I wanted to take a moment to talk about the types of sellers out there in the housing market.
There are usually two types of sellers: potential sellers and must-sell sellers.
The first group are people who will sell their property, but only for the right price.
The second group consists of motivated sellers who have to sell, even if the price isn’t right.
Let’s discuss why this is important and how it affects the housing market.
Who is a potential home seller?
As the name suggests, a “potential seller” is a homeowner who wants to sell his or her property, but only if the conditions are right.
This usually means that they will only give away the property at the right price. And this Right price Its price is usually high.
For example, you might see a home listed for $500,000 in a neighborhood where most other properties sell for, say, $450,000.
This is usually the first clue. The price is higher than similar properties. Another way to look at this type of seller is that they simply are not motivated.
They dumped their belongings on MLS to see if there were any takers. There’s a good chance they’re not that serious.
It’s almost the equivalent of a homebuyer who appears to tour open houses just to be curious, often with little intention of making an offer.
The potential seller is like that and is not too bothered if his property sells or not.
Often times, they go against the listing agent’s wishes by listing the property for “too much money.”
This type of property languishes on the market, often for months if not years in some cases.
The seller who must sell is the payer
Conversely, we have the “must sell seller,” which is the exact opposite of the potential seller.
This individual Needs to sell their houseAnd quickly. They don’t have time to hang around and score at the top of the list.
The property must be listed competitively, and the seller must be willing to entertain things like seller’s liens and repair requests.
The best way to summarize this type of home seller is the word “enthusiastic.” In fact, you may see the phrase “Motivated Seller” on their property listing or on their yard sign!
A home buyer should prefer this type of seller because they will be more willing to negotiate.
The starting point for their price list should also be more reasonable.
For example, if recent comparable sales in the neighborhood were $450,000, it would likely be listed at a similar price. Or even less!
The best way to summarize this is that the property is “priced to sell”.
Today’s housing market is dominated by potential sellers
Now keeping in mind these two definitions of home sellers, I would argue that in most markets nationwide, we have a lot of potential sellers.
Why? Well, if you look at what sellers are trying to sell versus what buyers are willing to pay, there is often a big gap.
You hear a lot of potential buyers say “that’s too much” or “I’m not willing to pay that much.”
But the thing is, many people who list their properties as “too high” don’t really care. They are not motivated sellers.
They simply put their property on the market to test the waters. In their mind, if someone offers them a complete list or close to it, they will accept it.
If not, well, who cares. Just let it sit and bide your time. There’s no rush.
What this means for the housing market is that despite poor affordability, house prices continue to rise.
CoreLogic S&P Case-Shiller Index Show Prices rose 4.25% year-on-year in August, although the rate of rise slowed for the fifth month in a row.
House price gains are expected to decline further, with an annual increase of only 2.3% expected by next August. However, prices continue to rise…
Low supply and cheap mortgages allow sellers to be patient
The continued decline in the supply of existing homes has kept home prices rising.
But the rate of currency appreciation has slowed and high mortgage rates and high house prices can be blamed for this. However, more importantly, House prices are not fallingAt the national level, at least.
This lack of affordability may eventually lead to an actual decline in prices, especially in overcooked markets, but it will depend on the type of seller that dominates the market.
For comparison’s sake, in the subprime mortgage crisis of the early 2000s, the market was saturated with sellers who needed to sell.
Many couldn’t (or didn’t want to) make their next mortgage payment, often because it was an adjustable-rate mortgage or because they qualified with declared income and could never afford it to begin with.
Today, you have a home seller who has a very low, fixed-rate mortgage, and they may do just that He wants For sale, but not at all desperate.
Until that changes, I don’t expect home buying conditions to change much.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My work experience in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and current) homebuyers better navigate the home loan process. Follow me on Twitter for hot takes.
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