The housing market has been on fire for the last twelve months. Buyers and their high demand far outstripped sellers and few houses. According to the latest Existing Home Sales Report the la National Association of Real Estate Agents (NAR), sales grew 23.7% over the same time last year while the inventory of salable homes decreased by 25.7%. There are 360,000 fewer single-family homes for sale today than at the time last year. This increase in demand along with such limited supply leads to more supply wars across the country.
Rose Quint, Assistant Vice President of Research Research with the National Association of Home Builders (NAHB), lately reported:
“The first reason that long-term searchers haven’t bought a home is not because of their inability to find an affordable home, but because they continue to outperform other offers.”
A survey in the NAHB report showed this 40% of buyers go over a house they wanted to buy. This is more than double the percentage in 2019, which was 19%.
What does this mean for sellers today?
It means that sellers have a huge influence when they negotiate with buyers.
In negotiation, leverage is the power that one side can influence the other side as it approaches its negotiating position. The leverage of a party is based on its ability to give benefits or eliminate costs on the other hand.
In today’s market a buyer wants three things:
- To buy a house
- Buy now before prices continue to appreciate
- Buy now and take advantage of historically low mortgage rates during them last
These three buying needs give the homeowner tremendous leverage when selling their house. Most realize that this leverage enables the seller to sell at a good price. However, perhaps the seller has another need that can be satisfied by this leverage.
Here is an example:
Odeta Kushi, Deputy Chief Economist at First American, lately identified a situation in which many sellers find themselves today:
“As mortgage rates remain close to 3%, millennials continue to shape homes and more existing homeowners are taking advantage of their equity to buy a better home … Many homeowners may want to upgrade, but don’t be afraid they won’t be able to find a home to buy. “
She then offers a possible solution:
“While the fear of not finding something to buy will not disappear in a limited supply environment, new housing supply may encourage existing homeowners to move. “
No doubt many sellers would love to build a new home to fit in perfectly with them changing wants and needs. However, most builders require them to sell their home first. If the seller sold their home, where would they live while their new home was built?
Returning to the concept of leverage:
As mentioned, buyers have compelling reasons to buy a home now, and many homeowners have challenges to deal with if they want to sell. Maybe they can make a deal to meet the needs of each party. But how?
The seller may decide to sell their home to the buyer at today’s price, which will enable the buyer to take advantage of current mortgage rates. In return, the buyer may rent the house to the seller for a predetermined period of time while the seller’s new home will be built. Real win-win negotiation.
Not every buyer will agree to such an agreement – but you only need one.
That’s just one example of how a salesperson could overcome a challenge because of the leverage they have in today’s market. Maybe you feel the need to make some repairs before selling. You may need time to get permissions or approvals for any improvements you have made to the house. Whatever the challenge, you may be able to work it out.
If you’re thinking of selling your house now, but worry, a big hurdle is holding you back, let’s connect. Maybe with the leverage you currently have, you can negotiate a deal that will allow you to move on to your dreams.
Content previously posted in Keep Current Things