in the purchase agreement that must be met for the sale to close. If the buyer’s contingency is not satisfied, they can walk away from the deal with their earnest money. As a seller, you want an offer with few contingencies since these slow down the sale and act as “escape hatches” for buyers to back out.
The most common contingencies include:
An offer with fewer contingencies is less likely to fall through, making it more appealing. In a seller’s market, buyers are often more likely to remove contingencies, especially if they know they’re up against competing offers.
In a seller’s market, buyers may throw in concessions, or incentives, to encourage the seller to choose their offer. For example, the buyer may offer to cover closing costs that the seller would customarily pay.
In a seller’s market, sellers may sell their current home faster than they’re able to buy their next one. That’s when a flexible moving date or rent back comes in handy. Buyers willing to budge on this point and give the seller some breathing room to house hunt may just push their offer to the front of the line.
Watkins was quick to mention home appraisals when asked about common challenges that come with selling in a seller’s market. Pricing a home on the higher end of market comps is all well and good, but the home must appraise for equal or less value than the buyer’s offer in order for the buyer’s lender to approve the loan.
“What we’re noticing right now are agents and homeowners trying to push the envelope on value. The inventory is so low, and the demand so high driving prices up. But of course, lenders and appraisers are like, let’s pump the breaks — this seems too high for the area.”
In today’s hot market, Watkins estimates that 80% of her listings are appraising low — some by as little as a few hundred dollars.
When a property appraises below the asking price, there are a few options to address the gap between the appraised value and the sales price:
Your agent can advise on what the best strategy is for your home sale, as Watkins explains:
“As a real estate agent, my job is to educate the seller as to when it’s smart to just put it back on the market or say, hey, this is the best appraisal we’re going to get, so let’s reduce, take it, and move forward.”
Choosing the right real estate agent is by far the most important decision you’ll make when selling in a seller’s market. While any agent can assist you sell your home, only a top agent can win you the best price possible.
HomeLight data shows that the top 5% of real estate agents across the country sell homes for as much as 10% more than the average agent. Top agents outcompete their peers when it comes to market research, pricing strategies, and bidding war negotiations — all essential for maximizing your sale potential.
“They are going to fight for your property value. They know how to address the appraisers to get that value where it needs to be to achieve a good closing,” Watkins shares, advising sellers to work with an agent who specializes in listings. With more than 15 years in the business, and more than 16 million dollars in closings last year, Watkins speaks from experience.
Low inventory and high buyer demand make seller’s market conditions the ideal time to sell. With a bit of preparation for a quick sale, expert agent guidance, and patience to explore multiple offers, sellers can get the best deal possible for their property.
Header Image Source: (Kate Antamanova / Unsplash)
Article: https://www.homelight.com/blog/selling-in-a-sellers-market-2/
