news article

Maximize Seller Profits When the Market Favors Buyers

Use these approaches to market research and pricing to ensure your listing doesn’t linger on the market.

Originally published in REALTOR Magazine

Even though high inflation and rising interest rates are beginning to dampen homebuyer demand, we’re still in a seller’s market. There still isn’t enough inventory to meet the demand that’s out there, so your sellers continue to have some advantages in the market. Use these guidelines to help make the selling process easier, faster and more profitable.

Monitor comp sales like a hawk. Buyers and their agents are more informed than ever about what houses are selling for in the neighborhoods they’re considering. But with the market changing as rapidly as it is, you can be the first to inform them of the month-to-month or week-­to-week shifts in your area. You’ll have to keep a close eye on recent sales of comparable homes and commit to frequent communication with buyers interested in your listing. Preparing a CMA and distributing it to potential buyers will show your listing’s value.

Get the house market-ready. Another example of how you, as an experienced agent, can help a seller is the input you can give regarding market preparation. I recently sold a home in Bethesda, Md., that received multiple offers. Before I listed it, I suggested the owners make simple cosmetic upgrades by adding fresh paint and refinishing the floors. Although these changes cost little in the grand scheme of the transaction, they may have been the most appealing characteristic of the home for the eventual buyers, who expressed appreciation that they “didn’t have to do anything before moving in.”

Avoid price gimmicks. Helping your seller set a reasonable list price goes hand-in-hand with your role in monitoring comp sales. One strategy sellers sometimes gravitate toward is pricing their home just a little below the amount of the most recent comparable sale. The intention is to spark a bidding war. But as the market shifts slowly in buyers’ favor, there’s a risk to this: You may not generate as many offers as you anticipated, and if a high offer falls through, that gives other bidders more negotiation leverage.

Alternatively, another common pricing strategy is to list for a slightly higher amount than the most recent comparable sale. With home prices appreciating quickly, this could make sense—but it also could backfire. Even in today’s competitive market, an overpriced house can alienate buyers, resulting in the house languishing unsold until the price drops. As an experienced agent, you can present an objective view based on market activity to figure out a fair and competitive asking price prior to listing to set your client on a path for success when the home goes to market.

While the inflation rate continued to rise in July, mortgage rates began to come down. You have to constantly monitor these economic factors while keeping a close eye on what’s actually happening in your own market to determine the best pricing strategy. Both approaches are reliable but need to be determined based on each individual market. Pricing isn’t an exact science nor a matter of quantitative analysis. There are numerous variables that need to be considered outside of just numbers. How fast do the sellers need to move? How long have they owned the house? How strong is their emotional attachment to the house? How willing are they to make any repairs?

Be vigilant when reviewing contracts. The average sale contract is 60 pages long. It can be overwhelming for a seller to try and understand. Now imagine, as an inexperienced seller, being in a bidding war and having many contracts from multiple bidders to consider. Sellers need you to help them discern the contracts that most closely meet their needs.

It’s a good idea to remind your client that the best contract isn’t necessarily dependent on the amount of the offer. What if there are contingencies that the seller views as unfavorable? As buyers regain some advantage in the market, prepare sellers that they may have to sacrifice a little more than they would have just last year. However, a stubborn buyer who refuses to give and take could be a red flag that you’ll find a better offer somewhere else. Also, be on the lookout for incomplete or sloppy contracts, which indicate carelessness on the side of the buyer’s agent and could be a red flag that he or she will be difficult to work with moving forward.

Choose the right offer. Other questions to ask as you’re reviewing offers: Is there an escalation clause? What type of financing is the buyer using? Who are the buyer’s lender and settlement agent, and are they local? Does the proposed settlement date work for the seller? All these issues need to be weighed before your seller accepts an offer.

I recently had a listing that received 23 offers, and buyer’s agents are entitled to an answer within 24 hours—so that’s a lot to sift through in a short amount of time. The process includes an offer presentation sheet showing all terms for each party, including price, contingencies, time frames and other factors. It enables sellers to see the merits of each offer side by side. The contract the sellers ended up accepting was clearly the strongest, but it took hours of review to determine which proposal was the best for the seller. A contingent-free, all-cash offer with a settlement date that fits the seller’s schedule is about as strong an offer as you will see. The fewer contingencies there are, the better the deal is for the seller. A strong financial position for the buyer is needed as well, shown by a large down payment and earnest money deposit, a prequalifying letter from a local lender, and personal financial information showing the buyer has the funds necessary for closing. The seller accepted an offer that was contingent-free and settled quickly, a positive for the seller.

By adhering to the guidelines listed above, whether providing help in monitoring, pricing, reviewing contracts or choosing the right offer, you are providing sellers expertise worth the investment in your services.