The market value of a property is what a seller is willing to sell the property for and what a buyer is willing to give for the property. In today's market in San Antonio and adjacent towns, sellers are seeing multiple offers and higher offers. Why is this and what can or does it mean?
In April 2014, *The Real Estate Center at Texas A&M reported that there is a larger difference between asking price and sold price when the inventory of houses is larger than there is when the inventory is tight. San Antonio is in a Seller's Market which is described as a period in which the average days on market for the area falls below 6 months and continues to trend downward. We have been in a Seller's Market for many months with an average inventory of about 4 months. Some areas of the city are reporting less than 2 months of inventory. In addition, some houses are selling for close to or more than 100% of asking price.
So simply said, market conditions is the why behind higher and multiple offers. Now as to what this can or does mean, it's easier to say what it does not mean.
- It does not mean sellers can set a higher price for their house than the neighborhood market.
- It does not mean sellers do not have to think about getting or keeping their house "show ready."
- It does not mean buyers will not be able to find a good deal.
- It does not mean the negotiated sales price is the final word.
One factor in selling a property is time. A house that sells in the first few days it is on the market will get a better offer and often more offers than one that has been on the market after the first week to 10 days. For some reason, if a house does not sell "almost immediately" in the kind of market we see in San Antonio today, buyers and agents begin to assume the house harbors some negatives. This is one of the reasons it is so important to price the property correctly. Too high a price for the neighborhood is a real negative; but even when the price is lowered to meet the neighborhood market, potential buyers and agents still seem to have a vague sense that there is a reason the house does not sell.
The second item is like the first in that you want your house to be the more appealing than other houses. A house priced correctly and spruced up to sell will sell quicker and garner better offers than one that fails to recognize that it is still important to compete with other sellers. Again time on market can play against a seller if the house isn't show ready.
More than average days on market (DOM) can be a good thing for buyers. If the house has been on the market for longer than its neighborhood, a savvy buyer's agent will look for possible reasons and share the information with her client. If it looks like the reason is because the property started out over-priced or "doesn't show well," there may be a better chance to negotiate. A house can fail to "show well" because of many factors, some of which are cosmetic. Messiness, noisy or smelly pets, an uncooperative tenant, and/or minor maintenance flaws can work against a seller and a savvy buyer might be willing and able to overlook these types of factors. Few buyers really want to take on anything major when they buy a house; however, if the reason for the days on market is price and/or the property shows poorly for cosmetic reasons, the seller may be more willing (or needing) to deal.
Another factor that can work in the buyer's favor is when the seller's house is competing with a nearby new home builder. A brand new home is enticing to buyers and the builders often offer significant cash incentives too, so the seller could have a harder time selling.
The last item has to do with appraisals. Unless it's a cash deal, there will be an appraisal. It's a good idea for a cash buyer to get an appraisal too. A lender wants to make sure the property has a value equal or exceeding the lender's investment or risk. Since appraisers work only from sales data, the value they assign may be lower than the current listed prices of houses in the neighborhood, but more importantly, it may lower than the negotiated sales price. Most buyers cannot come up with the additional cash needed to get the loan, especially when the appraisals are lower by thousands of dollars. Even if a buyer is willing to invest more cash into the house, the seller will need to consider negotiating.
Markets have cycles. A professional, full-time Realtor will keep themselves well-informed about the current market and the markets of specific neighborhoods. A professional Realtor will also work to keep up their awareness of the industry, trends in the industry, and tends and predictions about the industry and the market. An informed agent can be the best asset.
*Based on data from Austin's Multiple Listing Service (MLS) from the last 15 years.