A couple days ago, we had an office meeting, discussing the low inventory in the market, and Dave, our Designated Broker asked: What would you say to a Seller in this market.
My immediate response was: Don’t get cocky. I got some confused looks from some of the other agents in the meeting, but let me explain:
Yes, this is a SELLER’S MARKET, and if you have half way decent property, you’ll have multiple full price, or above list, offers the first day. And values are up, so you’re probably going to get more for your home than you anticipated. That’s all great……………………but…………….
Where are you going to go?
You’ve got to live somewhere, so, where are you going to go once you sell?
Cause, guess what? Every other Seller in the Valley is in the exact same position you were just in, but now YOU’RE the Buyer. So, whatever extra equity you got out of your sale is going to go right into the pockets of the person you buy from, minus 10% for the costs of your sale.
There’s also a second level to “Don’t Get Cocky”. Remember how I talked about Appraisals in the last blog post? That still applies. So, while you can put your house on the market, and have a stack of offers by the next day, don’t think you’re going to get the 20% over list that someone might offer just to get their foot in the door. Yes, they might be willing to pay that much for your property, and that’s got to make you feel good, but if they can’t get an appraisal for that amount, it’s meaningless. If you’re working with an experienced agent, they should be able to tell you, with a fair degree of accuracy, what your property will appraise for. Taking offers ridiculously over that value, as tempting as it might be, might lead to some serious disappointment. Especially if that buyer has used that over list amount to ask for seller concessions that they need to close the deal, or if you’ve agreed to make repairs or offer credits for BINSR items. Remember, those things affect your net, too.
That brings me to the other thing you really need to scrutinize, the Buyer’s financing.
I’m hearing a lot of rumblings from other agents about deals falling through because the Buyer’s financing falls through at the last moment. I personally think this is a result of all the whizz-bang fancy online mortgage services, that’ll throw an approval letter at anyone with a pulse, but then won’t lend because the buyer was never really credit worthy. Your agent is really going to need to do some due diligence in verifying that the “qualified Buyer” who you just sent you an over-list-price offer, can actually make it to the finish line. Whenever a deal falls though, it costs everyone involved money, and more importantly, valuable time. So you want to make sure you’ve got a buyer who can actually perform. So you’re Listing Agent is going to need to be on the phone, or emailing, the buyer’s Lender, and asking them hard questions.
One of the things that I’m seeing as a result of this trend in not so qualified buyers is Sellers making it a condition of the contract that the Buyer qualifies with their preferred lender. Buyers aren’t required to use that lender, but this lets the Seller know that Buyer really is qualified, and if something goes sideways, offers a “Plan B” to get the deal done. If you’re a Buyer, and you see this, don’t freak. It’s nothing nefarious. In fact, it might save you the heart ache of losing out on a home.
So, if you’re going to sell in this market, some of the same suggestions apply to you as to Buyers:
1) Plan ahead. Where are you going to go when you sell? You’re going to be face with buying in this low inventory, just as your Buyer had to. So all the suggestions I made to Buyers will apply to you.
2) Be cautious. Too Good To Be True usually is. A “Ridiculously” above list offer is just that, ridiculous, and likely to blow up in your face.
3) Stay humble. Yes, your home may have gone up 30% in the last three years. But, so did everyone else’s. And, nationally speaking, the Phoenix market is still lagging behind most of the other major metropolitan areas in the country. So, if you’re going to move to one of those markets, you might find that the extra equity you got from the sale of your property here, won’t match up to the property values there.
As always, if you have questions, comments, or concerns, feel free to contact me Erin@HomeSellerErin.com