Dear Sellers,
How are things? I hope all is well. It’s been such a crazy market, but things are starting to change. So, let’s chat. This is coming from a good place, and it’s based on observations and what I’m hearing from real estate professionals.
THINGS TO KEEP IN MIND ABOUT TODAY’S MARKET:
1) You’ve lost power: The market is still competitive, but it’s not what it was in February. The truth is buyers have gained more power lately. Most agents I talk to say they are easily getting about half as many offers compared to a few months ago. So, instead of getting eight offers, you might only get a few. And if you’re priced too high, you’ll probably get zero offers.
2) Buyers are growing more sensitive: Mortgage rates skyrocketing means affordability has taken a beating. Seriously, buyers are easily paying $500 or more each month to get a mortgage this year compared to last year at the same time. This means buyers are becoming more sensitive to price, condition, and location. In other words, if they are paying top dollar, they are growing pickier about what they buy.
3) Don’t aim for unicorns: Be careful of the idea of a unicorn buyer who is going to swoop in, ignore the comps, and pay top dollar in cash for your home. If that happens, great. Keep in mind only about 15% of sales this year have been all cash in the region. This means 85% of buyers are getting a loan.
4) But Zillow says: Don’t get hung up on what Zillow says your house is worth. The only thing that matters is what real buyers are willing to pay. Nobody gets stuck on a low Zestimate, so why get hung up on a high one?
5) Avoid strongarm moves: “Remove the appraisal contingency, pay me an extra $25,000, and give me your firstborn child.” These things still happen in some price ranges (okay, not the child thing), but the market is starting to see just a little bit more sanity lately. I’ve heard quite a few stories of buyers bailing after the seller countered with a strongarm move that might’ve worked a few months back. In short, buyers are picky about getting into contract AND staying in contract.
6) Sales are old and crusty: Sales tell us what the market used to be like probably 30 to 60 days ago when the properties got into contract. In other words, sales are like historic artifacts that tell us what the market used to be like. In contrast, we see the current temperature of the market with what is happening with listings and pendings. This means it’s key to know the sales, AND gauge any temperature change since.
7) Be ready to negotiate if needed: I am hearing more stories of buyers asking for credits for repairs, concessions, and price reductions. Sometimes sellers feel they’re losing when this happens, but in some situations it’s simply the ticket to selling for top dollar. In short, listen to what buyers are asking for, and help the deal feel good for them too. This isn’t just about you. Don’t be afraid of FHA and VA buyers either.
8) It’s not time to push the price: Look, sellers aren’t entitled to always netting more than recent sales. My advice? Price reasonably and see what the market gives you. There are some situations where you might need to price lower than recent sales too to generate interest. Forget about record-breaking sales or your overpriced neighbor. What is getting into contract right now? That’s the ONLY thing that matters.
9) Tighten up the details: Buyers have become more sensitive about condition, so it can help to address minor cosmetic repairs before you hit the market (if you can). I’ve talked to a number of buyers who feel discouraged about the condition of homes right now for the price, so a good way to stand out is to be sure your property is tight. Buyers notice details, and solving minor issues only helps give them fewer reasons to say NO.
10) Watch for symptoms of softening: Talk to your agent about the temperature and be in tune with signs of softening. As you see stuff like this, let it influence your strategy for pricing and negotiating.
11) Don’t expect to go $100,000 over: A seller got two offers and said, “Let’s hold out for something higher.” I’m not saying to be hasty about accepting offers, but don’t embrace unrealistic expectations. Headlines from the past talked about bidding wars, but right now headlines are starting to say stuff like, “The temperature has changed,” or “It’s still competitive, but it’s not what it was.” On that note, don’t be afraid to reduce the price if needed. You are not giving up value if value wasn’t ever there in the first place.
12) Other: What other advice would you give? Please comment below.
I hope this was helpful.
Sincerely,
Ryan Lundquist
Certified Appraiser / Housing Market Analyst
Sacramento Appraisal Blog
p.s. Thanks for picking up the dog dookie before the appraiser shows up
Be aware of where in your particular market, the line is drawn between financed purchases and cash purchases. Where I live, the line is around $1,000,000. Below that number, interest rates really do matter. When over $1M, it becomes almost all cash offers. Interest rates are not as much a deciding factor.
Thanks. That’s good advice. In my market there is more cash above $1,000,000, but even at luxury price points we still see only about 25% of the market is cash. That’s often surprising when I share that with others, but it’s the truth. So I would say everyone is going to feel the affect of rates. Though to your point, not everyone is going to feel it equally. That is 100% true. Moreover, jumbo rates are actually more favorable right now compared to conventional rates, so there is more advantage at the top… I’m so glad you mentioned this. Thanks.
Hmmmm on the first-born child thing, my parents tried to through me into several deals, they were rejected. Down here in my neck of the woods it is weirder as two cities are still rocking and one is well showing some price issues. Graph showing decline in avg & median sale prices to below January numbers. So something is amiss. My comment to the sellers out there, Don’t panic and for the love of goodness if you have a good agent would you please listen to them. If you don’t have a good agent, what are you doing???? I would recommend to NOT go back and read the newspapers from 7 to 9 months ago, the facts and markets are changing. Not 2008, but folks be reasonable about what you are doing and the position that you take. Unless you want to be listed for sale 4 months from now. Make sure your agent keeps you informed on what is happening in the mortgage market for interest rates especially if you are in the low to mid range of pricing for your area. This market seems to be the ones that are a little more sensitive right now. And if your home is near a new housing tract, make sure you keep tract of what is going on with pricing there as they can be competition. And don’t look at the closed sale prices, find out what the builder is giving away to close the deal. Hearing some interesting things right now as some builders are a little bit of uh oh, we have standing inventory, what is going on. So be careful and watchful. Good news sellers if the market is changing just a tad bit maybe that makes it just a little easier when you go to buy somewhere else. Good luck.
So much good stuff here, Brad. I love your commentary. Our market is actually still moving too. We are not dull by any stretch. I think we are starting to see the effect of higher mortgage rates in the stats though with more listings, fewer offers, and a slight dip in pendings (that might be starting to regulate (we’ll see)). No matter what, it’s not January to March any longer. Very important to recognize that. I totally agree with you though too about staying grounded. Sellers, don’t freak out. And listen to your agent, know the stats, be objective, and be realistic for the market that actually exists.
” Don’t panic and for the love of goodness if you have a good agent would you please listen to them”. – liked
” Be ready to negotiate if needed”. liked
Great advice for sellers to take care of the little repairs when the market gets more competitive. It’s hard for appraisers to see in the comps unless we talk to the market participants, but it’s real.
Thanks Gary. Yeah, this is a real dynamic. We certainly do glean so much perspective from other real estate professionals, buyers, sellers, etc… So much insight is out there. This is really key for appraisers though because there are implications for value. As always, we really need to weigh the comps carefully.
I got an email yesterday from a Folsom builder. They are sitting on a half dozen inventory homes and another dozen due for completion this summer. They are offering interest rate buydowns instead of slashing prices. Last new house starter home I referred a client to took over a year from contract to occupancy. (Jan 2021 to Feb 2022). Of course those new homes start at over 450 per square foot.
Thank you Jim. This is definitely something to keep watching. I appreciate the heads-up.
I remember the 3-2-1 buy downs from the mid 1980’s – ya had to figure the figure this cost to determine the final cash price. Hated using these as sale comparables.
Good point Ed. This is definitely something to keep on the radar for comp selection.
This particular Blog is very well written and needs to be carefully read.
It touches on many of the realities of this changing market.
Mik
Thanks so much Mike. I appreciate it.
Hey Ryan, can I share this on my FB business page? I will give you all your credits where credit is due, I just want some of my sellers/fence sitters to see perspective from a 3rd party. Let me know that it is ok… Many thanks for a great article.
Hi Suzanne. Thank you so much. Please do share the link. I appreciate that, and I am always cool with people sharing links. No need to even ask. On a side note, people do ask how they can share my content, so I have a sharing policy to make things easy. Good luck in creating conversation though. https://sacramentoappraisalblog.com/share/
This is incredible information and really sums up what has been happening lately. I am in the East Bay and this hits our market dead on! Would love to also share this – if you wouldn’t mind… it’s great!
Right on Michele. I appreciate it. I suspect lots of markets around the country can relate. Please do share the link. If you have other ideas about what sharing means, here is my sharing policy. Thanks for the support. And reach out any time. https://sacramentoappraisalblog.com/share/
Thanks for this, Ryan. There are so many great ‘one-liners’ that will stick with our sellers as we get them to understand the current market.
That’s music to my ears. Thank you so much Kelly. I really appreciate the kind words. This is exactly why I wrote the post. I want sellers to get up to speed.
Real Estate is hyper localized. Even in the greater Sacramento Area, there are too many specific local areas in which trends differ. My business is from the East Bay to Yolo counties and the RE market is like the weather, different everywhere with some similarities.
Thanks Dan. Yeah, I agree. I wonder if you think I’m saying something different… Like I say, the market is like a Hot Pocket taken out of the microwave too early. Some spots are blazing hot and others are luke warm. The point is the temperature isn’t the same. To be fair, that’s true in any market. With that said, the temperature overall has changed in the big picture lately, right? To me it’s like seeing the forest and the trees. The big picture view (forest) has changed, but there are many examples of total chaos still (trees (neighborhoods, price ranges, etc…)).
Great article and info! I was speaking about this change at an event last month and the audience was primarily flippers and agents…they were all starting to notice changes. The Bay Area “unicorn: meme is great! The same applies when we are negotiating deals off-market, they always believe in the unicorn investor willing to pay 95% of market for a heavy fixer!
Thanks David. I appreciate hearing. Yeah, belief in unicorns is a real thing. It’s interesting to hear how that shows up in your world too behind the scenes. This is one reason why we have to be so careful to share actual stats. For instance, in a presentation this morning I shared that 12.8% of the market in Sacramento County so far in 2022 has been cash. I think that’s startling because many believe the number is probably 90%. Granted, lots of investors use conventional, so cash isn’t the sole way to track investors. I’m just saying though, there is such a powerful unicorn narrative, and stats can help dismantle some of the belief system. It must be tough to try to work with owners on deals like that. Thanks again.
Love this blog!
Thank you so much.