MARKET CONDITIONS – OVERVIEW
The Real Estate Market is fluid and therefore changes periodically, sometimes cyclically, and sometimes seasonally. It is helpful to understand how market conditions can affect your position as a buyer.
MARKET CONDITIONS
CHARACTERISTICS
IMPLICATIONS
The supply of homes on the market exceeds demand.
The number of buyers seeking homes exceeds the supply or number of homes on the market.
The number of homes on the market is equal to the demand or number of buyers seeking homes.
PRICING THE PROPERTY
Probably the single most important decision to be made when listing a property is determining the right asking or list price for the property. Once a realistic list price is achieved, the property will be marketed and promoted to attract potential buyers.
BENEFITS OF PRICING WISELY
- The property usually sells faster than if over-priced because it is exposed to more qualified buyers.
- The home doesn’t suffer from a loss of “marketability”.
- The closer to market value the pricing, the higher the probability for offers.
- A well-priced property can attract higher interest, and potential for competing offers.
SETTING THE PRICE
It is important to price the subject property at market value. When setting a price for the property, the listing level must strike a balance between the seller’s need to achieve the best-possible return, and the buyer’s need to get good value. With many years of experience, a professional Real Estate Salesperson can help in setting a price that will accomplish both objectives.
The market value of the subject property is determined in exactly the same way as any other commodity – what a buyer is willing to pay for it in today’s market. Despite the price paid originally, or the value of any
improvements that have been completed; the value is determined by market forces.
Buyers look at about a dozen properties on average before making an offer on a property. As a result, they
have a good overview of the market and will compare your property against the competition. If it’s not in line
with similar properties that are available, buyers won’t consider it good value for money.
DETERMINING A HOME’S VALUE
Ultimately, the market determines the true value of a property. The following list of factors need to be considered when comparing the subject property with similar properties, in order to establish a competitive list price:
- Location
- Size
- Style
- Condition
- Features
- Updates & upgrades
- Community amenities
- Neighborhood
FACTORS INFLUENCING OVERPRICING
- Extensive renovations/hidden costs
- Desire to buy in a higher-end area
- Original cost of the home was too high
- Lack of reliable market information
- Built-in “bargaining room”
- Perceived emotional value.
IMPACT OF OVERPRICING
Not uncommonly, Sellers can be lured by the temptation that if they price their home high, initially, they can lower the asking price later. Experience shows that when a home is priced too high, it experiences little market activity (showings & online hits). Gradually, the price will come down to market value – by that time, however, it has been for sale too long, and some buyers will be wary and thereby dismiss the property.
The thinking that interested buyers “can always make an offer” is faulty – if a property is over-priced, potential buyers looking for a lower price range will likely never see the property. Those buyers who can possibly afford a home at the higher asking price will soon recognize that they can get better value elsewhere.
THE IMPORTANCE OF EARLY ACTIVITY
The moment a property gets listed on the market, there tends to be a flurry of activity surrounding it – agent viewings, clients showings, and online viewings. This is a key time for gauging interest and assessing buying potential. In the event that the home is over-priced, it doesn’t take very long for interested parties to lose their initial interest. Second showings, or absence of, are a telling sign of serious or dissipating interest. By the time the price is reduced on the listing, a majority of prospective buyers will be lost.
MARKETING PLAN
A property (home) is an extremely important personal asset – it is quite complex to market, and therefore requires a well-organized process to facilitate. Example:
MARKETING PLAN
Pre-Marketing:
- Property/area inspection & preliminary assessment
- Client Objective(s)/ Market Realities
- Market Research: activity evaluation – current [ Subject property vs market audit: valuation
- Subject/comparators – reconciliation/triage & SWOT Analysis
- CMA (Comparative Market Analysis)
- Listing proposal/Listing agreement
- Details & logistics re The Listing
- Setting Expectations & review processes
Marketing Plan:
- Staging (int & ext)/preparation/ listing
- Photography/Virtual Tour
- MLS/GDAR exposure / Outside Boards
- Internet: MLS / RLP Website / Realtor Website / Social Media
- Agent viewing/marketing/networking
- Signage
- Advertising & Target Marketing
- Client showings
- Public Open House
Service:
- Regular activity reports
- Market activity updates
- Qualifying buyers
- Communication with buyers’ agent(s)
- Manage documents flow
- Negotiate/navigate offer(s) process
- Post-sale follow-up
ELEMENTS OF AN OFFER
Price
Depending on local market conditions, your opinion of value, competing interest in the property, and the market information supplied by your Realtor, the price offered may be different from the Seller’s asking price.
Deposit
The deposit is a measure of good faith, and will be applied against the purchase of the home when the sale closes. Your Realtor can advise you on the appropriate amount, if not specified in the listing.
Terms
Includes the total price offered and the financing details. You may arrange your own financing, or ask to assume the Seller’s mortgage, if attractive enough.
Conditions
These might include clauses to protect you, such as “subject to buyer obtaining suitable financing”, or “subject to a home inspection”, or “subject to buyer selling their property”.
Inclusions and Exclusions
These might include appliances and certain fixtures or decorative items such as window coverings or mirrors, TVs and TV wall mount brackets, etc.
Closing or Possession Date
In general, the day that title to the property is legally transferred and the transaction of funds is finalized, unless otherwise stated.
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