I’m reading a lot of headlines and seeing YouTube videos about the market crashing.
Is it going to happen? Short answer is NO.
Is the market slowing down a little right now? YES. It always does this time of year. People go on vacation and those with kids like to be in their new home before school starts. I always like this time of year because I can catch my breath and enjoy a break before it picks back up a little for the rest of the year. When I go to a track and I get used to doing 120 MPH in a straight, hopping on the interstate on the way home and doing 80 feels slow. Right now we are all so used to a crazy fast market, that even a strong but not super strong seller’s market feels like a major slow down.
Are we seeing more houses come on the market right now? YES. I think this is because all the sellers who would have sold during COVID now feel it is okay to put their house on the market. We started seeing more listings hit the market after the vaccinations rolled out. This makes me think that the sudden increase in inventory hit all at once. We will see if it keeps up. Really though, I sort of hope it does. I would love to see a balanced market where there aren’t 5 offers the first day on the market for a loser house and 15 offers the first day for an HGTV worthy house. Simple economics tells us that as long as there are more buyers than sellers, that it will remain a seller’s market. As long as it is at least a balanced market, meaning supply is equal to demand, prices will remain the same.
I listed a manufactured home in a tiny town in northern Scott County on 15 acres last week. I have had it in my pipeline for close to a year so I have been watching the market in the area for a while. Prices have gone up quite a bit, but lately similar properties have all been listed for about $160k.
So we got pictures and put it on for $160k. I fully expected it to sell for a little more since the market value is no longer determined by recent sales. It is determined by how desperate the buyer is.
Turns out they get more desperate every day.
We got 8 offers. 10 actually but two were for a financing type that did not do manufactured homes so we can’t really count those.
One offer was $155k. I always laugh at those buyers and scratch my head. What rock have they been hiding under that they and their realtor don’t know that practically every house in multiple offers goes for at least list price.
Five of the offers had escalation clauses. That is where the buyer pretty much says they will pay so much more than any other offer up to a certain price.
I got one offer for $200k. My mind was blown. No escalation clause. Just a flat $200k.
This gave me the chance to tell the buyer’s agents with the escalation clauses that they might want to up their amount if their buyer really wanted the house.
Fortunately one buyer whose offer had some better secondary terms raised their escalation clause to be $200k. I have seen where people throw out some high number on an escalation clause to get their offer noticed but they have no intention of every going that high. I called that buyer’s agent to confirm they were legitimately willing to go that high. They were. They got the house for $200k. Next step is to convince the appraiser it is worth that.
I have always said a house is gonna sell for what it is worth. I said it when it was a Buyer’s Market. I’m saying it now. Overpricing your house is the surest way to make the process take longer and likely sell for less than it could have. Price it right and buyer’s all rush to see it when it is a new listing, regardless of the market conditions. They are afraid of losing the house if they like it. You want that sense of urgency.
Back in a Buyer’s Market, the goal was to drop the listing on the market at the right price and hope to get multiple offers. It is the same today, only with a few tweaks.
Today the list price is more like when an auctioneer begins the auction with a number low enough that they know they will get that first person to raise their hand. Then the price keeps going up until nobody else raises their hand. The list price is more like a suggestion these days. You still do not want to start off with too high of a list price. I often suggest a list price to sellers. They will tell me how strong the market is and want it to be higher. Then when a house sells for more than the list price, they feel like they left money on the table and undersold it. That is not the case. If you had several buyer’s bidding up your house, that means you got every penny out of it.
What I like to do is examine the most recent comparable sales in the neighborhood. I figure out what the house is worth compared to what other buyer’s have recently paid for houses around my listing. Then I put it on for that price since we know 100% that number will work. The worst thing that could happen is you sell it for full price. Then I drop it on the market late on a Friday. That way everybody sees the listing and starts scheduling showings for the weekend. It is good when buyers see other buyers coming and going. It shows them it is a hot listing and they better decide fast. Once I get one offer, I let all other realtors who have shown it know. You don’t tell them before they show it. You wait until after they have shown it so they don’t assume they won’t get it and cancel the showing. Even if the offer sucks and is not one I can suggest my seller accept, just having one enables me to leverage any other offers up as high as any buyer can go.
I recently put on a listing for $360k. We got 6 offers on it. Five had escalation clauses and we ended up selling it for $384k……and that must be the market value since that is what a ready, willing and able buyer agreed to pay. My seller is a good friend who was very happy with the results. If I had put the house on the market for $384k, do you know what would have happened? Since there was only one buyer willing to pay that much, I probably would have only gotten one offer. It would have been full price or less. I wouldn’t have been able to leverage the terms towards the interest of my sellers without the presence of more than one offer any more than an auctioneer could drive up the price with only one bidder in the room.
A buddy of mine is a realtor in Oklahoma. He posted something on facebook about the market there. Somebody made a comment. He replied to their comment basically saying that a lot of sellers think it is easy to sell their house right now without a realtor, but they need realtors now more than ever to sort through the chaos of getting so many offers.
It got me thinking.
Back when the market was bad and houses were taking forever to sell, I would sometimes have a seller joke that I am making too much money when their house sold immediately.
The public thinks being a realtor is easy money. When it’s a sellers market like it is now, they think they can do the same tasks we do and save the money. But here is the thing, you are really paying a realtor for what they know and to use their knowledge. You are not paying them to just perform tasks. That is why most for sale by owner houses take longer to sell, usually don’t get as many offers, and tend to fall apart more often than those listed by a good realtor……and I will not even get into the quality of pictures that for sale by owner people take, lol.
Even in this market when selling a house is so easy, you need somebody who can tell you which offers are most likely to get to the closing table. There are many variables within an offer besides just the price. Most sellers just think “This buyer is willing to pay the most so let’s go with that one!“
I sold a house this week that I wanted to tell you about.
The buyer is a first time buyer who was sent to me from two separate past clients. She works with a client who has become a friend of mine…..Thanks David! Her mother works with another friend who has used me before too……Thanks Doug! I don’t have this happen often when somebody is asking for realtor references and I get mentioned twice. It always makes me feel twice as good that somebody would take their time to connect two people they care about. Close to 100% of my work is getting referred to new people or people coming back to use me again. That is why I don’t ask for reviews and don’t advertise. I just don’t need to do either to attract new work!
The buyer was going to be in the super tight $150ish market. There is almost nothing ever for sale and when something hits the market, you are competing with cash buying investors who sometimes don’t even look at the house before making an offer. This was going to be a tough one.
Right after I started working with this buyer, I get a text from another client who was wanting to sell their house.
The sellers are past clients who I have thoroughly enjoyed working with several times. They bought a house to rent many years ago and it was time to part with it. The sellers did a lot of work to it themselves and it looked really good. The price point was going to be around $150k, which is very hard to find in the current market.
I just knew this was the house for my buyer. I mean, I had recommended it to the sellers when they bought it so I could certainly recommend it again to my buyer!
I told the sellers what I thought it was worth. I told them that I had somebody that was interested in it. I also told them that they could put the house on the market and possibly get a little more than the price range I thought it would sell within since you never know what a desperate buyer will do in this market. They liked the idea of me managing the entire transaction and keeping it simple, so I showed it to my buyer. Of course she wanted it. It was a gorgeous home in one of the most desirable neighborhoods in her price range.
The buyer is happy she didn’t have to frantically make an immediate decision and that she got a great house. The sellers are happy because they know I am managing the whole transaction and made it so easy for them. A win for everybody.
I seem to be having this happen several times a year now. A seller will tell me they are wanting to sell soon and then shortly afterwards I have a buyer tell me what they want and they describe exactly the house my seller has. Happens the other way too. I will have a buyer tell me what they want and then I will have somebody tell me they are ready to sell the exact house the buyer described. It’s sort of cool when this happens. It makes me feel like I am a small part of a bigger story.