What Is a Seller’s Market?

Simply put, a seller’s market is a market where there are more homebuyers than sellers. Based on basic laws of supply and demand, this means sellers have the upper hand: They will likely sell their place quickly, perhaps for over asking price, with a minimum of fuss or pushback from buyers. 

Meanwhile, homebuyers in seller’s markets face a tough road: Due to increased competition, they’ll have to act fast, bid high, and generally bend over backwards to woo sellers into accepting their offer over the many that may be at their disposal.

So here’s what buyers need to know about seller’s markets—and how to survive them.

Are we in a seller’s market?

For the greater part of 2021 and 2022, the U.S. housing market was a seller’s market. Homes were flying off the market in record time due to historically low mortgage rates and sellers were in the driver’s seat. Buyers all over the country had to waive contingencies and offer over asking just to have a chance at being the winning bid.

But in the last several months, uncertainty about the economy, inflation, mortgage rates, and more has stunted the market—and taken power away from buyers and sellers alike. Some experts have dubbed it “nobody’s market” right now. Others still believe we’re in a seller’s market, especially in hot areas of the country where buyer demand is high and median days on market is low.

What makes a seller’s market?

The main metric used when evaluating housing markets is home price appreciation.

“The greater imbalance of supply and demand, the faster you’ll see price appreciation,” Blomquist says.

Here are the factors that often fuel seller’s markets:

• Population growth. Generally, when there’s an increase in the number of people moving to a town, demand for housing begins to exceed supply. You can view population growth in your town using the U.S. Census Bureau’s American FactFinder.
• Job growth. An influx of new companies and jobs can in turn fuel population growth that turns areas into seller’s markets. For example, “wherever Amazon opens its new headquarters, you’re going to see a huge influx of home buyers in that city,” says Seth Lejeune, a real estate agent with Berkshire Hathaway in Malvern, PA. You can view job market trends in your city through the Bureau of Labor Statistics.
• Housing starts. The term “housing starts” refers to the number of new homes on which builders have started construction in any particular month. Because new construction directly affects supply, a decrease in housing starts can result in a seller’s market. 

Are you in a seller’s market? How to tell

Home buyers and sellers can evaluate whether they’re in a buyer’s or seller’s market by analyzing a few key variables:

• Average days on market (DOM). This measurement shows the median age of real estate listings in your area. “If houses are selling in your neighborhood in less than 10 days, it’s a strong seller’s market,” Lejeune says.
• Asking vs. final home price. In seller’s markets, bidding wars can often erupt among buyers, which means sellers may enjoy a final sales price that’s equal to their asking price, or more. So, if a home is listed at $450,000 and sells for $450,000, $460,000, or higher, that’s a seller’s market. In a strong seller’s market, the final sales price is typically at least 10% higher than the asking price.
• Home prices over time. Rising home prices over time is a sure sign of a seller’s market. You can determine if home prices are rising or falling in your city by looking at your ZIP code’s “market price curve”.

Buying a house in a seller’s market

To compete against other buyers in a seller’s market, you need to be prepared. First and foremost, you’ll need a mortgage pre-approval letter before you start shopping, so that a seller knows you can put your money where your mouth is.

You may also have to waive some contingencies to edge out other buyers—or widen your search to an up-and-coming neighborhood with less demand.

Other ways to make your offer more attractive include increasing the amount of earnest money that you’ll put into the escrow deposit, adding an escalation clause, writing a personal letter to the seller and, of course, offering above list price.

Source

Experts in Residential Real Estate in Orlando

If you are BUYING or SELLING real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

Ways for Buyers To Deal With a Low Home Appraisal

Roller-coaster rides don’t have anything on the real estate market in terms of stomach-churning lows and adrenaline-pumping highs. But when you finally find the home of your dreams and are ready to sign on the dotted line, you’re in the clear, right? No more drama?

Not if your home appraisal comes in significantly lower than the accepted offer. Even if you think your offer is fair, it doesn’t matter to your mortgage lender. If you receive a low appraisal, chances are you won’t be approved for the full amount of your loan. And if the seller’s unwilling to lower the price, you’ll have to make up the difference.

According to Fannie Mae, about 10% of home appraisals come in low. If it happens to you, it doesn’t mean your dream is doomed. Here are the four options you have when you receive an appraisal below your offer price, plus insight into the chances for success in each case.

1. Appeal the appraisal

Appealing what you consider to be an unjust appraisal requires a concerted effort, but it is doable.

“In order to appeal an appraisal, you will have to request a copy of the appraisal report,” says Carter Crowley, co-owner and acquisition manager at CB Home Solutions in Wisconsin. “This way, you can check the details and find concrete evidence of any miscalculation. It works all the time if discrepancies are found.”

Errors and discrepancies are more common than you might think.

“There are sometimes errors to the processing, such as failing to include certain sources of income or incorrect comparables used in the comparison,” says Joel Camino, CEO and founder of Indiana’s Next Modular.“In these cases, if you can provide evidence to support your claim, then it may be possible to have the appraisal revisited and a revised result given.”

Chances of success: It’s hit or miss. While errors aren’t unheard of, Jonathan Faccone, managing member and founder of New Jersey’s Halo Homebuyers, says that “the success rate [of appeals] is generally low, as appraisals are typically conducted by licensed professionals and are based on objective criteria.”

2. Order a second appraisal

If you suspect the first appraisal was flawed, ordering a second one is a viable option. But it will cost you.

“To order a second appraisal, you need to keep in mind that you will bear the fee,” says Zach Tetley, co-founder of Nexus Home Buyers in Knoxville, TN. “Once you ask for the second appraisal, the lender asks you to fill out the form for ‘reconsideration of value.’ The lender may or may not entertain your request.”

Chances of success: Snagging a second appraisal can be time-consuming and costly, and it might not pay off.

“Lenders may also be cautious about accepting a second appraisal, as it may be seen as an attempt to cherry-pick a higher valuation,” says Faccone.

3. Negotiate with the seller

Trying to come to a mutual agreement with the seller is probably the easiest and most obvious option on the table.

“Negotiating the sale price with a seller is easier than attempting to get a second appraisal,” Melanie Hartman, owner of Maryland’s Creo Home Buyers. “Any homeowner will have a hard time selling their house for more than it’s worth. As long as the appraisal is accurate, most sellers are willing to adjust their selling price to get their house sold.”

A renegotiation can also help “to bridge the gap between the appraised value and accepted offer,” points out Boyd Rudy, team leader at Keller Williams Living in Brighton, MI.

Chances of success: If sellers are as eager to offload their home as you are to buy it, this might be a promising avenue.

“However, sellers are not obligated to renegotiate, and they may be unwilling to lower the price,” Faccone says.

4. Walk away

Walking away from your dream home often feels like a divorce—it’s emotional, and there are financial implications.

“Walking away from the purchase is a drastic option that should be considered carefully,” Rudy says. “On the one hand, it can help to avoid a situation where the buyer is locked into a purchase that is significantly overpriced. On the other hand, it may mean forfeiting the time and money that you have invested in the purchase process.”

If you have an appraisal contingency in your contract, that means you take yourself out of the deal and still get your earnest money deposit back. But without an appraisal contingency, walking away can mean losing any upfront costs like your inspection fee and earnest money.

In certain situations, you might have no other choice.

The seller is not obligated to lower the asking price if the house appraises low. So in a seller’s market—where houses are in demand—the seller might not be amenable to a price negotiation. For many buyers, this means they’re forced to drop the purchase because they can no longer afford the home. Their mortgage lender will loan them only enough for the appraised value, leaving it up to the buyers to make up the difference. And if they can’t make up the difference, they’ll have to say goodbye.

Ultimately, the decision will come down to your financial circumstances and whether you believe the appraisal is accurate, Rudy says.

Source

Experts in Residential Real Estate in Orlando

If you are BUYING or SELLING real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

What Does ‘Contingency’ Mean in a Real Estate Listing?

When you see the word “contingency” in a real estate listing, it may be one of those real estate terms that make you go, “Huh?” But don’t sweat it. We’ve all been there, and we’re here to help clear up the confusion.

Every home sale is dependent upon certain contingencies. They can make or break a real estate sale, but what exactly is a contingent offer?

“A contingency in a deal means there’s something the buyer has to do for the process to go forward, whether that’s getting approved for a loan or selling a property they own,” explains Jimmy Branham of the Keyes Company in Coral Springs, FL.

If the buyer is having trouble getting a mortgage, or the property appraisal is too low and the bank won’t increase the loan, or there’s some other problem with getting a mortgage, a contingency clause means that the contract can be broken with no penalty or loss of earnest money to the buyer or seller.

So when “contingency” appears in the listing itself, “it means the sellers have already accepted an offer on the property (at least regarding price), but there are still steps to clear before the contract goes fully pending in the system,” says Stephanie Crawford, a Realtor® in Nashville, TN.

These are some common contingencies that could delay a contract:

• The buyer’s mortgage pre-approval letter is still pending.
• The buyer is waiting to get the home inspection report.
• The buyer has a contingency based on the appraisal.
• The buyer is waiting for a spouse or co-buyer, who is not immediately available to sign off on the home sale.

Additionally, if it’s a real estate short sale—meaning the lender must accept a lesser amount than the mortgage on the home—a contingency might mean that the buyer and seller are waiting for approval of the price and sale terms from the investor or lender. Or it could mean the seller and buyer are waiting for the official paperwork for short-sale terms that have been verbally or informally approved.

Not all contingent offers are marked as a contingency in the real estate listing. For example, purchases made with a mortgage generally have a financing contingency.

Obviously, the buyer cannot purchase the property without a mortgage. However, real estate is generally shown as “pending” in the real estate listing, rather than as having a contingency, if the buyer’s only contingency clause is a financing contingency, an inspection contingency, or other standard contingency.

Should you make an offer on a contingency listing?

Your ideal new home might be listed as having a contingency, meaning the sellers have accepted an offer from a buyer, subject to one or more contingencies. So is it still worthwhile to pursue the home?

Most experts say you’re probably too late to the game. But you should never say never, especially if you’ve fallen hard for the house. Even deals in contract can sometimes fall through due to a contingency, so all hope may not be lost.

The seller might be willing to continue showing the property during this time, but if it’s a house you’re excited about, talk to your real estate agent.

It matters what the contingency is for. If the sale has a contingency based on the buyers selling their current home, for example, the sellers may be accepting other offers. If they’re just waiting for an appraisal or fulfillment of a termite inspection contingency, you’re probably too late.

“In the agent comments on the MLS listings (which the general public cannot see), it will typically say what the contingency clause is for and when it will be over,” says Dale Weir, a Realtor in Chesterfield, MO. That should give you a better sense of your chances with the home.

Still, if the pending contract is contingent on a clean home inspection and the buyers back out, you may want to reconsider jumping in yourself. The home inspector might have found something that would make the property undesirable or even make it possible to renegotiate the purchase price.

Sometimes the deal falls apart for reasons that may be quite justified—don’t let your obsession with the home cloud your judgment as a buyer.

If you’re in the home-buying market and the property you like is listed as contingent, you can also place an alert on the listing. That way, you can receive a notice the moment the real estate transaction falls through and is back on the market.

Can you make an offer on a contingent listing?

There are no rules against buyers making an offer on a contingent listing. If you’re up for a waiting game, go for it. But the sellers might not consider the offer, depending on what the sellers (and their real estate agent) have promised the other potential buyer.

To make your offer stronger, consider writing an offer letter to the homeowner, explaining why you are the perfect buyer, or even making your real estate contract one with zero contingencies, or with as few contingencies as you as a home buyer are comfortable with.

Just be aware that it can be a risky move: Make sure that the real estate contract provides an out for you. It wouldn’t be good to lose your earnest money deposit if something troublesome turns up on the home inspection, for example, or if you don’t qualify for a mortgage.

Bottom line: Talk to your real estate agent to determine if it’s wise to make a real estate offer on a contingent listing. Your agent should have a good sense of whether it’s worth going all out for this property or if you’re wasting your time.

If you decide to let the listing go, make sure you are seeing properties you’re excited about as soon as they are listed to avoid this problem in the future. If you’re in a hot market, properties can move fast!

Source

Experts in Residential Real Estate in Orlando

If you are BUYING or SELLING real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.