sellers market

Is it a good time to buy?

by John Rice

This is a question I get asked a lot these days. People are worried about a housing crash and they dread the process of finding a home. It is not a fun time to be a buyer for sure!

My response usually is “Today is a better time to be a buyer than tomorrow will be, but it isn’t as good as it was yesterday.” Prices are going up every day between the whole supply/demand thing and inflation. I don’t see an end in sight short of some major economic crisis that creates a lot of unemployment and/or skyrocketing interest rates. (And keep in mind that we DID just have a major unemployment situation in 2020 due to COVID.) Even if either happens, there will be more buyers than sellers since people will simply decide not to move from their current home, which will create an even more out of balance supply/demand situation.

All this is pretty wild compared to 6-7 years ago. Back in 2014 I bought a rental house that had been on the market for more than 6 months. I was the only buyer and I offered much less than the list price and the seller was happy to accept it. I just sold that house for more than twice what I paid for it. Granted I did paint it, put new carpet in the bedrooms and replaced 3-4 windows over all those years.

So, if you are on the fence about entering the market, I say go for it. Sure, you will pay top dollar. You will probably have to bend over backwards to get a seller to even consider your offer. You might lose a few houses along the way. But what is the alternative? Keep renting? With all this inflation we are seeing, your rent is soon going to go up. And it will always keep going up. Meanwhile, the principal and interest part of your mortgage payment will always stay the same. All that can change in your payment is the property taxes and insurance amounts you pay.

A pleasant surprise this morning

by John Rice

Like always, I woke up, made a cup of coffee and checked out the new listings. I saw what prices got reduced, then viewed the pending and sold listings. Pretty routine. Lately it takes about 30 seconds to go through the 15-25 new listings every morning.

Today I woke up to more new listings than I have seen in a while. Many of them were under $200k!

I am really hoping this is the beginning of a new trend. There has been speculation that a lot of sellers were holding off on listing there homes until COVID got under control and they felt okay about letting people in their homes. Today might have been the first day of that.

I am starting to hear from a lot of sellers that it might be a good time to sell their homes. Of course, it has been for a long time. However, when many sellers feel like prices have gotten crazy and decide to cash out, it could mean a shift in the market a little. While I think it will remain a Seller’s Market for quite a long time, I totally welcome a more balanced market. It is good for everybody.

Or it could just be that it is the first big spring day when all the sellers begin to put their homes on the market. Sellers usually need the first couple of warm weekends to spruce up their yards before listing.

We’ll see how the next few weeks pan out. All I know is that it got me excited to think about so many new listings hitting the market!!

2 wrong ways and 1 right way to win in multiple offers

by John Rice

I recently got to experience a part of real estate that I don’t do often. I got to be a seller. In all of my life, I have only been a seller 4 times. I sold the first house we owned a long time ago. I sold two rentals in the past several years. And just this week I sold another rental property.

The first sale of this house fell apart and it came back on the market. Two of the offers I got were from people who had seen it when it was first on the market.

Wrong way #1

I got an offer from somebody who had lost in multiple offers the first time it was on the market. It was the exact same offer with just the dates changed. The buyer’s realtor seemed a little upset that I didn’t take it the first time and was a little snarky in letting me know that I should have accepted it then. Here is the thing. If I didn’t pick your offer the first time when I had other offers, why would I pick it again when I also had other offers. They should have changed some terms to make it more attractive to me. I even told the buyer’s realtor what I didn’t like about the offer.

Wrong way #2

I got a phone call from a realtor who had a couple of questions about it. This realtor asked if I did “Escalation clauses.” I wasn’t totally sure what he meant but I did tell him one of the offers I had in hand did have an escalation clause, so I guess I do them. He then told me how they were not fair to buyers and that he wouldn’t show my house to his buyer. Since I had two other offers in hand, I really didn’t care. He called me later that night and said his buyer wanted to offer $150k for the house that they hadn’t even seen yet. The list price was $130k. Both my offers were $130k and $130,500. If he had submitted an offer earlier, and done the escalation clause he was opposed to, his buyer might have gotten my house for something like $131,500 instead of $150k. He dropped the ball. Instead of riding his high horse about a perceived injustice in the market, he should have shown her my house and written an offer. But no, he lost his client the house and was willing to let her overpay for it.

Right way #1

I get a phone call from a very wise agent. She tells me how her people saw the house the first time it was on the market. They currently live on that side of town and want to stay. That tells me these buyers really want the area. She tells me that they are preapproved with a local lender. Always the best choice. I asked her who she usually recommends for a home inspector. One of the inspectors she mentions is one I personally use when I buy houses. I tell her that and the next thing I know, they have scheduled an inspection with the inspector. So, I am a seller and a realtor. What am I looking for when examining offers? The best terms I can get from a buyer that I feel will mostly likely get the deal done. This agent recognized my concerns and adjusted. In the end, her ability to think about what she could do to get the house for her buyer is what got it.

This is what you need a realtor for. Today’s market is like a traffic jam. You can have a realtor who sits there not moving and complains, a realtor who just stays stuck in the same lane, or one who figures out how to get around obstacles. I feel sorry for the buyers represented by the first two agents.

How to price your house in a Seller’s Market

by John Rice

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.

They need us now more than ever

by John Rice

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!“