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Seller’s market

Market Realities and What to Expect in 2018: Our fast-paced seller’s market is leaving everyone unhappy. None of the parties engaged in a real estate transaction, like the current market. Not the home sellers, not the home buyers, and probably not real estate brokers. Each has its very own valid reasons.

Most home sellers find themselves wondering if they could have sold for more. Most homebuyers worry that they might have paid too much. And real estate brokers see the sales process as exceedingly demanding, enormously complicated, and significantly more fraught with peril than ever before.

 

Caveat emptor – home buyers must be even more aware:

Home buyers must be more diligent when selecting a broker to represent them. Due to limited inventory, locating a home that meets one’s needs and desires has become challenging. Buyers and their brokers must work harder and put in more effort to succeed at closing a transaction.

The challenge of crafting a winning offer has become excessively complicated. Buyers can easily be exposed to extreme risks, especially when represented by inexperienced, over-eager brokers unable to grasp the complexities. This phenomenon can become even more impactful when the brokerage’s business model transfers the client from one broker to another during the buying process.

Some home buyers, blinded by getting a couple of thousand dollars kicked back to them, tend to ignore the risks they expose themselves to, and often end up overpaying in massive amounts due to inadequate representation.

I received a phone call from a broker representing a potential buyer for one of my recent listings. Within the first two minutes of our conversation, she had committed to an offer that would have an escalation clause, inspection, appraisal, and financing contingencies would be waived and earnest money deposit would be non-refundable to the buyer. I listened in utter disbelief and felt deeply sad for this potential buyer. I asked, when did your clients see the house? “They haven’t seen it yet” was the reply.

This approach to obtaining a winning offer cannot only prove catastrophic for buyers; it also creates unnecessary complexities for sellers.

Another recent example; is a client who referred his friend to me. He had made several unsuccessful attempts to get his offer to be accepted. In my initial conversation, it became apparent that even though he had signed several offers, he had no understanding of what an offer was supposed to be all about. He felt a whole lot better and in control after I explained my 9-point buying system.

 

Well-informed Consumers:

Most consumers today are well-informed. They tend to do their research and generally speaking make good decisions. This is significant because it helps alleviate fears that a bubble might be developing.

During our first meeting, I share with all of the new clients that I like to deal with informed consumers. Occasionally, I run into someone who may not be well aware. In those situations, before we start to look at homes, I walk them through a process to help them become better informed. I also extensively use technology and research tools to enable my clients to remain fully informed throughout the process.

 

Nuts & Bolts:

There has been a 17% price increase in home values in King County since last year.

In the more affordable and mid-price ranges, it is still a frenzied market. The luxury segment (more than 1 million) has substantially outpaced last year’s market. Throughout NWMLS, 3,727 single-family homes have sold for more than a million dollars during the first eight months of 2017. 2,456 homes had sold last year, during the same time frame. This jump of nearly 52 percent in the luxury segment of the market is a reliable indicator of what to expect in 2018.

Another significant indicator is a double-digit drop in inventory in 13 of 23 counties, as compared to last year. At the time of writing this article, the inventory is the tightest; just under one month. It was double that last year; just under two months.

Earlier this year, it was not uncommon to see homes that were listed in the $600,000 to $850,000 range sell for about $120,000 to $160,000 higher than the asking price. Almost 30 percent of these sales had low appraisals in the $25,000 to $30,000 range. The consistency of this number is a validation of the assessment outlined above, that some brokers who represent buyers, either due to lack of experience or their business model, throw in the towel too soon and some buyers end up over-paying.

Multiple offers continue to be the norm for homes that have been priced accurately. However, overpriced listings are getting fewer showings and mostly no offers. Well-informed buyers are staying away from overpriced homes. This is evidenced by offer review dates on overpriced listings passing without any activity.

This is a key phenomenon that strengthens the argument against a developing bubble.

* Stats contained in the article were taken from the September 2017 issue of NWReporter, an NWMLS publication.