Dear Sellers,
How are things? I hope all is well. The housing market is so chaotic right now, so I wanted to share some thoughts and advice that I figured might help. This is coming from a good place and it’s based on observations and conversations with the real estate community. I hope this helps.
HousingWire Podcast: By the way, here’s a podcast I did last week with HousingWire to talk about appraisals in a hot market.
THINGS TO KEEP IN MIND ABOUT TODAY’S MARKET:
1) Don’t price for the unicorn: Every area has the idea of unicorn buyers who swoop in to pay way more than anyone else. That’s the dream, but fixating on an outlier buyer can be a huge mistake that means you sit instead of sell. My advice? Price for the market that actually exists and rejoice if you get bid up.
2) Don’t expect cash: Selling to a cash buyer could happen, but how many cash transactions are happening in your area? In Sacramento so many sellers dream of greenbacks, but only 14.4% of all sales have been cash this year. Remember, the vast bulk of the market is financed, so buyers using financing CAN get it done.
3) Be realistic about timelines: Nearly every real estate vendor is slammed, so if you counter the buyer, be realistic about longer turn-times. You don’t want to be like, “You have 8 days to get everything done” when that might not be enough time (especially for the appraisal).
4) Be careful of greed: The obvious goal is to net as much money as possible, but helping a deal also feel like a win for the buyer can help a transaction close. Yes, buyers are willing to pay more today, but they also want to feel like they’re paying a mostly reasonable price without being taken advantage of.
5) Apples and oranges: Pricing an apple according to an orange is a classic real estate mistake. Too many sellers want to price based on a sale or listing that is superior in quality, condition, location, or some other feature. Here’s the strategy. Price according to similar homes – not dissimilar ones.
6) The Zestimate: Um, yeah, don’t get distracted by Zillow’s value.
7) Get inspections first: This might seem odd, but many real estate agents in today’s market actually recommend getting a home inspection and pest inspection up front so buyers can know exactly what is going on with the house before making an offer (this can at times help buyers remove the appraisal contingency too). Not everyone agrees with this strategy and it won’t be relevant in every market, but it’s something to maybe talk about with your agent.
8) Know if the market slows: At this time of year we usually start to see seasonal slowing, so as you list in coming weeks and months be realistic about the market if it does change. Look, right now things are ultra hot and the verdict is still out on what type of season we’ll have for the summer and fall. It usually softens, but we’ll see what happens this year. All I’m saying is the temptation is to price according to the hottest moments from a few months ago, but if you’re late to the spring party be sure to price according to however the market feels at the moment.
9) Listen to lower offers: I talked with a seller recently who had four offers and wanted to hold out for something higher. Look, if buyers are coming in lower, it’s time to listen to the market. Don’t get so infatuated with hot headlines that you aren’t listening to actual buyers trying to purchase your home. And if you’re not getting any offers, maybe the market is trying to say something…
10) Expose yourself: Okay, keep your clothes on, but be sure your home gets adequate exposure to buyers. Honestly, you really only need a weekend in today’s market. I’m just saying you may not want to sell within the first few hours. Having at least a few days gives more buyers a chance and it’s actually helpful for those who offered to have a little bit of space to be sure they don’t have remorse about offering.
11) Other: Real estate professionals, what other advice would you give? Please comment below. Thanks to so many real estate friends who shared bits of wisdom on Instagram and Facebook too for this post.
I hope this was helpful.
Sincerely,
Ryan Lundquist
Certified Appraiser / Housing Market Analyst
Sacramento Appraisal Blog
p.s. Thanks for picking up the dog crap before the appraiser shows up
———————————————–
If you liked this post, subscribe by email (or RSS). Thanks for being here.
Sellers-do not act surprised when the appraised value falls short of the contract price-you knew it was a crazy high offer. And also do not be shocked when your transaction falls apart. Granted, half of the transactions are getting appraisal waivers and for the other half- buyers are waiving all contingencies, including appraisal. Be careful of which offer you accept. Pigs get fat, hogs get slaughtered. And yes-as always, pick up the dog poop before the appraiser shows up. Stepping in your dogs dookie is a 3-5% reduction in appraised value. Pick it up and put the Zestimate in the same receptacle-they both stink.
This was gold. Haha. Thanks Mark. I really appreciate it.
LOL Mark! I’m glad you told me because I always thought the dog dookie adjustment was 10-15%.
Yeah, I appreciate Mark bringing us all up to speed here…
Mark I was going to use the same phrase-pigs get fat and hogs get slaughtered. I tell my sellers that.
Hahaha. Good one!
My famous quote to sellers “The market is talking to us“!
Yes!! I love it Edgar. The market is speaking. Are you listening? That isn’t always easy to do, but it’s so necessary.
Ryan, sage advice! I always appreciate your keen insights and for always speaking the truth. By the way, I listened to the HW podcast you were on. Excellent job my friend! Thanks for all you do!
Thanks so much for the kind words Jamie. I really appreciate it. The podcast was fun. 100% off the cuff (which is always my preference). Hope you are well. One of these days I hope our paths cross in person again.
We are doing good. We’re fully vaccinated which feels good. I’m looking forward to visiting in person again as well. My wife and I have to just figure our when.?
Right on. That’s great to hear. My household is just about to that fully vaccinated threshold. It feels good to see a little bit more normalcy returning to life. A pandemic better not happen next year…. That’s all I’m saying. 🙂
Is there a regional variance in dog poop adjustments?
Great job as always Ryan. Love the unicorn picture.
Well, and does it vary by dog type too? Big questions here Joe. 🙂 Thanks.
Nice post, really great advice. Thanks!
Thank you so much.
Thanks for the great insight Ryan. I like the idea of having the inspections done up front I know the seller will need to pay for them. However, this lets the buyer know everything there is to know about the home and you don’t need to negotiate a second time with the buyer. In the long run I believe you will get your inspection money back plus more. I would be curious what others think.
Just remember KARMA is a Bitch you might be a seller today and a buyer tomorrow!!!
Thanks again Ryan
Thanks John. Yeah, I was taken aback by how many agents are recommending inspections as such. I get it though to help buyers make informed decisions and maybe increase the strength of offers. I’ll be curious to see if this has staying power as the market changes over time. For now I really understand the dynamic though.
And amen to your last line. 🙂
This entire chain just made my day…better to scoop the poop than have a dump in the market by not scooping or listening. And the quotable quote of the day for my take away is “pigs get fat, hogs get slaughtered” – epic!! Thank you all – I’ve been giggling the whole way through.
Haha. I know. Too good. Thanks Michele.
Always spot on Ryan! Thanks for putting it together so well!
I appreciate the kind words. Thank you so much DeeDee.
If the market determines “value”, are we saying the “unicorn” pricing is OUR element to force downward? I’m not a principal. I do what my principal says [if it’s legal and non-fattening]. I show them the data. More I cannot do.
All I know is the commentary for that point came after talking with a seller who was wondering why a Bay Area buyer hadn’t bought the house yet. The idea was someone from out of town should have swooped in to pay more by now… Sigh. Sometimes buyers overpay, but aspirational pricing is often a glaring mistake.
Sellers, please be prepared to be reasonable when buyers request repairs after inspections. Buyers are paying premium prices now, and while they still shouldn’t nitpick, but except in the case of major fixers, they want any significant condition issues to be corrected prior to close of escrow.
Yeah, and some repairs are going to need to be done. Only 14% of the market is cash right now, which means about 86% of the entire market is being financed. This means lenders are going to require certain repairs, so it really might not be possible to get away without doing certain things. So your idea of being reasonable is key. It’s important to be in touch with the market that actually exists.
I agree John. I always recommed up front inspections to my clients and my agents. Up front inspections reduce surprises during escrow and keep deals together that otherwise may fall apart. The buyer can be made aware of potential issues and can make their offer accordingly. It is a small investment for piece of mind.
Thanks Erin. Seems very reasonable – especially for today’s market.
100%
Thanks, Ryan, for your valuable insight. We certainly are in a wild ride right now and your advice is spot on.
Thanks Gail. Yep, wild ride is the perfect phrase.
Quick question, for some laughs – if you get a degree in poop scooping, could be called ‘Dookie-hauser’?
Haha. Thanks Jeff. The funny thing is my kids wouldn’t even get that joke. 🙂
Hi Ryan!
Sellers – Don’t be surprised if the buyers (who paid way over-asking for your home), now feels a right to ask for a lot on the Request for Repairs. Start thinking about what you are willing to do and how flexible you are going to be…and remember…they DID pay way over asking for your home!
That’s so good Paula. What an important consideration to keep in perspective also. It’s not always easy for sellers to stay grounded in this reality, but it’s crucial.
You had me at Unicorn Buyer! Great info, Ryan. Thank you!
Thanks so much. 🙂
1- With covid ending more confidence from sellers who didn’t want people potential sick going thru their homes means much more inventory coming soon = healthier competition and lowering of prices.
2- Mortgage and rental moratorium coming to a end = many foreclosures hitting the market, along with taxes that need to be paid.
3- Money printed and handed out like candy in the trillions will force interest rates to rise no matter what the fed says.. = a major cool off within the RE market.
4- Listen to the big guys like Ken McElroy, Jeremy Grantham who predict prices will crash, not in a few years but very soon! Grantham says it will rival 1929 (scary)!
Thank you Bob. These are all things to watch. I’m anxious to see what the market feels like when we do start to feel normal about life. At this time of year we start to see new listings somewhat crest for the year, so it’ll be interesting to see if we get some sellers come out of the woodwork so to speak.
I’m not familiar with those names, but I do know lots of people are getting clicks for sensational predictions. Whenever someone predicts the market I like to ask these questions: When is it going to change? What will cause the change? And how severe will the change be? I find many real estate “prophets” are vague and keep punting their predictions down the road until they presumably come true. I’m always open to hear somebody’s take of course. I guess I’m just bearish on sensational predictions without specificity. It sounds like your sources are being specific though, so I think that’s a good thing so we can weigh their prophecy skills.
Thanks for the comment. I don’t mean to sound anal. It’s just all year long I’ve heard of people with huge predictions and so far nobody has been right. And of course nobody predicted the market we’re in right now…
There is Buyer Fatigue … many dont want to get BEAT one more time. This means that fewers buyers are writing offers if they hear yiu already have 5 offers on the table
Thanks Ida. There is definitely some fatigue happening out there. Though I’ll be curious to see the stats over time and what they represent for all buyers. My sense is for now we are seeing most buyers still engaged, though like you said there are absolutely cases of fatigue. So far in my market I’m noting about twice as many offers as normal and sales volume has been up for 11 months in a row.
I recently had a tidewater situation for my VA buyer, who was in contract $40K above list. We knew market value was loser to $20K above and I supported it with comps to the appraiser, telling him we knew it wouldn’t appraise at contract price. Appraisal came in at $505,000 as expected and buyer went out of pocket $20K.In this market, I always disclose to buyers where the comps are at and how much they realistically will pay out of pocket, before writing the offer.
Nice job Karen. It’s so important to be realistic in this market. I appreciate your commentary.