You may have heard the phrase “Seller’s Market” recently. Here in Spring Hill and various other parts of Middle TN, where the Real Estate market is booming, those words describe the current market extremely well. What does “Seller’s Market” really mean?
To put it simply, a seller’s market or buyer’s market is determined by the local area home values adjusted by supply and demand. In a seller’s market there is a shortage of available housing in an desired area. Those homes have a higher price attached to them because of the shortage of homes and the large number of buyers wanting to live in that area. Buyers will have to pay a higher premium in order to buy into that market area.
What a Seller’s Market doesn’t mean…
A sellers market doesn’t mean that the sellers can ask any price they want for their house. In order for a sale to be successful (unless the buyer is an all cash buyer who doesn’t mind forking over a fortune for an overpriced house) the house must appraise! If the house does not appraise for the necessary amount for the loan to work either the buyer will have to pay more cash for the home, the seller will have to lower the price, or the sale will fall through. Often appraisals are behind the curve of the growth in an area. It is always wise to do some detailed market analysis to determine what the right price is to set for listing your home. A real estate agent can compare the houses in the local market and do what is called a comparative market analysis. Market conditions are the number one factor in determining the price of a home.
What a Seller’s Market does mean for the seller?
The Seller will benefit greatly in the seller’s market as they will be able to attain the highest possible value for the home.
What does a Seller’s Market mean for the buyer?
For the buyer to purchase a home in a seller’s market they will have to pay a premium for the home. It may also mean that items traditionally paid for by the seller may end up being paid for by the buyer. Most everything is negotiable but not as negotiable as in a more balanced market.
The buyer must also understand that they are not the only buyers looking for a home in that market. Often multiple offer situations will occur which are great for the seller but not for the buyer. Achieving a successful offer on a home in a bidding war can be a challenge and is extremely frustrating for the buyer.
How does this affect you?
Whatever type of market you find yourself in the most important thing is that you do your research. Know what the home values are in the area. Look at the closed listings in the last 6 months, look at the days on the market, and talk to your real estate agent about the trends happening in the area. BE INFORMED before you begin. Even if you are 6 months out on listing or buying a home talk to an agent so you know what to expect and can prepare accordingly. If you are a buyer get pre-qualified and get an awesome lender who can close on a home fast. That will give you an advantage over other buyers who may not be as prepared as you!
Send me your questions anytime!