Buyers should adjust their expectations and distinguish between their wants and needs.
Sellers need to determine which aspects of an offer are most important to them.
Listing price and a home’s differentiators are critical factors in attracting buyers.
Despite economic upset and a clear slowdown at the onset of the COVID-19 pandemic, real estate professionals in markets across the country are reporting a big uptick in homebuying activity. Data shows that the nation is experiencing one of the most competitive housing markets in recent history.
Due to low inventories, home prices have been pushed to record highs, and these market conditions are having an undeniable effect on clients looking to purchase or sell a property this year. Coupled with the uncertainty of the year to come, brokers and agents will need to work hard on behalf of their clients to navigate transactions in the weeks and months ahead.
Here are some tips to keep in mind as you advise buyers and sellers amid rising home prices.
Working With Buyers
Adjust expectations: For clients who are determined to purchase a home despite higher prices, expectations may need to be adjusted. Buyers should carefully define the difference between wants and needs, and be willing to sacrifice items on their wish lists that aren’t necessary to daily life (think pools, a specific paint color, larger garage size, etc.). Buyers may also need to look for homes in areas or neighborhoods they hadn’t previously considered to find the home that’s best for their family and budget.
Fewer options: Many homeowners have chosen to stay in their homes longer, leading to a lower inventory of homes available to buyers. If buyers aren’t directly affected by high home prices, they may still be impacted by the limited options on the market.
More renters: Due to both the financial impact of rising home prices and the uncertainty of the market, some potential buyers may further delay purchasing a home until they are able to increase their income, save money, or ensure job security. It’s likely that current renters (especially younger families and individuals) will re-sign leases or stay in the rental market until home prices level off or they are able to save more money—whichever comes first.
Working With Sellers
Increased profits: Higher listing prices lead to higher sales prices, which is definitely a benefit for those looking to sell a home. Some sellers may even hold off on putting their homes on the market in hopes that national average prices will continue on an upward trend.
A different kind of market: Homeownership is out of reach for many people, with an estimated 71% of Americans unable to afford a home purchase. In a balanced market, this might mean that there are fewer offers coming in on any given listing, so sellers would need to prepare for a longer wait. However, with inventories at a historic low in many areas, sellers are finding themselves with multiple offers from the pool of buyers. They will have to decide which factors within those offers are most appealing to them (e.g., quick closing, waived contingencies, offered amount, etc.).
What Rising Home Prices Mean for Real Estate Pros
Listing price is more important than ever: Helping sellers price their homes correctly—especially when compared to similar homes in similar locations—will be crucial for attracting buyers in a challenging market. Agents need to have a deep understanding of their market and research prices regularly. Sellers will turn to an agent to ensure their home is listed at the right price.
Highlighting differentiators is key to attract buyers: The market is competitive, so agents need to help buyers justify the higher price they’re likely to pay. The listing agent should work with sellers to confirm that their homes are ready for potential buyers and call attention to features that will attract buyers in this market. This can make or break the sale. The agent should spend time fine-tuning a listing description to highlight the attributes that make an active listing stand out from the competition, such as space for a home office or outdoor areas for respite.
Encourage buyers to get creative with location: Know your market and have a solid grasp on up-and-coming neighborhoods, new construction, and even less popular areas throughout the area. Buyers may not be able to afford their dream home in their dream location, but maybe you can find them an option that meets both their budget and lifestyle in a neighborhood they hadn’t considered—especially if they work remotely. Buyers will expect you to be the expert when it comes to location.
Understanding market pressures and trends will impact your business for the better and are key for your clients’ success.
Source: REALTOR® Magazine