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Chairman’s Message: Understanding the Transitional Market

Quincy Virgilio: MLSListings Inc 2018 Chairman

Quincy Virgilio
2018 Chairman, MLSListings

For years now, California has been operating in a real estate market that is an extraordinary anomaly to the rest of the country: scarce inventory, sky-high prices, over-asking price bidding wars. It was understood that the market would level off and return to some semblance of normality, but the question has always been when.

That day has finally come as we are now firmly in a “transitional market.” Surprisingly, this may be an unfamiliar term and condition to agents because we’ve been in such a feverish seller’s market for so long. The industry defines a transitional market as one in which the market is essentially neutral, favoring neither the buyer or the seller – basically a flat market.

The upside is that a transitional market really requires the expertise of a real estate professional and it’s a key pitching point when talking to prospective clients because of the special considerations that must be taken into account. Client education and expectation-setting are critical in conversations with buyers and sellers. Some of the main things to discuss:

  • Fair market value. Sellers need to understand the fair market value of their home. This is determined by supply and demand. In a transitional market, there is little to no negotiation so establishing the right price is critical.
  • Terms. Unlike in hot real estate markets, the terms in transitional markets are more solid. As noted above, there is very little negotiating, so all offers should be positioned as a “best offer.” And it’s important to set expectations with sellers that there will not be the bidding wars of the old days.
  • Professional guidance. For buyers and sellers who have only seen California’s real estate market, where available properties fly off the market as soon as they are listed and sales prices are the result of bidding wars, it is more important than ever to have the guidance and insights of a knowledgeable agent or broker. Clients need to understand why and be convinced of the value in working with a professional.

Right now, we are seeing more inventory and, in some cases, where prices are actually being reduced, yet the number of sales is still up and rising. It’s important to know the key figures and show them to your client. MLSListings can help you pull relevant data for your market.

More importantly, don’t be afraid to have a tough conversation about the changes in the marketplace. Just because a seller wants to set an unrealistic price does not mean you cannot push back – you just need to be able to make the case for a fair market value price.

Yes, you may risk the seller walking away in search of an agent or broker who can get them the price they want, but the market will always dictate what the seller actually gets.

 

 

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