I wanted to take a moment to talk about the types of sellers that exist in the real estate market.
There are generally two types of sellers: potential sellers and sellers who have to sell.
The first group is people who would sell their property, but at a reasonable price.
And the second group consists of motivated sellers who have to sell, even if the price is wrong.
Let’s discuss why this is important and how it affects the housing market.
What is a Potential Home Seller?
As the name suggests, a “potential seller” is a homeowner who is interested in selling their property, but only if the conditions are right.
Generally, this means that they will only part with the property at a reasonable price. And that the right price it is usually a high value.
For example, you may see a home listed for $500,000 in an area where many other properties are selling for $450,000.
This is usually the first clue. The price is higher than comparable properties. Another way to look at these types of salespeople is that they are not motivated.
They threw their stuff at the MLS to see if there were takers. Chances are they aren’t that serious.
It’s about the same as the typical home buyer who visits open houses just to be curious, often with little intention of making an offer.
A would-be seller is like this and is not too fussy if his property sells or not.
Often, they go against the listing agent’s wishes by listing the property for “too much money.”
And these types of goods end up on the market, often for months if not years in some cases.
The Salesperson Must Sell Is Motivated
On the contrary, we have “the merchant to sell,” which is the exact opposite of the one to be sold.
This person they need to sell their homeand quickly. They don’t have time to mess around and write aloud.
The property must be listed competitively, and the seller must be willing to entertain things like seller consent and repair requests.
The best way to sum up this type of real estate agent is the word “motivated.” In fact, you may even see the phrase “motivated seller” on a real estate listing or yard sign!
A home buyer should like this type of seller because they will be more willing to negotiate.
And the starting point of their list price should also be reasonable.
For example, if the most recent similar sale in the area was $450,000, chances are they will be listed at the same price. Or less!
The best way to sum up the property is “sale price.”
Today’s Real Estate Market is Dominated by Prospective Sellers
Now considering those two definitions of real estate agents, I would argue that in most markets across the country, we have many potential sellers.
Why? Well, when you look at what sellers are trying to sell versus what buyers are willing to pay, there is often a huge gap.
You hear many prospective buyers say “that’s too much” or “I’m not willing to pay that.”
But the thing is, most people who have listed their properties as “too high” don’t really care. They are not motivated sellers.
They simply throw their properties on the market to test the waters. In their mind, if someone gives them a full list or close to them, they will go with it.
If not, well, who cares. Just let it sit and bide your time. There is no rush.
What this means for the housing market is that despite being unaffordable, house prices continue to rise.
The CoreLogic S&P Case-Shiller Index showed prices rose 4.25% year-over-year in August, although the rate of appreciation declined for the fifth month in a row.
And house price gains are expected to cool further, with annual gains of just 2.3% expected next August. However, prices keep rising…
Low Assets and Cheap Collateral Allow Sellers to Be Patient
The continued low availability of existing housing has kept housing prices rising and rising.
But the appreciation rate has been falling and you can blame both high mortgage rates and high housing prices for that. However, and most importantly, home prices are not fallingat least across the country.
This lack of affordability can eventually lead to a real drop in prices, especially in over-cooked markets, but it will depend on the type of marketer in charge.
By comparison, in the early 2000s, the market was full of sellers to sell.
Many couldn’t (or didn’t want to) make their next mortgage payment, often because it was an adjustable-rate loan or they qualified on a specified income and couldn’t really afford it.
Today, you have a home seller with the lowest possible, fixed-rate mortgage search to sell, but he has no hope at all.
Until that changes, I don’t expect home buying conditions to change much.
Before creating this site, I worked as an account manager for a real estate broker in Los Angeles. My experiences in the early 2000s inspired me to start writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the mortgage process. Follow me on Twitter for the latest.
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