Estate and mortgageMistakes Sellers Make In Sellers" Markets
Procrastinating home sellers who don"t list their home soon after getting wind of record-level sales, multiple offers, and high bids that define a hot seller"s market, could be left twisting in that very same wind.
In a matter of months, Silicon Valley"s real estate market changed from a buyers" market to a sellers" market and it could just as quickly blow back in the other direction.
"Mistakes sellers make? Waiting too long is a big one. The caveat is not to take too long to prepare or you might miss this market," said Janet Houde, president of the Santa Clara County Association of Realtors.
As recently as October last year, reports of Silicon Valley"s housing market came with falling values and homes that wouldn"t sell.
That"s changed and what"s good for sellers in Silicon Valley"s hot market can be good for sellers in any hot market.
With inventories so low and demand so high the median price of detached single-family homes sold in Santa Clara County (Silicon Valley) is expected to break the $600,000 barrier by March and sales could reach a record 2,000 a month. Most homes in the area sell at or above the list price and the DOI is at 30 days and falling. DOI is a theoretical number indicating how long the current inventory of homes would last at the current rate of sales if no new homes came on the market.
"Most of the country talks about months of unsold inventory. Santa Clara County talks about days," said Richard Calhoun, broker owner of Creekside Realty in San Jose. Calhoun also publishes the Bay Area Real Estate Market Newsletter, a statistical look at housing markets in five northern California counties, including Santa Clara County.
Linda Boyd, a real estate agent with John V. Pinto & Associates-Realty World in San Jose says right now there"s a "feeding frenzy" as pent-up buyer demand out paces the inventory. Consumer confidence apparently has won out over relatively high unemployment and limited job opportunities, but that could change in the coming months.
"The further we go into the spring and summer, the inventory will build up. Sellers should not wait because the more inventory that comes on that is going to keep prices from going out of bounds. From the end of January to the first of April is when it"s really a perfect time to sell because the inventory is not built up yet and even the new construction doesn"t help," said Boyd.
Boyd also said inventory at the entry-level, low end is particularly hard hit, pushing up the price of 1,200-square-foot, two-bedroom two-bath 20-year old condos in downtown San Jose -- one of the area"s least expensive markets -- to more than $325,000.
"We are in dire need of properties in the $275,000 range and every condo in that price range that comes on the market will have multiple offers on the first day. I could sell five tomorrow if I had them," said Boyd.
Calhoun, to the contrary, says waiting to put your home on the market right now could pay off because all indications are that prices have only just begun to rise.
"If you are moving up and buying as soon as possible, selling your existing home later might be better. If properties prices are increasing 1 percent a week and it cost the seller 0.20 percent per week to hold a vacant property, the seller is making 0.8 percent per week. Knowing what the market is doing is important to get the most out of it," said Calhoun.
Agents say procrastinating too long, solely to find the peak of the market, often doesn"t pay off because there"s no way to know when the market peaks until it starts falling.
Sellers in a seller"s market also often get greedy and attempt to push the market with an overpriced home.
"My personal opinion is that sellers should price toward the high end of the price range for the product they have, but not above the range. A home priced above the range gets fewer showings therefore less bidding, which is where prices get driven up," said Houde.
Other agents lean the other way and price their homes toward the low end to generate bids that will drive the property"s price up.
"Those priced at or just below the market price will sell in a few days. If they get greedy and price it too high it may not sell," said Boyd.
Agents generally agree that adding curb appeal and sprucing up a home by cleaning, removing clutter, painting, landscaping and updating fixtures, windows, doors and performing other cosmetic touches, puts your home in the best light at a nominal cost for a big pay off.
Generic improvements that enhance your home"s functionality, efficiency and aesthetics -- all to give it a more contemporary feel -- also means completing deferred maintenance and making sure all the components are in good working condition.
"Even with competitive bidding, the house that shows the best will get the highest price. Sellers should do the same things we advise them to do in other markets," said Houde.
Agents in sellers" markets also advise:
Use the multiple listing service for maximum exposure.
"The biggest mistake is to not properly expose the property to the market," said Calhoun.
Keep buyers" agents competitive. Don"t reduce their commission to increase your take home.
"If a buyer goes out and finds three properties that they are interested in and these properties offer a $500 commission, a 2.5 percent commission and a 3.0 percent commission, what property would any human being push and which property would they avoid? The lower the compensation the less motivated the buyer"s agent is. If a seller wants to reduce their cost, the seller should make the reduction on the agent representing the seller and not touch the buyer"s agent"s compensation," said Calhoun.
Instead of accepting back-up offers, be prepared to return to market for a higher price.
"In a backup situation, the buyer can continue to search for another property without obligation. If that buyer is still available when the first sale fails you can still bring them back into the picture. As a buyer"s agent, I love the backup position. It gives me all options," said Houde.
Manage multiple offers fairly, don"t jump at the first over-list bid and keep your options open.
"Don"t accept the first offer on the first day, but don"t wait too long either. This is the same regardless of a hot or cold market. If homes have increased 10 percent and the seller prices based on comparables and takes the first offer, the seller misses 10 percent. However, if the property is exposed to the market, the buyers will bid up to that 10 percent increase," said Calhoun.
Look for mortgage-approved buyers who have the cash to prove they are ready to buy.
"If a seller gets multiple offers, the highest price is not necessarily the most important item. Down payment, appraisal contingency, the buyers" motivation to buy, are all important. Also, sellers that want no inspection contingencies are exposing themselves to unnecessary legal exposure. Even if the seller gets reports that buyer should be encouraged to get their own," Calhoun added.