"Low Ball" Offer in a Seller's Market

In light of the past 2 years of national Real Estate news, the phrase "Seller's Market" may seem out of place to many of us. Understanding how to respond to and win in a market that is leaning toward the seller's advantage is important to both Buyer and the Seller. Having a Seller's Market does not mean that Seller's can have their way and sell homes above market value, but it does mean that given low inventory levels, buyers are going to move faster to buy homes that show well and are priced to market. It also means that buyers are much more likely to get into bidding contests over the homes that they really like and homes are more likely to sell at or near their listing price. Lastly, in a market that is bent toward the seller, buyers find that desirable houses come-on and go-off of the market at a much faster and unpredictable pace.  Here today, gone tonight.

A Seller's Market is usually defined by inventory levels being below approximately 5 months. That means, in this market if no additional homes are put up for sale, every home that is currently for sale should be sold in 5 months. Of course, the inventory of homes is constantly changing. New homes are being listed and existing homes are selling--so some of today's homes will sell fast and some will not sell at all. If it's a Seller's Market--wouldn't all the homes sell? No. Not if they are not priced to market and show well to their comparable market value. But the homes that do show well and are priced right, tend to sell much faster than the annual trends for days on market (DOM). 

So, how do Buyer's take advantage of a Seller's Market? Buyer's who are serious about buying during a Seller's Market must be ready to look aggressively during the week at homes that meet their needs and when they find a home that they connect with--you can't hesitate. Be ready to make an offer before you find the house, so when you find it--you are ready. If it looks right. Feels right. Smells right. Make an offer immediately. The same day if you can. Every hour that you wait to make an offer is an hour that another buyer who saw the home earlier in the day may be negotiating an offer on the same home and beating you to the draw. You may think "Well, if it is meant to be--it will happen." Maybe. But I have seen many buyers express this same sentiment regarding an offer that they missed or under-bid and then for months afterwards regret that they did not get that particular house. Never finding another house that they connected with as much as they did that one. It is the hardest and worst part of my profession. Seeing a buyer regret not getting the home that they really wanted.

The second mistake that Buyers can avoid is presenting an offer that is too low when they know that there are multiple buyers interested in a very interesting property. This is very hard because all we have heard on the news for the past 2 years is how hammered the Real Estate market has been. But when you are looking at a local market that is doing well, is growing, appreciating and has low inventory of well presented homes--you can not expect to make "low ball" or bargain deals. The truth is, a bargain is getting a great home that you love and you connect with emotionally. Paying market value on a home in a market that is going up is not a bad thing. If you wanted to buy cheap Real Estate, let your Realtor know. We all know those communities and those areas--but then you must realize you are buying a home in a much higher risk area. As long as you are willing to take the risks, you can still buy discounted properties.

Real Estate is a business of risks and rewards. Just like the stock market. The low risk investments cost more than the high risk investments. If you are an investor in the game of high risk investments--I have areas in town that we can talk about. If you prefer to invest in areas where the communities are well established and known, just remember that you always pay for what you get.

If you are considering a new home in the Greater Austin-Round Rock MSA, give me a call. Let's Talk. 

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