In real estate, a transitional market refers to a period of time between a seller’s market and a buyer’s market. There are lots of posts that explain how to sell in a buyer’s or seller’s market – but few that focus on what to expect and how to attract qualified buyers to your listing in a transitional market.
Identify the direction of the transition and respond accordingly:
Transitional markets aren’t just lulls. Rather, they are the conduit between a buyer’s market and a seller’s market, and you need to figure out which way the trends are moving so that you can respond accordingly. If the market was recently considered to be a buyer’s market and is shifting towards becoming a seller’s market, you may want to wait a bit before listing your house.
Alternatively, if the market is shifting from a seller’s market to a buyer’s market, you need to prepare to be more competitive. Research the market and similar homes, price your home competitively and advertise aggressively. By preparing yourself to tackle competition head-on, you’re increasing your odds of getting a great outcome at closing.
Price clearly, and don’t expect to negotiate:
When it’s a seller’s market, sellers often receive several full-price offers quickly, and they can afford to be picky about what offers they accept. Additionally, sellers can price their homes aggressively without worrying too much about scaring off prospective buyers. Conversely, during a buyer’s market, buyers may put in low offers on a home, and they may even end up haggling with the seller to get an even lower price.
In a transitional market, there tends to be less haggling. As a result, you shouldn’t price your home too high as it may deter buyers.
Fair market value plays a big role in transitional markets:
The fair market value of your home, often abbreviated as “FMV,” is the value of your home in average market conditions. For the most part, FMV tries to isolate the value of your home from surges up or down in the marketplace. When lenders use an appraiser to help evaluate the worth of a home, the value they generate is considered to be the FMV.
In many cases, FMV does not reflect the price at which you can sell your home in a buyer’s or seller’s market. In both of these markets, demand and supply pull so strongly against each other that the price of your home is likely to go up or down significantly. However, in a transitional market, FMV can be a good starting point when determining a logical list price.
A transitional market offers no advantages to buyers over sellers or vice versa. To succeed, simply focus on researching market trends and their impact on your bottom line to make sure you price right and get the best possible return on your investment.