Monday, May 15, 2006

Shifting Strategy

As we been posting for some time now, the market is shifting away from the seller's market we have been experiencing for several years and moving towards a buyers market. This balancing act does have a major impact on establishing a strategy whether you are buying or selling real estate.

Homeowners in recent history have taken the strategy to find their new home first and negotiate that contract THEN market and sell their home. IN the fast and frenzied market we are coming out of it usually meant a quick sale if marketing, price and condition were all good.

One drawback of that scenario was the uncertainty of final sale price, however, since it was such a strong market, the final price was usually close to the original asking price.

Well, times are changing (and as I've said I believe it will be beneficial to the real estata market). Homes are sitting on the market longer and it is more difficult to predict the market time.

Marketing and sales strategies become even more critical in this market when selling a home. The balancing act require more strategizing and patience when dealing with a shifting market.

In a seller's market, buyers usually face a lot of competition. They often need to bid over the asking price and waive contingencies to get an offer accepted. In a buyer's market, there are more sellers than buyers. Listings take longer to sell; buyers can afford to be choosy.

A balanced market is somewhere in between a seller's and a buyer's market. However, even in a balanced market, you'll find pockets of variability depending on supply and demand.

For example, in desirable neighborhoods where inventory is low, a balanced market might exhibit characteristics of a seller's market. However, this will only be the case for well-priced listings that are in prime condition, or priced-to-sell fixer-uppers that have a lot of upside potential.

In a hot seller's market, virtually everything sells. This is not the case in a more balanced market. Keep this in mind if you're thinking about selling your current home and buying a new one.

HOUSE HUNTING TIP: It's a great time to make this kind of move because interest rates are relatively low. However, if you intend to buy before selling, be aware that this is a riskier strategy for some homeowners than it was a year ago.

In a strong seller's market, the challenge is finding your next home. But, selling your existing home is often relatively easy. In a balanced market you will have an easier time finding a home, but it could take longer to sell. The other factor to consider is that it may be more difficult to predict ultimate sale price.

The real estate market is not static. Particularly in a transitional market, it can be stronger one month than it is the next. Unless you have ample funds at your disposal, you should factor this in to your home buying strategy.

One homeowner learned this lesson the hard way when they bought a new home in San Francisco before selling their existing Oakland, Calif., home. They made the move in 1994 when the real estate market was in transition. They bought their new San Francisco home when market activity was brisk.

Two months later when their Oakland home went on the market, the market softened enough to delay the sale a few months. The sellers reduced the asking price in order to hasten the sale. They ended up selling for less than they had budgeted for and had to sell stock in order to complete the transaction

If your funds are limited, a safer strategy is to put your home on the market before you buy your new home. You should be actively looking for your new home while you're waiting for your home to sell.

In markets where there are a lot of houses on the market, an offer that is made contingent on the sale of your existing home may be a workable. However, if you're trying to buy into a pocket of the market that is in high demand and where there aren't a lot of homes for sale, like the Upper Rockridge neighborhood in Oakland, a contingent sale offer may stand little chance of being successful even in a more balanced market.

Keep an open mind about your options. If you sell your current home before buying the new one, you'll know exactly how much money you have to work with. You don't have risk of coming up short of the funds you will need to make a financially prudent move.

THE CLOSING: You may have to make a move to an interim rental. But, that's better than racing to buy a home that may not work for you in a couple of years.

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