Homebuyers have had the advantage for years, especially in hard-hit real estate markets. But recent numbers indicate sellers might be starting to see a resurgence. Some experts have even dared to say that we may be on the verge of a seller's market. Dictionary.com defines a seller's market as: "a market in which more people want to buy than want to sell." With active listing inventory (the number of properties on the market) at 12 month lows and absorption rates in some parts of Manhattan falling way below the 10 year average, many sellers are now gaining the upper hand. However, not everyone has been clued in to this trend. I've found (and continue to hear from my colleagues) that some buyers don't realize or can't accept that the market has changed, especially if you're looking to buy downtown, on the west side, or new construction. Every buyer wants to get a good deal and who could blame you? But, if you don't know the market and aren't prepared, than you may not get the home of your dreams. Here are a few common pitfalls that buyers can avoid:
Sticking With Lowball Offers:
Ridiculously low offers were the norm during the housing bust, but buyers can't get away with them anymore. Buyers and sellers have different definitions of a lowball offer. Sellers think they've been lowballed on offers less than 90 percent of their asking prices, while some buyers say bids of 80 percent to 85 percent of the list price are reasonable. Recent reports show negotiability on a steady decline, highlighting discounts from the original asking price falling this month to 7 percent from 10 percent and 21 percent of properties selling at asking or above.
I recently had the experience of dealing with a buyer who came in with an offer on one of our west side listings at 18 percent under asking and refused to negotiate any further. When I tried to explain the current market conditions, I'm sure he thought it was just a "broker tactic." He walked away from the apartment and two days later we had an accepted offer from an all cash buyer at only 6 percent under the asking price. In this case my sellers were willing to negotiate, despite the lowball offer, but in many cases coming in too low can actually offend the seller and taint negotiations or worse! Cause them to walk away from the table altogether.
Taking Too Long to "Sleep on It":
Agents who tell buyers not to dilly-dally often are accused of being self-serving. But with so few houses available for sale, buyers just don't understand how the market has changed.
According to the National Association of Realtors, the number of homes listed for sale has fallen by more than one-third since the peak in July 2007. New listings are coveted by house hunters frustrated by the lack of choices. Not all homes sell quickly because some sellers are asking for higher than market value or the homes are in poor condition. But properties priced appropriately in desirable neighborhoods tend to go under contract within weeks or days.
Littering the Contract With Contingencies:
The standard real estate contract includes stipulations, such as the buyer qualifying for a mortgage. But with so many all cash buyers and strict credit restrictions, sellers are often reluctant to go with a mortgage contingent offer. Last month we had a bidding war between an all cash and a mortgage contingent offer. The buyer getting a mortgage was offering $75k more, but the seller accepted the lower all cash offer because they knew it was difficult to obtain financing in their particular building.
Failing to Make a Personal Impression on the Seller:
With some homes getting two or more bids, it's not enough to offer a competitive price. Owners will look at other factors to decide which offer to take. Take the time to meet the seller's agent. Strike up a conversation. Ultimately, it's the seller's call on which offer to select, but the listing agent will have input and it doesn't hurt if the agent likes the potential buyer.
Is it really a seller's market out there? Well... It's as close as I've seen in a while and it seems to be the trend. As always, the key to getting the home of your dreams is staying on top of the market. If you have any questions or want more tips for home buyers email toni@elliman.com.