The Market Is Changing… Sellers Just Don’t Know It Yet

Certified Mortgage Advisor
NMLS 1701021
Published 
July 8, 2022

Clueless buyers in a market that keeps on evolving

The housing market is changing and sellers just don't quite get it yet. But as a home buyer, you are beginning to get more leverage going into the rest of the year and this upcoming year. So welcome to this week's Reddit recap, where I take a look at what home buyers are talking about online and see if I can add some insight to it.

The Reddit post

So I saw this Reddit post that was really interesting because I think this is what you're going to be seeing a lot more of if you're putting in offers in the next few months on a home that you're looking at. So they said, how common is this during the offer process? My husband and I put our first offer on a house this week, since we're new to this, we're not sure how common the situation is.

We put an offer in on Sunday. Our agent said it was a strong offer due to a few things we added to the offer. We heard back from the seller's agent, 48 hours later. He basically told our realtor that they had one other strong offer. And the seller is hoping for an offer, which contains an appraisal gap coverage.

We decided to put in a new updated offer on Tuesday evening with a $5,000 appraisal gap which they said was reasonable for the house. The next day, our realtor reached out to the seller's realtor to check in but did not hear back until the following day. Here's a portion of what she told me. So I've been continuing to try to follow up with the agent.

I finally connected with him. He's very clearly trying to draw other offers which aren't only rude but makes for a likely difficult process. My recommendation would be for us to establish an answer time today, or we'll pull your offer. He doesn't appreciate it, and he's trying to leverage your offer to get other ones. It's completely up to you guys.

If you wanna wait it out and hope that he isn't successful, my recommendation would be to give them until three. To give a solid answer. And then they go on to explain just a little bit more about how common is this.

The significance of 24 hours

So when you do put in on an offer on a home, it's going to have an expiration date. What's very common is to put in 24 hours. So you say, I want to buy your home for $300,000. I need to hear back from you within the next day. What's more generous is doing something like 48 hours. So the seller can respond and they can either reject your offer. They can accept it, or they can counter your offer.

And they can, they might come back and say, we'll take this deal 4, 3, 10, or we'll take it at 300 and we need the closing date to be this. Or we need credits to be this. They can change the terms of the offer or they can accept it. But you put an expiration date on that and you need to hear back from the seller.

Why do we need to put an expiration?

The reason why you do this as a buyer is that this isn't the only house that you're likely looking at. You need to add some time pressure for the seller to come back and make a decision. It's not just, here's my offer. Go sit on it for a week because you need to move the deal forward and apply some pressure on the seller.

Unfortunately, with the way that the market has been, where we've been in a really strong seller's market over the past couple of years. And that's where the sellers have the leverage.

There's not as much inventory

Inventory just means how many houses are available. So the sellers have control of the market. They got to dictate a lot of prices and the terms of the deal. So basically they would choose the best, most competitive offers. However, the market's shifting, and we're seeing homes being listed on the NMLS for a longer period of time. We're seeing more price reductions as well.

This happens when news lags behind

As things change, they shift into a more balanced market and then potentially into a buyer's market where you as a buyer have more control to dictate the price that you want and the terms that you want as well. The issue here is a lot of sellers are running off of information. That was still more accurate three months ago.

And it takes a few months for sellers to kind of catch up to the reality of the situation, because the news that you're hearing about the market lags behind what's actually happening day to day. Just a little bit, unless you're hearing it directly from a realtor or, you know, someone who's actually in the market if you're just hearing it from new sources that information's likely lagging behind, just a little bit.

So sellers are in this position where they feel like they're on top of the world and they can sell for whatever they want. They can ignore your expiration date on a contract and just wait out other offers and act like your offer just doesn't really have as much weight as it should.

Moving to a more balance market

So you as a buyer are now in a position where you get to start. Moving weight around a little bit. Unfortunately, we were in a market whereas as a buyer, you kind of were at the will of the seller. Now we're starting to move into a territory where things are becoming more balanced. Not every market is like this, yet. Some of those more competitive markets are still very competitive, but a lot of smaller markets, a lot of less busy markets are moving more into a balanced market and we might see them move more into a buyer's market. In the coming months.

No need to fear, stick to your offer

So since this is the case, do not be afraid to make a stand about what your offer is. This probably isn't the market to come in super low. We don't wanna come into a $300,000 home with like 250 or that's probably not going to help you win the deal, but we're moving into a market where you now get to be a little bit stronger about things like, Hey, we are going to propose an expiration for 48 hours.

And if you don't respond, we're moving on. We're not playing this game where you get to dictate the terms, just because you thought that's what the market is like. That was the market three months ago. And that isn't the market now. Don't be afraid to do this and work with a realtor who can help you figure out what's going to be the best thing for your market. Again, not every market is going to be like this. As we see markets kind of catching up to balancing a little bit more.

What is supply?

But if we take a look at supply inventory houses on the market, it's all the same thing. Just different words for it is basically telling us how many months of inventory, or houses exist to satisfy all of the buyers on the market.

If we take a look at the past couple of years, starting in January of 2019, we can see when we kind of hit the very beginning of COVID how this supply dropped drastically, this is really a heavy seller's market. Anything between five to seven months of supply tends to be balanced. Anything lower than five, we would call a seller's market.

Anything higher than seven, we're gonna call a buyer's market so we can see a super heavy seller's market. This is also when prices started increasing. As things have been changing, we can see where started moving, more balanced, and dropped down a little bit more. And now inventory is up higher eight months, and then just recently came back down to 7.7. So we're in that spot where nationally people are gaining more leverage as they're looking.

Know that you have a leverage, no need more fear

So all this to say, just as a recap, this, unfortunately, was common and still is common. But things are changing. You're beginning to have more leverage. And so don't be afraid to come in with your offers if you have the luxury to do so to start making a little bit stronger offers that are more in your favor.

Home and Money

If you'd like to connect with a real estate agent who can help you take that next step, I partnered with Home and Money. You can go and check it. They've worked with thousands of home buyers to take the next step into getting into their homes and they can help you too. Again, you can go to Home and Money.

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