Common misconception : Often buyers believe that by choosing to purchase a home without representation, they are in a better position to negotiate on price. It is often believed that since they are not utilizing the skills of a real estate broker, they can easily reduce the price of the home by the amount that would have otherwise gone to their real estate broker.
This is simply not the case. Realtor fees are contractually agreed upon when the seller entered into the listing agreement. Any price negotiations would effectively be an adjustment from the list price of the home,and a reduction to the seller’s net proceeds. In fact, entering negotiations without buyer representation definitely puts the buyer at a disadvantage right from the start.
Real estate brokers have access to industry data that proves not only valuable, but crucial in negotiations – when only the seller has access to this information; the scales are tipped right from the start. IT’S TRUE: For any home that is offered for sale through the MLS (the vehicle by which most public sights obtain property offerings) the seller has contractually agreed to pay ALL Realtor fees to their listing broker. This is most often a set percentage of the selling price of the home.
Here is how it works: When entering the property into the MLS (Multiple Listing Service) the seller’s broker, in turn, agrees that a portion of those contracted fees will be shared with any broker representing the buyer in the transaction, thereby sharing their commission which is collected from the seller at closing. If there is no broker representing the buyer – the listing broker retains the entire amount. Remember representation doesn’t cost you, the buyer, anything – not being represented can cost you more than you realize.
Whether you are buying or selling a home, it’s important to know if it’s a buyer’s market or a seller’s market. (Or sometimes, it’s a little of both.)
A buyer’s market is one in which there are too many properties on the market for the number of buyers. Since supply & demand favors the buyer, properties take longer to sell and prices generally soften or fall. If you are selling your house in a buyer’s market, it’s important for your home to be in good condition and priced right. If you are buying a house, a buyer’s market is great for you, since you’ll have many homes to select from, many will be in very good condition, and you’ll be able to buy your new home for a great price. For the last few years, Denver has been a buyer’s market. Now is a great time to buy a home!
A seller’s market is just the opposite: too many buyers and not enough sellers. With more buyers than sellers, properties tend to sell quickly and prices rise. If you are selling a house, it’s great to be in a seller’s market, for it will be easier to sell your home quickly for a good price. On the other hand, if you are trying to buy a home in a seller’s market, it can be frustrating to watch prices rise and to have other people outbid you for the home you want.
Over time, as the economy and interest rates change, a buyer’s market changes into a seller’s market, and then back again. Today’s buyer’s market won’t become a seller’s market overnight, but if you aren’t tracking key indicators during the transition, you won’t see the change coming. The key indicators to watch are the economy and unemployment in the area, interest rates, building permits, home sales, loan defaults, and foreclosure sales. Together these key factors point to the real estate market’s overall direction.
Most real estate professionals generally consider a balanced real estate market to be one in which most properties take an average of six months to sell. Brokers calculate this number by tracking the number of days on market (DOM) of every property listed and sold. A balanced market means that there is likely to be at least six months worth of inventory (properties) on hand to sell for the number of buyers in the market. If the number rises above six months inventory on hand, then the market is swinging into a buyer’s market. If it falls below, it is becoming a seller’s market.
Many believe that winter is a perfect example of a buyer’s market because most buyers aren’t looking to move at this time of the year. Although it is true that there are fewer buyers, there are usually fewer properties on the market as well. Since properties offered for sale during slower times of the year are generally marketed more aggressively, they often sell for as strong a price as they would if they were marketed during in a busier period.
In the spring, a seasonal adjustment occurs. More properties come into the market and buyer activity picks up as families with children (still the single largest buyer demographic) buy properties so that they can move during summer vacation. Because of this, spring is traditionally thought to be more of a seller’s market. However, a buyer’s market can easily exist in the spring if conditions dictate; that is, if there are more properties than buyers, longer DOM numbers and falling prices.
Sometimes, certain events can create an extended buyer’s market even if the local economy is relatively strong. A national recession (or fear that a recession is on the horizon), stock market contraction, lower consumer confidence, mounting job layoffs, rising inventory, declining new properties sales, rising interest rates, rising energy costs, and other such events can affect market conditions and property values.
Seasonal or not, any time there is more than six months inventory on hand, there is a glut of properties on the market. And whenever there is a surplus of properties for sale, prices will begin to soften and sellers will need to adapt to the changing market in order to attract buyers. Proper pricing will be critical and sellers may need to offer special incentives such as paying the buyer’s closing costs, offering seller financing or a large “redecorating allowance” to attract buyers.
As properties become more competitive, buyers realize that their interest is at a premium and they will begin to increase their demands to sellers. Those nice chandeliers and refrigerators that normally would be excluded in the purchase price of the property now become bargaining chips for the buyer. The buyer may submit offers with any number of sale contingencies or they may ask the seller to pay more of the closing costs than usual. If the market has begun to swing in the buyer’s favor and sellers aren’t flexible enough to make concessions, they could find their home languishing on the market.