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Tips for Selling or Buying a Home in Shifting Markets

Planning on buying a home? Thinking of selling a home? Timing is key to everything from getting a good price to closing a deal. 

By Karen Lynch | American Express Credit Intel Freelance Contributor

6 Min Read | August 13, 2020 in Life

 

At-A-Glance

A buyer’s market and seller’s market work very differently in real estate.

At stake is everything from the number of houses on the market to the range of prices and speed of sales.

When buying or selling a home, it’s a good idea to study current market conditions and be prepared to act on them.

Maybe timing isn’t everything when you’re buying a home or selling one, but it comes awfully close. Your probability of success in the housing market can lie in the answers to two important timing questions:

  • When are you buying or selling a home – during a buyer’s or seller’s market? The first rewards buyers with lower prices, and the second delivers higher prices to sellers.
  • How quickly can you make a deal? If you’re buying a home and aren’t well prepared, other bidders may land the home you had your eyes on. If you’re selling a home and aren’t ready to close fast, you might watch your home’s value drop as time passes.

 

Is This a Good Time to Buy or Sell a Home?

In the wake of the 2020 economic downturn, you might have expected a buyer’s market in real estate – lots of homes for sale but few buyers. After all, that’s what happened after the Great Recession of 2008. 

 

This time, however, many parts of the country have been experiencing a seller’s market – few homes for sale but many buyers. In these local housing markets, bidding wars have been breaking out among buyers vying for the same properties. Houses have closed fast, buyers have paid more or dropped out of the bidding, and sellers have reaped the rewards. 

 

Why the difference?

 

National Housing Trends Differ Over Time

At a national level, each economic cycle is different. The Great Recession actually came about when a bubble in the hyperinflated housing market burst, driving prices down an average of 33% nationwide.1 This episode is freshest in people’s minds. However, the housing market has performed relatively well in all other economic downturns since 1980, real estate experts say.2  

 

Several factors have shaped today’s national housing market, where the number of properties for sale had already been falling in recent years. Among them, health-related limitations on home showings and sellers’ economic uncertainties further reduced the supply of houses on the market. At the same time, historically low mortgage rates, health concerns, and an increase in remote working were driving demand. The result: In April 2020 the median price for an existing home was up 7.4% over April 2019, with condo prices up 7.1% in the same period. Over half of the homes sold in April of this year were on the market for less than a month.3

 

Local Housing Trends Differ from Place to Place

But national trends don’t tell the whole story. The housing market can vary from region to region – and within regions. As one real estate expert described it, there are “thousands of micro-markets, all in different phases of growth or decline.”4

 

For example, real estate analysts have attributed some of the current housing demand to remote workers upgrading from urban apartments into suburban single-family homes. This has shifted the balance between buyer’s and seller’s markets in some metropolitan areas. 

 

How can you tell what’s happening in your local market? One way is to dig into local news coverage and other indicators such as realtor.com’s new Housing Market Recovery Index, which tracks 50 metropolitan markets.5 Local real estate agents also distribute statistical analysis in social media and email newsletters. Working with an agent is often recommended. And it’s wise to stay up-to-date on the latest information because markets can change quickly.

 

Tips for Acting on Housing Trends in Seller or Buyer Markets

If you’re buying a home, of course, you may also be selling the one you’re in now. In either case, you can apply the following rules of thumb to buying and selling a home: Knowledge is power. Be prepared. Act from a position of strength. 

 

Buying a home: Buyers can lose focus as they swipe through real estate listings online, cruise from property to property with an agent, or get swept up in a bidding war. Here are some tips that are useful for buying a home in either a buyer’s or seller’s market – but especially in a seller’s market, where properties can go like hotcakes:

  • Make a list of what you really want in your dream home – whether something major, like a good school district, or relatively minor, like a gas stove. You may have to compromise when buying a home in a seller’s market, but it’s helpful to understand what you might be sacrificing before you bid.
  • Establish a price range that fits your budget going in, but don’t expect to negotiate the asking price down in a seller’s market. In fact, you may end up in a bidding war that will drive the price up.
  • Whether in a buyer’s or seller’s market, research the neighborhood you’re targeting, comparable sales in the area, and major local developments on the horizon that could affect your living conditions or future home value.
  • Because things can move fast in a seller’s market, it’s a good idea to be prepared: Know your credit score, get a mortgage preapproval, have cash on hand to back up any bid with an “earnest money deposit” – typically 1–3% of the purchase price,6 and line up additional funds to compete with as large a down payment as you can afford with “proof of funds” in hand. From the seller’s perspective, the more cash you can offer, the better, since it can reduce uncertainties about your mortgage approval.
  • Be sure to have a home inspection conducted before you close, but you may need to be flexible about accepting some flaws “as is” in a seller’s market.
  • While a buyer’s market often means lower prices and less pressure on buyers, bidding on a coveted property in a prime location will almost always make buying a home a highly competitive process. 

 

Selling a home: In a seller’s market, you may get away with putting your home up for sale pretty much “as is.” Not so in a buyer’s market. In either market, you’ll want to consider these steps to increase your profit and sell quickly:

  • Get your home ready by de-personalizing the rooms, de-cluttering, doing a thorough cleaning, and making minor home improvements that could get you a better price without major investment. Professional stagers can also help boost your results.
  • Get your paperwork ready in advance, including title and disclosure documents, which are often legally required to reveal a property’s defects as well as its good points.
  • Be strategic about pricing and marketing. This is an area where an agent be helpful.
  • Make yourself readily available to act on bids, inquiries, and the appraisal that buyers commission before finalizing their contracts.
  • In a buyer’s market, sellers have to lean in further on all of the above.

 

The Takeaway

When buying or selling a home, you’ll inevitably find yourself at the intersection of two real estate clichés: “timing is everything” and “location, location, location.” Understanding the current dynamics in your target market, getting into a position to act quickly, and remaining focused yet flexible are all key to success in the housing market.

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology, finance, and related public policy issues for more than 30 years.

 

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

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