Tips On How to Time The Real Estate Market

Here Are The Tips On How to Time The Real Estate Market.

It’s likely that billionaire real estate tycoons such as Sam Zell, and Santa Barbara’s Tom Barrack would collectively agree that nobody can time the real estate market, not even them. It may leave you wondering: If the pros can’t time the market, how can you?

For starters, you can employ the same techniques that have worked for many who live by the creed: Buy low and sell high. The first step is to determine the type of real estate market that exists in your town.

Although there are many variations and twists, basically real estate investment markets fall into three categories:

Buyer’s Markets

Buyer’s markets exist when there is more inventory, meaning houses for sale, than buyers. Because buyers have many homes to choose from, not every home for sale will sell. Most experts agree that if six months or more of inventory is on the market, it is a buyer’s market. Also note that in buyer’s markets, fewer numbers of buyers will result in fewer sales, which can skew median prices.

Seller’s Markets

Conversely, in seller’s markets, there are more buyers than available inventory. Because there are fewer homes for buyers to choose from, almost every home will sell. Typically, there is much less than six months of inventory in a seller’s market. In extreme seller’s markets, there is less than two months of inventory in reserve.

Neutral Markets

Neutral markets are balanced. Typically, interest rates are affordable, and the number of buyers and sellers in the marketplace is equalized. The scales don’t tip in either direction, meaning the market is normal without experiencing volatile swings. Inventory is generally around four months, give or take. Note that good buys exist in neutral markets, but there are no overall indications that favor buyers over sellers or vice versa.

If you are going to buy a home and can afford to wait for primo conditions, a buyer’s market is it; there is no better timing. Here are a few advantages to buying in a buyer’s market:

Lower Sales Price

Sellers are more willing to wheel and deal because they know or should know that if they refuse to accept your purchase offer, they might not receive another. When fewer homes are selling, prices typically fall.

Buyers Can Command Concessions

Buyers can ask sellers to pay their closing costs, providing their lender will allow the credit. Buyers can also expect sellers will pay for special reports such as pest inspections or roof certifications and a home warranty.

Contingent Offers Are More Acceptable

Sellers are generally more agreeable to accepting a contingent offer that is dependent on the buyer selling the buyer’s existing home. An offer in the hand is better than no offer at all.

Request for Repairs Easily Negotiated

If the home is in need of repairs or updating its systems, sellers will often credit the buyer for the repairs or fix the problem(s) noted by a home inspector.

Buyers Control the Transaction

Buyers can ask for longer inspection periods, extend closing deadlines, and ask for early possession, terms that would be automatically rejected in a seller’s market.

If a buyer has no urgency to buy a home, a seller’s market is not an ideal time to buy. Here are a few disadvantages to buying a home in a seller’s market:

Top Price

Multiple offers are common. Sellers command list price and get it, sometimes more.

No Concessions

Sellers are reluctant to pay any of the buyer’s closing costs or pay for inspections.

Contingent Offers Rarely Happen

The seller doesn’t want to wait for a buyer’s home to sell.

Request for Repairs Are Not Honored

Sellers will typically tell buyers to purchase the home “as is.”

Sellers Control the Transaction

Most sellers will not bend from the original contract, regardless of circumstances, because there are three more buyers around the corner.

If a seller does not need to sell, there could be a downside to putting a home on the market in a buyer’s market. Here are the disadvantages of selling in a buyer’s market:

Lowball Offers

Sellers in soft markets lose equity. Little demand for homes puts pressure on sales prices, causing buyers to make lowball offers.

Buyers Expect Concessions

Buyers will ask sellers to pay for closing costs, thereby lowering the seller’s net proceeds.

Contingent Offers Are Riskier

If a buyer’s home does not sell, neither will the seller’s and by that time, the number of buyers typically dwindles even more.

Buyers Demand Repairs

All those little things sellers have put off repairing will pop up in the home inspection, and buyers expect sellers to fix them.

Sellers Do Not Control the Transaction

Buyers tend to ask for “out” clauses that would let them walk away from the deal all the way to closing.

It is the best time to be a home seller. Here are a few advantages to selling in a seller’s market:

Higher Sales Price

The list-to-sales-price ratios are lower in seller’s markets, meaning sellers command higher prices, sometimes over the list.

Concession Refusals

Sellers refuse to pay buyers’ closing costs, and they often reject offers asking for seller-paid inspections.

Contingent Offers are Rare

Buyers find it easier to sell their homes and realize sellers will not agree to a contingent offer with 10 buyers in the wings.

Buyers Rarely Request Repairs

Buyers still obtain home inspections but forego a request for repairs, accepting the property “as is.”

Sellers Control the Transaction

It’s common for sellers to negotiate shorter inspection periods and to expect buyers to waive certain contingencies such as appraisal or loan contingencies.

VAAL Real Estate was Founded with the aim of reducing the hassle of finding and buying homes. VAAL Real Estate has been successful in developing a brand whose main aim is to change the market by understanding and satisfying the needs of potential and future homeowners.