Price Reductions in a "Seller's Market"
Prepared by Barbara Sim, Mortgage Loan Officer, NMLS #755989, Inlanta Mortgage, Inc.
When I am out meeting with REALTORS®, many times I am told that they don’t really work with Lenders, as they focus their business on listings. That’s a great position to be in, especially since recently it has been a “seller’s market”. But you have a responsibility to your seller to see that their home closes in the time frame dictated by the purchase contract and to understand the type of financing that the buyer may be using in case there are any requirements on the seller side (which often there are).
An issue that concerns everyone is a property that has been over-priced being able to appraise. When a listing agent calls me and tells me they are concerned about the appraisal, I have to wonder what comps were used in the listing/offer and who was in control of setting the price – the seller or the seller with guidance from their agent?
Last week, in a report from Zillow, it was revealed that there has been a rash of price reductions across the country. According to the report:
What does this mean? It does not mean that home values are depreciating. Truth be told, a seller may put a home worth $300,000 on the market for $325,000 hoping a bidding war will occur and a buyer will pay more than its actual value. That has happened often over the last few years. If the seller gets no offers and reduces the price to $300,000, it doesn’t mean the home dropped in value. It is still worth $300,000. It was never worth $325,000.
This does mean that sellers should be more conservative/realistic when it comes to the price at which they list their home.
Sellers have been listing their homes at inflated prices hoping a super-hot market will deliver a buyer willing to pay virtually any price to ensure they don’t lose the house. That strategy has worked somewhat successfully over the last two years. However, the time that strategy would have worked may have passed. There is a growing number of buyers coming into the market and they are going to be more selective on the home they chose.
Where does this leave us?
Prices are not depreciating. However, if you want to sell your listing quickly and with the least amount of hassles, pricing it correctly from the beginning makes the most sense. Be familiar with the lender that is doing the financing for your listing. Feel free to reach out and talk with them about the buyer’s qualifications. That might make the difference in which contract your seller accepts. Most reputable lenders are happy to talk to listing agents to help get their buyers into the home of their dreams. ‘While we cannot disclose all of the information, it helps to know how far into the application process the buyer is, how serious is this buyer and the likelihood of getting to the closing table in the time frame written on the contract.
Always feel free to reach out to me on any questions you may have!