Right now, the real estate market in the area for sellers has never been stronger. Low inventory and super low interest rates for mortgages for buyers is driving prices higher. Sellers may think that a “hot” market means more money for their home. In many instances, a hot market does indeed mean a faster sale at or above asking price. However, there are some pitfalls that a seller in a hot market needs to be aware of before putting their home on the market.
A Clean and Well Maintain Home Sells For More
Your home if selling in a hot market will always do better when it shows well. Getting the home ready and cleaned for the market matters. If you want to attract multiple offers on your property right after listing it, prepping and a deep clean is probably the best way to make that happen. In a hot market, buyers need to move quickly and are driven by first impressions and emotions. There is no better way to make someone fall in love with your house than to make it shine.
Your home doesn’t have to be perfect in a hot market. One of the “lucky” aspects of a hot market is that outdated or quirky homes sell more quickly than they otherwise would. However, it doesn’t mean more money, it just means buyers become more willing to overlook cosmetic or dated homes and may even be more willing to accept pricey fixes such as an old roof or leaky windows. Seller’s should be aware that buyers often are pushing the limits of the budget they have for home. Pre-sale inspections can go a long way to help buyers see the quality and condition of your home as well as not get surprised after they get into contract.
Sell Better with Inspections and Reports for Buyers
If you as the seller appear completely prepared to sell, a buyer will feel more confident making a quick-closing offer. There is no reason not to showcase the home in the state and condition that it is. You want to assure buyers there are no surprises after they make an offer. Because properties in a hot market tend to sell quickly and have shorter contract deadlines, you need to be prepared to present all relevant documentation to potential buyers right away. Getting all the inspections done before listing your property so you can present an accurate picture to buyers from the get-go makes sense. Have your disclosure documents all prepared and ready to go before the house goes on the market.
Be Prepared to Move Quickly
Hot markets see more buyers purchasing with cash or minimal financing than other markets. If you’re lucky, your buyer may not need to be approved for a loan, which would greatly reduce the amount of time your property is under contract. If you decide to accept an all-cash offer, you will likely close in a short amount of time.Before you list in a hot market means more often than not you need to move quickly. Be prepared for this possibility prior to placing your property on the market. You should be searching yourself for a rental or for the replacement home before you list. It may even be wise to have a rental lined up if you do not find another property to buy right away.Be Committed to Selling – It’s Not the Time to Test the Market
Work Closely With Your Agent to be Committed to Selling
Just because the market is hot does not guarantee multiple offers for over asking price. Set reasonable expectations about selling your home.
Every property for sale is different. This is where your agent can really help you understand the market. Sure, you’ve heard about the house down the street that sold in two days for $50,000 over asking. But you do not know all the circumstances surrounding that sale. Perhaps it was just a fluke with the perfect buyers coming in for that house. Perhaps there was something highly unique to that property that made it sell so fast and for so much money.
House prices can differ drastically within neighborhoods. Many criteria that aren’t readily apparent from researching the MLS or past sales might make a property sell for more: a great layout, lots of light, decorator colors, or mature fruit trees are all examples of things that might tip buyers into a frenzy that creates high prices and multiple offers.
Your home might not offer these. Take solace in the fact that you are selling in an up market and are more likely to sell for closer to your asking price than you would in a down market. And, if you happen to be one of the lucky ones who garners more from the sale than you ever imagined, feel free to pop the champagne at closing!
There is no “perfect” offer you should be hoping for to make you sell the home. Price and terms often have dependencies on them which ultimately impact the price. Make sure to have a frank discussion about your motivation and committed to sell with your agent. Buyers are often under the gun for time and that is driving the offer price. Telling the buyer, you need a 3-month rent back for free might help to NOT sell your home. Understand in a hot market time is of the essence. Be sure that you will be present or able to review all offers within a short amount of time after the property is listed.
Pro Tip: Plan on responding to the offers within 24 hours. If you plan to counteroffer, do so in a timely manner. It is not uncommon for the negotiation process to take 24 to 48 hours. I’ve seen where offers are not reviewed until a later date where the seller and agent are hoping for offers and the seller receives no offers. Buyers are well informed in today’s market, the best buyers are on the home search 24/7, if your home is priced right, it will get an offer quickly in a hot market. If you go a week without an offer and your market is hot, you’ve missed the best buyers for your home.
Hot Market Appraisal Issues
Hot markets often arise quickly and the nature off a hot market causes issues for the appraiser. Home Appraisers may be comparing your property to properties that sold for significantly less a month ago. The appraised value of your home is supposed to be based upon a balanced market where the sale isn’t with few sellers or few buyers. Hot markets cause the value to be higher than it would be in a normal market.
What Happens If My Home Doesn’t Appraise?
If a property doesn’t appraise for the offer price and the home was to be purchased with a loan: The buyer will have a lot of difficulty getting the loan amount they needed for the current offer price. As a seller you may be forced to lower your sales price or seek out buyers who are paying cash and do not need the approval of an appraiser to complete the deal. Most of the time, if a property doesn’t appraise and the seller won’t lower the price, the deal is dead, as the buyer has no other options besides a traditional lender to cover the purchase price.
Pro-tip: Buyers in a hot market, buyers often have no extra available cash other than down payment and closing costs. It’s important that your agent qualify the buyer who makes an offer and verify if they can or have cash available should the home not appraise in a hot market. Think twice about accepting an offer where the lender pre-approval of the buyer is not higher than the purchase price. Make sure the agent calls the lender to discuss the qualifications of the buyer before accepting or countering any offer.
Final Thoughts – Don’t Second Guess Selling in a Hot Market
My advice is be committed to selling and realistic about pricing your home selling quickly, Hot markets are about commitment. Buyers are committed to buying and you should be as well. Here is a helpful checklist if you want to sell in a hot market.
- Do your research before you sell and explore homes for sale
- Look at the market as a buyer – tour open houses and talk to real estate agents to assess the hot market.
- Contact a real estate agent(s) and get a real price for you home to sell in less than 30 days.
- Make plans to rent or to buy quickly so you can sell quickly.
- Commit to making your home ready for sale.
- Commit to selling
- Enter into a listing agreement to sell your home with a price to sell quickly.
- Get pre-sale inspections, reports, and disclosures.
- Adjust the price based upon your homes condition to sell quickly
- Sell the home
- Respond to offers as they come and quickly
- Make sure you pick the best buyer who can and will complete the purchase