Why do buyers markets benefit buyers?
In a buyers market, there are more homes for sale than there are buyers shopping for homes. This gives buyers the negotiating power, because many listings are competing with each other to get the attention of relatively few buyers. A buyers market is often prompted by low interest rates. Another sign of a buyers market is a having a high percentage of distressed properties available, like foreclosures and short sales.
In contrast, a sellers market happens when the number of listings on the market is limited, so many buyers are competing for fewer homes, and sellers hold the negotiating power.
To determine the state of your local market, you can look at current inventory, talk to your real estate agent.
Expectations when selling a home in a buyers market
While most major metropolitan areas have been sellers markets recently, buyers markets are out there. If you find yourself selling in a buyers market, it’s important to be realistic about how the market will affect both the price you can sell your home for and the amount of time it will take to sell.
In a buyers market, homes generally stay on the market longer, price cuts occur more frequently, and homes are sold for less, relative to their listing price.
Here’s an example using Zillow data from 2018. In July, 18 percent of listings in a typical buyers market had at least one price cut, compared to 16.9 percent of listings in a sellers market. And, in a buyers market, the median number of days a home was on the market (from listing on Zillow to closing) was 73.5 days, compared to 61.6 days in a sellers market.
As mentioned earlier, when inventory is high, there are also a lot of foreclosures and short sales on the market. If you have a well maintained, cared-for home, this can actually benefit you, because your house will look better than the many “sold as-is” homes flooding the market. Remember, other sellers know this too, so you can still expect plenty of competition.
Preparing to sell in a tough market
Selling a home in a buyers market can be an uphill battle, so it’s important to mentally prepare yourself for what can be a stressful process. Make sure you’ll be able to emotionally separate what you love about your home from the feedback you get from buyers, and remind yourself that it’s normal to receive lowball offers in a buyers market.
If and when an offer does come in, do whatever you can to keep the negotiations going, staying open and flexible. Remember to consider the full package. There’s more to selling a home than just the sale price, and entertaining low offers doesn’t make you a desperate seller — it makes you a smart one, as you’re making the most of a cool market. If you don’t have wiggle room on price, consider other concessions you could make to your buyer, including appliances, offering a convenient close date, or waiving contingencies.
If you are selling and buying at the same time — selling your current home in order to buy a new property—you may want to wait to buy your house until after your current house has sold. Buying is easy in a buyers market, so you should be able to find and purchase a new home quickly.
Home selling tips for listing in a buyers market
Sometimes, waiting for market conditions to improve isn’t an option. Here are a few steps to follow to successfully sell your home in a cool buyers market.
Hire an experienced agent
Navigating a tricky local real estate market is infinitely easier with an experienced agent by your side. A great agent can advise you on home updates local buyers love, competitive pricing, successful marketing strategies, and negotiating tactics.
- FSBO alternative: If you’re worried about having to accept a low sale price, you could consider listing your home for sale by owner. You won’t have the expertise of a veteran local agent, but you will cut out the standard 3-percent commission an agent would receive.
- Zillow Offers alternative: Another way to sell your home quickly in a cool market is to sell it directly to Zillow. Through the Zillow Offers program, you can get a cash offer for your home without ever having to list it, and you can close quickly on a timetable that works for you.
Inspect and make repairs
More and more sellers are paying for a home inspection before listing their home so they know ahead of time what challenges they’ll come up against during the negotiation process. With a thorough inspection report in hand, you can make any deal-breaking improvements before listing, and you’ll be able to identify repairs that might necessitate a price reduction.
MAKE THE NECESSARY REPAIRS
- Tackle any major repairs found in your inspection — like a roof, furnace, or water heater — or expect to come down in price later in the process.
- Fix cosmetic items that might keep your home from making a good first impression. Common — and relatively affordable — fixes include painting, repairing window screens, and updating fixtures.
Update your home to attract buyers
Since your home will be competing with other homes in your area for a limited pool of buyers, making the updates that today’s buyers are looking for can really make your home stand out.
While there are some trends that may be more or less popular based on where you live (and your agent is a good resource to identify what buyers in your particular area are in search of), here are a few home features that the majority of recent buyers surveyed by Zillow said were extremely or very important:
- Air conditioning (76 percent)
- Private outdoor space (70 percent)
- En suite master bathroom (62 percent)
- Their preferred style of kitchen (56 percent)
- Energy efficient features (56 percent)
- Smart home capabilities (27 percent)
Maximize marketing tactics
In a buyers market where your home needs to look its absolute best, drawing attention to your home’s most attractive features is more important than ever.
EXTERIOR HOME UPDATES
Your home only gets one first impression with a buyer, and usually it’s the view from the curb. Focus on:
- Landscaping: Tidy up garden beds, plant colorful flowers, mow the lawn, and remove any leaves or debris. Twenty-nine percent of recent sellers said they improved their landscaping before selling.
- Pressure washing: Make sure the driveway, walkway, and sidewalk are neat and clean.
- Painting: Take a critical look at your home’s exterior and see if it needs to be repainted. If not a full paint job, perhaps just a new coat of paint on the shutters, doors, or window frames could freshen things up. Twenty-one percent of recent sellers reported painting the exterior of their homes.
- Decorative flourishes: Budget-friendly updates like new house numbers, upgraded light fixtures, or a new mailbox can show that your home has been well maintained.
INTERIOR HOME UPDATES
According to the Zillow Consumer Housing Trends Report, 79 percent of recent buyers said taking a private tour was extremely or very important to their home-buying decision. And 45 percent said the same of having the home free of the seller’s belongings.
Make sure your home’s interior looks its very best for each and every showing.
- Clean and declutter: Do a deep clean on your house, while also decluttering every room. Remove excess furniture that might be making a room look small, pare down trinkets, and remove personal belongings like photos and keepsakes. And don’t forget about closets and pantries. Sixty-four percent of buyers said that ample storage space was extremely or very important. Consider getting a storage unit and keeping items off-site while your home is on the market.
- Stage the home: In a competitive market, home staging can be an important tool in making your home attractive to buyers. Consider hiring a professional stager to provide their unbiased input and expert recommendations on making each room look its best.
- Wash windows: Make sure that all windows are thoroughly cleaned, both interior and exterior, to let in as much natural light as possible.
ONLINE DETAILS THAT HELP YOU SELL FAST
A whopping 79 percent of recent buyers reported searching for homes on the internet, so having a complete online listing that really shows off your home’s best features is an absolute must.
- Get professional listing photos: Almost half of all recent buyers said that viewing professional pictures was extremely or very important to their home-buying decision. For only a few hundred dollars, a professional real estate photographer can capture your home in a way that makes it really stand out.
- Have a complete listing description: In addition to photos, the listing description that shows up for your house on the MLS and sites like Zillow should be comprehensive, clearly written, and packed with keywords about the features that buyers love the most. Your real estate agent should be able to help you identify the most popular home features locally.
- Add video tours: Virtual tours, video walkthroughs, drone videos, and 3D Home tours are increasingly popular with younger buyers, and millennials now make up 42 percent of all home buyers and 61 percent of all first-time buyers.
How to price a house in a buyers market is especially challenging. You want to price it competitively to attract buyers. Price it a little too high and shoppers won’t visit. Price it a little too low, and it can make you appear desperate and limit how much profit you can turn.
The best way to know how to price your house to sell is to look at comparable homes that have recently sold in your area. Focus on homes that are similar in size, location, and features, and work with your real estate professional to come up with a pricing strategy that works.
With help from your agent, consider which pricing strategy will work best for your home:
- At market value: You aim to price your home at exactly what the market says is fair, which sets you up for a smooth, successful appraisal.
- Below market value: Another strategy in a buyers market is to price your home a little (but not too much!) below market value to attract shoppers.
- Above market value: Usually not your best bet in a buyers market. When you list above market value, not only will you have a hard time attracting buyers, but when you do find a buyer, your home may appraise too low and the deal could fall apart, as lenders won’t finance homes that appraise lower than the sale price.
Avoid stale listings
A stale listing is a listing that has a DOM longer than other comparable homes for sale at the same time.
WHAT IS DOM?
DOM refers to “days on market,” and is a measurement of the number of days between when a home is first listed and when an offer is accepted. In a highly competitive sellers market, the DOM on area homes can be as short as a few days. In a balanced market, it’s likely a few weeks. And, in a buyers market, it can be a few months.
HOW DO I KNOW IF MY LISTING IS STALE?
While the average days on the market varies based on the state of your local real estate market, your listing may be considered stale when most of the other comparable properties have sold, and your home is still available. Another sign is when you experience a significant drop off in online views, tour appointments, and open house attendance.
If your home listing has turned stale, consider removing it.If your schedule and finances allow, consider waiting a few months and relisting your home when market conditions may be more favorable.
OFFER BUYER INCENTIVES
Part of winning the sale in a cool market is understanding the needs of your buyer. Consider sweetening the deal with incentives that speak to common buyer challenges.
- Include add-ons: First-time buyers make up 46 percent of all buyers, so throwing in some extras — like window treatments, lawn equipment, grills, or a home warranty — can make your home really stand out. So, if there’s something in your home that appeals to your buyer and it’s something you’re willing to part with, consider adding it to the negotiations.
- Pay closing costs: In buyers markets, it’s more common for buyers to request (or sellers to offer) to pay some or all of the buyer’s closing costs. This is especially attractive to buyers who may not have a lot of liquid cash available.
- Pay for repairs: If the buyer’s inspection turns up any issues, you can make the negotiating process a little easier by offering to make repairs before closing, or by lowering the price to cover the cost of the repairs.
- Allow rent to own: Offering a rent-to-own agreement — where a future buyer pays monthly rent, a portion of which goes toward an eventual down payment — can be a good way to open the door to potential buyers who may not have the money to buy right now, but might down the road.
- Owner financing: In a seller financing agreement, you accept a larger down payment on the property, but assume the risk of the buyer defaulting, as you’re essentially serving as the lender. This can appeal to buyers who want to avoid high financing fees.
- Pay discount points: When you offer to pay discount points for the buyer, you are essentially giving them money to lock in their interest rate at a lower rate than what they’d be able to get without those extra funds. It’s also called “buying down the rate.” One point costs the equivalent of one percent of the sale price, and it typically helps the buyer lower their interest rate by one-eighth to one-quarter of a percent. This kind of incentive is appealing to borrowers looking to lower their monthly payment and the overall interest paid over the life of the loan. It can also make a mortgage more attainable for people with less-than-perfect credit scores.