Whether you are thinking of buying or selling a home in Kamloops, understanding the current market is crucial.
You need to know if you’re in a buyers’ market or a sellers’ market because that’s going to affect how your property is marketed and how much money you’re going to get for your home. If you understand the market, that will tell you what your home is worth and what you can expect if you’re a seller. If you’re a buyer, it is going to tell you what the appropriately priced offer on the property would be.
Currently in Kamloops (July 2018) we are in a seller’s market. In a seller’s market, you’re much better off listing your property at a price that is going to attract as many potential buyers as possible and try to create an environment where they have a “fear of loss” motivation; you should aim to capitalize on that and end up in a situation where you have multiple offers.
Fear of Loss Motivation
Here’s an example of “fear of loss” motivation – also colloquially known as FOMO, Fear of Missing Out.
Let’s say you’re looking at a newspaper ad because you’re shopping for a black Dodge truck. You look at 15 of them – they all have similar mileage, and they’re all around the same price. If you are the person trying to sell a Dodge Dakota in that environment, the best thing to do is to position your Dodge Dakota to look the best and price it 5% cheaper than all the other ones. Then all the buyers will want to come have a look. Everyone will look at your price and then make offers because they don’t want to miss this opportunity to get this amazing deal.
It’s the same with houses. Even though you may think that your house is unique, and beautifully decorated, with all sorts of redeeming features, the reality is that when people are initially looking at the information available on the Internet, they typically don’t know any of that. They will call up their buyer’s agent and ask to see the home based on the first impression they’ve had from the photos.
Your listing agent has to make sure when they list your property that they have a good understanding of the market value of the house, and then position it in a way where it’s going to get the most exposure and the most interest as possible. Then what needs to happen, in this market, is the listing agent needs to maximize exposure.
Some Realtors will say we’re not going to accept any offers until “this date,” and I give two to three weeks for everyone who is potentially interested in it to come and see it.
Price it Right
A lot of people make the mistake of pricing their home too high, thinking it gives them room to negotiate. For example, if a house is worth $500,000 and they price it at $550,000 because they think they can negotiate and end up with $500,000. That’s the worst thing you can do because that’s going to put people off.
The average buyer is not a professional real estate agent, and they’re the ones deciding which properties they want to see based on their online research. If you don’t make your home appear to be a really good deal, you’re going to lose a lot of potential buyers. When they come see your home, then they can find out that it’s got lovely decoration, it’s a great neighbourhood, it’s close to a school, and all the other great features. But until they come and physically see the home, it won’t really be on their list, so you can miss a lot of people. If their search parameters are set at prices under $500,000, your house won’t even show up at all.
Understanding and Expertise
You’re much better off understanding the market, understanding how people buy, and understanding the psychology of buyers and sellers. It’s very important. As a seller, it can make you tens of thousands of dollars, if not hundreds of thousands of dollars, especially in hot markets like Vancouver.
As a buyer, understanding this can save you the same kind of money. Right now, there are a lot of buyers in our local market from Vancouver and they’re working with Realtors from out of our area who maybe don’t understand the local market. If they were using a local agent who knew the market, they would probably be getting better information regarding pricing, neighbourhoods etc. A local agent who knows the market and is working as a full-time agent in the thick of things can save you, or gain you, thousands of dollars.
Preparing to Buy Real Estate in a Sellers Market
Get any pre-approval for financing in order before you do anything else. Make sure there is no need for an offer to be subject to financing. In a buyers market sellers will accept an offer subject to financing, where multiple offers are coming in a buyer without this condition will be preferable to a seller. Beware: If you are approved for $500,000 but the lender does not think that the home is worth that then you could still have a problem so always keep that in mind when making finance free offers and take advice.
2. Create a Plan with Your Realtor
Determine with your realtor what your maximum price is. How flexible you are about move-in dates. Your realtor should know the current conditions well including how much many of the offers have been above the asking prices. You need an experienced realtor who can knowledgeably work fast when you're ready to make an offer, there's no time for extra fiddling around with paperwork and questions when a property you want is being flooded with multiple offers.
Making Offers on Real Estate in a Sellers Market
3. Put Your Best Offer First
If the seller is receiving multiple offers on a listing, the probability of it being sold for more than the asking price is higher, a low-ball offer is a waste of everyone's time in a sellers market. Sellers with multiple offers will select the highest offers for consideration, there is unlikely to be any back-and-forth haggling with lower offers like there often can be during buyers markets. Decide quickly what the most you'd be willing to pay for the property is, and offer that.
4. Go Light on Conditions
When a seller has multiple offers to choose from, the other factor that can weigh in better for one offer over others is how seller-friendly the conditions are. Better yet, don't put any conditions on the purchase unless you're willing to put up a very high offer. Again advice, advice, advice before you jump into a condition free offer.
5. Flexible or Delayed Possession Date
If you make it easier for the seller in any way possible, your offer will hold more sway. Consider offering a flexible, even a delayed possession date to give the seller more time to prepare for their departure from the property.
If a property has remained unsold for some time in a sellers market there may be concerning reasons why. While it may be tempting to snag it, particularly if you've endured numerous failed offers already, there could be real problems or a significant market-value discrepancy that just isn't in your best interests in the longer term. Ask your realtor to look into what the delay is about and consider the potential problems or issues with some caution.
Sellers’ markets don’t last forever so move quickly and decisively to catch the window of opportunity to sell your property before it changes into a balanced market.
2. Don’t delay by over-prepping your home
The best strategy in a buyers’ market is to invest some time and money to beautify your home to make it more attractive than others on the market; however, the best strategy in a sellers market is to get your home into market as soon as possible before the sellers’ market turns into a balanced market. Remember, there is very little competition in a sellers’ market so your place doesn’t have to be perfect – just do quick updates and avoid delays so you don’t miss out.
3. Consider selling now, moving later
In a sellers’ market, you are in the position of power – so feel free to use that power. If you don’t know where you want to move yet, you can customize the sale making it a condition of your listing that buyers must complete the sales transaction quickly so you get your money sooner, but also require them to allow you to rent back on a month-to-month basis until you are ready to move. This is a perfectly acceptable condition in a sellers’ market. You can also ask your Realtor to add a subject clause to you finding a house.
4. Price your home strategically
Kamloops buyers are eager, but not gullible, so you have to be strategic to get the best price. There are actually two strategies in a seller’s market. The first is to price at, or slightly below, fair market value and let buyers get into a bidding war and push up the price in a matter of hours/days. The second is to price 3-4% above fair market value and wait for an offer to come in over a few weeks. You will get to the same price either way. For example, if your realtor says the fair market value is $1M, you can list it at either $999K and get immediate multiple offers that push it to $1.010M or you could list a little higher, say $1.029M, and you will still get offers around $1.010M but it will take longer and it may give you a sense of comfort knowing for sure that you didn’t leave any money on the table.
5. First offer is often the best
We see this time and time again – a buyer comes forward in the first week with a great offer and the seller turns it down thinking he/she will get even better offers, but they don’t materialize. In fact, the sellers often never even get the same offer again. The reason the first offer is often the best is because there is a lot of excitement around brand new listings and buyers will often offer their top price to try and beat out the heavy competition.
6. Greed always backfires
Have you noticed that even in this seller’s market there are some houses that languish on the market. That’s because those sellers set their prices too high. Buyers know the market and they will not be duped into paying too much. Furthermore, once a high-priced house sits on the market for over a month, buyers are not interested anymore. Once the seller finally decides to reduce the price, it’s too late – the damage is done. Buyers say “there must be something wrong with that house because everything else is selling quickly and that place hasn’t sold yet”. At this point, you can’t even get fair market value anymore. It’s a type of crowd mentality – buyers want to buy properties that everybody else wants, and they don’t want homes that nobody else wants. I’ve seen beautiful houses come onto a seller’s market priced too high and then keep reducing their price and end up selling below fair market value simply because of this phenomena.
7. Capitalize on “new-listing excitement”
When a new listing comes on the market, there is a fairly predictable rhythm. In the first week there is usually a lot of excited buyers looking at the property. If the property is reasonably priced they will have end up bidding and raising the price in a multiple offer situation. If there are no offers by end of the first week then you know that your price is somewhere above fair market value and you may not get full asking price. In the second week, the remaining buyers will view the house. If you haven’t received any offers by the end of the month, then you know you are maybe priced too far above fair market value. In the third week if you are "offer-less" your listing will move into a new phase where you will have a few viewings per week from new buyers coming onto the market. If you haven’t received any offers by the end of the sixth or seventh week, you could be heading into dangerous “stale listing” territory. I cannot stress enough the importance of capitalizing on the swarm of buyers and hysteria that will come in the first two weeks of your new listing – be ready with a strategic price and be open to seriously looking at the first offers, which are usually the best.
8. Realtors help you maximize price and minimize risk
Realtors are not smarter than you. But they are trained in real estate law and they know how to generate and manage offers in a way that is strategic, legal, and will get you the highest price. You can be the smartest guy in the room, but if you don’t know the rules then you are at a disadvantage. Realtors know the protocol and how to use it to your advantage.
Markets change, sometimes they work in favour of buyers, sometimes they work in favour of sellers. There are good reasons to buy in either market, but there are different approaches to buying property between the two. An experienced realtor is an especially useful ally to work with when you're buying property in a seller's market where time and sales move so fast. To buy property in a sellers market, you may need to plan and strategize accordingly!