First of all – what exactly is a buyer’s market?
We all know high level what it is – buyers win, sellers lose – at least that seems to be the general perception that we run into.
Whether a market is a seller’s market, buyer’s market or balanced market at any given time, is based on the absorption rate.
The absorption rate is determined by using the current amount of inventory divided by the most recent month’s sales numbers and arriving at how many months it would take to deplete the current listings based on that figure. If it falls well under 6 month’s worth, it’s a seller’s market. If it’s around the 4-6 month mark then generally it’s a balanced market. Over 6 months and we’re looking at a buyer’s market. It’s not that cut and dried, but that’s the gist of it. Now, how can a seller proceed in a buyer’s market when there’s presumably a lot of inventory for a buyer to choose from?
- Be prepared – When you are selling a house in a buyer’s market, you have to separate yourself from the competition. How do you do that? With more choice, a buyer will be able to pick and choose. We recommend preparing your house by de-cluttering, staging, and repairing. That way when a potential buyer comes in, they are seeing the positives of your house and not adding up the charges to make it their happy home.
- Work with a Realtor® you trust – There are a lot of different real estate business models to choose from. But, this is one of your biggest investments. Working with a Realtor® you trust; one who will be open, honest and work hard for you is critical. Like every business, there can be a perception that all Realtors® are the same. This could not be further from the truth. Trust is more important than charisma or fee structure. Ask for references, review their marketing plan, and, most of all ask a lot of questions up front.
- Separate your desired price from your bottom price – With the internet it is easy to look up houses in your neighborhood and try to guess what your home is worth. As well, it is exciting to look at the top of the scale and think of the possibilities – like the Lotto ads. But, if you do not also understand your bottom price, you will not make the best decisions in terms of initial pricing, ongoing pricing trends and the market. You may end up chasing the market.
- Be open for business – In a buyer’s market, there is naturally an imbalance of sellers to buyers. Buyers want to look at all different times. The more prepared and willing you are to showcase your home at a moment’s notice, the more likely the serious buyers will see your home. More restrictions means less opportunity for you to sell.
- Don’t be offended – This is your treasured home. You have put a lot of emotional equity into it. Whether it is your design ideas or personal tastes, remember that buyers do not care. They are looking for their new home and not your old one. So they will nitpick. They will comment on all of the reasons not to choose yours. It is their opinion not yours. However, keep in mind that if you continue to get the same repeated negative feedback it is a sign that maybe you should make some adjustments.
- Be patient – Bottom line – in this type of market, it takes longer to sell. The farther away you are from selling your home at the low end of the market, the longer it may take to sell. What used to take 10 days may now take 20 days to sell. A contract time of 90 days that seemed long, may not be long enough. A week without showings is not unusual. In a buyer’s market there are fewer buyers and it just may take longer to get the right person in.
- Offer to extend – In a buyer’s market it is not uncommon for a home to stay on the market beyond its initial contractual time frame. So now what do you do? Unless you believe your Realtor® has not done enough work to try to sell your home, why would you change now? Your Realtor® has already invested time and money to work with you. No one is any more invested to sell your property than they are. Sometimes, it just needs more time and another review of expectations.
- Insist on bad news and no news – Communication is one of the keys to staying abreast of the market. In a buyer’s market, sometimes the only thing you will hear is bad news and reviews. Or worse, news that nothing happened. That is ok. Sometimes that is what you need to hear. But insist that your Realtor® communicate with you weekly at a minimum and more often if needed. Be willing to hear negative feedback and poor market trends. That way you can respond appropriately. Just don’t accept blatant silence.
- Be willing to negotiate – When that offer finally arrives, first don’t get mad. (And we don’t recommend ‘getting even’ either!) In a buyer’s market it is normal to get lower than hoped for offers. A buyer knows they may be able to obtain a deal. Otherwise it would not be a buyer’s market. However, if they chose your property to take the time to write an offer on it, they are serious buyers. Rely on your Realtor® to review current market data, the validity of the offer and be prepared to counter-offer. Reasonable buyers will expect a counter and be willing to be fair in the context of the current market. They will not however, be likely to over pay, so flexibility is key.
- Don’t panic – Even if you haven’t had a lot of interest, when that offer comes in, do not panic and just accept. Again, listen to your Realtor’s® guidance. You hired them because you trust them, I hope. So if the deal cannot come together because it is not a win-win, do not panic. If one offer came in, there can be more. However-if you’ve had more than one offer and they’re similar in price, there may be a consideration here.
- Be ready to move in a hurry – Part of the flexibility is possession date. In a buyer’s market, people sometimes wait until they have to move before putting an offer in on a house, in a quest for finding the best deal. That means they may be in a hurry to do so and may push for a fast possession time. You may have planned on selling your house in 60 days and have another 60 to find your next home. Lots of time to pack and prepare. The reality is it may take 100 days and the buyer may ask for 45 days. Now you have to find a home, pack and move with less prep time than you anticipated. Be ready.
- Have your financing in place – Because it can go from slow to warp speed when an offer comes in, be sure you are financially prepared for your next home. Talk with your mortgage advisors before you have to, if you are using a mortgage, about porting or bridging. Have your own financial affairs ready to react quickly and it will ease the panic.
- Get your pricing right! – Having made all of these points, a critical step to a sale in a buyer’s market is to get your pricing right. Now is not the time to ‘try out a price’ or you will find yourself chasing the market. When your Realtor® gives you a range of pricing for similar properties, your property should match the price you choose i.e. if you want to choose the top end of the window, your home should look like a show home.
If you price it right…they will come. Got questions? We’re here!