There is one big hairy question right now that is top of the mind for our clients!
WHAT IN THE WORLD IS HAPPENING IN THE MARKET?
I am going to answer to the best of my ability as I have a front row seat. The local market hit an all-time high in February 2022. It began a slow descent in March and continues to today. Houses that would sell in 24 hours with multiple offers started to sit a week, a month, and now have price reductions. Over the last few weeks, we have seen more listings drop in price than new listings added to the market.
This is a result of multiple factors. Some factors are as you suspect. For example, Russia invaded Ukraine, we saw another wave of Covid surface, interest rates rose (and continue to rise), and material costs and labor costs in the construction industry sky-rocketed. Labor shortages and a labor force that has become difficult to count on created even more challenges for the real estate industry, whether it is unresponsive lenders, realtors too covered up with work, or title companies reeling under the real estate pace from the end of 2021. And so everyone is just grouchy!!
It is like people were already beginning to hold their breath in May and June! Then July hit, and the inflation announcement came out, followed by a determination that we are now in what economists used to call a recession. As a result of all of these factors, we are seeing a thaw. (The good news is that material prices have begun to come back down. Whew!!)
It’s not all terrible, though. July vacations may have caused more upbeat buyers and interest in real estate investment. Properties are still selling. Buyers have begun to realize they can use other lending products like 5 and 7-year ARMs with the low interest rates they were accustomed to. Essentially, they work out the plans and means to pay off their mortgage in that time period. They may also have possible plans to flip it at that juncture. Buyers of cabins are realizing that their cabins still cash flow positive with the new rates, just not quite as much! Of course, they can add a bit more down payment and get it back into the same handsome return.
So what do you do if you’re a seller? If you have a goal to sell, now is the time. No one I know is predicting that we will have a comeback anytime soon. Honestly, you missed the peak to sell, but the good news is property values are still extremely high. Your equity is also still there, so you can check the numbers. Grieve your lost opportunity, accept the changing reality of the situation now, and most importantly – don’t look back. Instead, move on with a good price as you enter this market.
Now is not the time to overprice it! Find out what the market value is today – not 60 days ago, not 30 days ago, not even last week. Pay attention to sold comparisons that are a quarter old. When was the contract taken? That is the vital question. Figure that part out, compare it to what other similar active listings are doing in terms of price adjustment, and then price it right under market value to get the highest value.
Remember, buyers always want to feel like they’re winning when they bid, and right now winning means getting a deal. If you price it above where the market is heading, then your overpriced listing is going to sell everyone else’s. Buyers will look for something below market value, especially if they are financing the property. There will not be problems with appraisals in a descending market, so the security of a “good buy” becomes a factor for buyers who are nervous about world conditions.
If you have a problematic property that has issues, you might need to offer owner financing in order to entice a buyer. This can be a great option and a way to recoup finances. Title attorneys can write up water-tight contracts that will protect your interests if you want to go this route.
Don’t forget to do all the normal “cleaning and staging,” since it is all the more important to present yourself in your best light. I covered some essential steps for this last month, which you can read about here:
With such high demand in the 2021 market, we became sloppy in the last seller’s market. We need to straighten up, dot our i’s, and cross our t’s in order to get top dollar right now.
But most of all, stay positive! Get moving with your goals so you won’t be caught a year from now saying I meant to sell when I could have gotten more. Don’t go it alone! Call us. We can help!
Next month I will answer the question, “what to do if you are a buyer?” Stay tuned…
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