Investopedia.com defines a “seller’s market” as, “A market condition characterized by a shortage of goods available for sale, resulting in pricing power for the seller.” In general, a seller’s market means that more buyers looking for homes exist than homes on the market, in that area or price range. In fact, both price range and area affect which type of market situation you experience. For example, homes priced under $250,000 in Central Florida sell extremely fast, however, if you go up to $400,000 the market shifts and you start to see more homes on the market than buyers shopping for them. As a result, those homes will sit on the market for upwards of 3 months instead of 2 weeks.

Let’s break this down by perspective –

Seller Perspective in a Seller’s Market

As a home owner…… what a great time to sell! A Seller’s Market means as long as you price your property according to what the market suggests, you could end up exceeding your list price. Many sellers can find themselves in a “multiple offer situation”. This gives them the ability to choose the best offer for their situation – which does not always equate to solely money! Sometimes flexibility in various ways wins out over a higher net profit.

The one thing we cannot stress enough however…. A seller’s market does NOT mean you can price your home as high as you would like and someone will buy it. Not the case at all. In order for the property to sell, you must price it according to similar properties in the same area. This is where a CMA comes into play.

 CMA in a seller’s market

A CMA, or a Comparable Market Analysis, gives a detailed report on a subject property and the market around it. Calculated by Real Estate Professionals, we use this report to find the value of any property a client would like to sell or purchase. The value comes in the form of a range a values with a suggested target value. The “suggested value” depends on the current features and upgrades the property has. We recommend using this value as a starting point to help determine the price at which to list the home. The range gives you an idea of what you could sell the property for, provided specific upgrades are completed.

When a seller decides to list their home within the range but higher than the suggested list price, this is what we call “pushing the market”. When done accurately, a CMA gives you an idea of the value the appraiser will find. A CMA completed by a Realtor is NOT an appraisal nor can a Real Estate Professional legally call a CMA an appraisal however, it is the standard for pricing a home to sell and also finding the value to make an offer in the Real Estate Industry.

Read more here about How A Home Appraisal Kills The Deal

How to handle being a Seller in the Seller’s Market

• First and foremost – you should always work with a trusted Real Estate Professional for any Real Estate transaction! We help facilitate the deal and get everyone to the closing table smoothly.
• If still living in the home, you will need to prepare yourself for Realtors to show the property. Real Estate is all about numbers, the more buyers we can show the property to, the more chances there are for offers. We recommend to our clients that are still living in the property they are wanting to sell, to leave for the first weekend to allow access to as many buyers as possible in that first weekend. This is especially true is you are looking for a niche buyer i.e. selling a home in a 55+ community or a cash only sale.
• Know your bottom line. Negotiating can be much easier and go a lot more smoothly if you have an idea of what your absolute bottom line is and what that means for your sale. This is especially true for sellers pushing the market to purchase their next home. Understand if you are pushing the market with price and won’t budge from the top of the range, your home will more than likely sit on the market longer which means dealing with the hassle of showing for longer as well.

Buyer’s Perspective in a Seller’s Market

If you’re a buyer… it’s a great time to buy! While the national interest rate stays relatively low,  the value in most areas continues to increase. At the current rate of value, year over year, the same home could cost you up to $40,000 more to purchase if you wait. So – don’t wait!

Buyers in a seller’s market

One of the main challenges for buyers in this market pertains to multiple offers. Many times a “multiple offer situation” for a seller becomes a “highest and best situation” for the buyers. This means they need to decide what their limit is and make the strongest offer they can. Sometimes the strongest offer is one that is flexible and open to the seller’s needs. Many times this will create a situation where the seller accepts an offer higher than the price they listed for.

Property values in a seller’s market

Now, this doesn’t mean buyers are “overpaying” for property – the property still has to appraise. If it doesn’t appraise for the loan amount the parties will have to renegotiate the terms of the contract. The buyer can choose to pay out of pocket or walk away and get their escrow deposit back. Regardless, it does mean that seller’s are pushing the market and buyers are eating it up. So let’s discuss how to handle being a buyer in a seller’s market.

How to handle being a Buyer in a seller’s market

• Again, hire a trusted and experienced Realtor! This point is even more important from the buyer’s perspective. There are more hurdles to overcome when you purchase a home versus when you sell a home. Also, in case you didn’t know, the sellers pay our commission so you should not go without representation.
• Know what you have to work with. This one seems obvious but time and time again seems to be forgotten. Something small will come up and our buyers will lose the home they wanted because they didn’t think ahead. Sometimes getting into your dream home could mean a monthly mortgage payment just outside of the comfortable budget you set for your family. Perhaps for your dream home closings costs and fees exceed what you budgeted. You will need to come up with just a little more which means dipping into savings you previously said you did not want to touch. These are all possible situations we have seen buyers go through. You need to know your limitations from the beginning. This will help with not only finding the right home but then negotiating when you find it, if need be.
• Don’t be afraid to be aggressive. This one has a few caveats which we will discuss in a moment. However, if you are getting ready to put an offer in on your dream home, be aggressive and make a strong offer based on the  current market in that area and your specific situation.

Difference in Realtors

Any Realtor will do a CMA on a property a client would like to make an offer on. However, a good agent will go a step further and look at the market in the area. They will give you a value for the property and also tell you how long similar properties in the area took to sell. A good agent will look at the sold properties to see if they sold for list price and if not, will look at how close it sold for. Looking at these factors plus the buyer’s specific financial situation is the best way to determine how to make an offer. Remember that you can always back out during the inspection period. Also, because the property will have to appraise for the loan amount, you do not have to worry about getting stuck paying more for a home than it is worth.

Conclusion

We always recommend to work with a trusted and experienced Realtor!! Moreover as a seller, we recommend to price the property accurately, be ready to show to prospective buyers, and know your bottom line. For the buyer we recommend you know what your hard limits are in terms of walking away from a property. You also need to be aggressive with your offer and/ or negotiations if the market suggests to do so.

Understanding the market right now is vital to getting the best deal possible. This is especially true at a time when properties sell at or above market value with inventory dwindling. This is a great time as a seller or a buyer to get into their next dream home. While a seller’s market currently dominates most areas making the process of finding a home a little harder on buyers, sellers are getting top dollar for their homes creating a great situation for most new buyers with values continuing to rise.

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