There Are 3 Types Of Home Sellers In This Market, 2 You Must AVOID Or You Will Lose!

The average Tallahassee home sold for 85.6% of its initial asking price.

Yep, that's right, homes are selling for nearly 15% less than seller's beginning bid, so how does a buyer use this information to ensure that she get's the best price when buying a home?

The average home seller came down 15% from the initial asking price

Something Most Homebuyers Do Not Know

Regardless of market conditions, there really are only 3 types of home sellers out there.

  1. Motivated sellers, who are actively seeking a buyer for their home
  2. Low motivation sellers, who would like somebody to buy their home
  3. Future sellers, who are testing the market and WILL NOT SELL THEIR HOME RIGHT NOW

Even most real estate agents do not understand this, so let's make sure we clarify each home seller type. This is a great lesson for homebuyers before they enter the market, but it is EQUALLY important for prospective home sellers, so that they know which type of seller they should be.

Seller Motivation, Not Market Cycles

Sellers Market in Real Estate - What it looks likeIf you have been following our recent reports on the Tallahassee real estate market, then you know that many areas around here have certain price ranges that are moving from a balanced market into a sellers' market. Even so, there is still a percentage of home sellers that will fail to find a buyer.

Whether we are in a buyers' market, a sellers' market, or one that is balanced, each home seller will determine the market for their home.

I've been saying this for a very long time, and one of the most-read articles on our site is "Why Real Estate Is Always A Seller's Market."

The fact is, a motivated seller will price the home to sell, making it a seller's market for that particular home.

Buyers Should Choose The Right Type Of Home Seller

So we have identified the three types of home sellers, so let's dig a little deeper and see why buyers need to avoid two of them. Remember, 80% of people surveyed in the Chase Survey of Recent Homebuyers found that they wish they had done things differently when they bought their home. Most were looking at homes they should have avoided.

#3. Future Home Sellers - This type of homeowner is getting ready to move "but is in no hurry." Has uneducated thoughts about selling the home and is just starting to decide to sell. If this seller meets the wrong real estate agent (98% of real estate agents are willing to list a seller who is unrealistic about the value of the home), then the home will be listed well above its market value.

If a buyer comes across this home in an online search, it is immediately eliminated (because the buyer is comparing it to all the nicer homes "around it" in the search results. Homes that are priced at or below their value will always look nice than those that are priced above their value. This is why the internet has changed the home selling process.

Now if a buyer comes across the home off line, this is where bad things happen. If the buyer looks at the home and likes it, the buyer cannot have it. Why? Because the seller is not ready to drop the price to what the home is worth. That means the buyer will have to pay above appraisal, which means the buyer (if borrowing money like most do) will have to come up with the difference between appraisal and the contract price in order to close on the home. In other words, the bank will tell the buyer he cannot have the home because it is overpriced. Of course, if the buyer has cash, then the buyer can do as she pleases. But just how often does somebody have that amount of cash and also be the kind of person who pays too much for something?

So buyers who look at homes they "cannot buy" end up frustrated and confused about what is out there. Sadly, many buyers do this for months with untrained real estate buyer's agents. This can cause a state of buyer fatigue that often times results in the buyer merely settling for the first home that is "good enough."

Buyers should eliminate over-priced properties from their offline shopping lists, it will ensure they do not create a "frankenstein house" that causes them to miss good opportunities that are out there every day.

#2. Low Motivation Home Sellers - This type of home seller has started to get serious. Maybe he has tried to sell as a "For Sale By Owner" and is now interviewing agents or listing with a friend. Regardless, this seller has not spoken with a market expert OR is not ready to listen to what the market is saying about the home.

Low motivation sellers are very similar to future sellers in that their home is not truly available. The homeowner remains attached to the home instead of seeing it as a house that needs to be sold.

Much like the future seller, you will not see these homes among your top value searches online, as the asking prices will push them to compete online with homes that offer more in terms of location and/or amenities (think of it this way ... a home worth $300,000, lined up with a bunch of homes worth $340,000 is not going to look very nice, right? Nice homes that are overpriced are no longer nice homes).

If you happen to stumble across a low motivation seller offline, you might like something about the home but it will be offset with something that greatly reduces the value. If you try to negotiate with this seller, you will likely end up in a fruitless and harmful scenario like the one we described with the "Future Home Seller."

Both the Future Home Sellers & Low Motivation Home Sellers show why the initial asking price varies so greatly than the final sales price of the "average" home. But there is no "average" home, there is only all home sales and an average recorded.

Currently, the average ratio between final sales price to current asking price is greater than 97% (ironically, hardly unchanged since the buyer's market). Why does this number rarely fluctuate?

Simple, because only properly priced homes make it to closing. In a seller's market, there are a lot of homes priced correctly (relative to the number of buyers in the market). In a buyer's market, not so many. Just because there are a lot of homes on the market does not mean there are a lot of properly priced homes on the market.

#1. Motivated Home Sellers - This type of home seller dominates a seller's market and is the one selling during a buyer's market. Regardless of market conditions, the seller can price his home to get sold for top dollar (top dollar is relative to market conditions, meaning whether the market is appreciating or depreciating, there is a top dollar for each home).

These sellers will always be among the first results in the searches that you perform as a buyer using a powerful property search tool. Most buyers put in a price range to narrow down the choices, and it should not be surprising that the best homes for the money typically appear most favorable.

As a buyer, limit your offline visitations to motivated home sellers only, and this will keep your internal emotional valuations locked into what you can afford.

Remember, 80% of homebuyers wish they had done things differently, so take a queue from their hard-earned lessons to ensure you are one of the 20% of buyers who are thrilled thrilled with their home and the home buying process.

Einstein Home Buyer

Home Buying For Smart People

A process designed to save you money when buying a home

Something tells us you’re just … well … smarter than most people looking to buy a home.

You’re not naive, you are looking for a house to call home, and you want to make sure that you love the home you buy, but also get a great value.

In other words, you don’t have to be an Einstein to “get” the home buying process. But you do have to be prepared.

We can prepare you

If you have any questions about choosing homes to view either online or offline not covered in this article, simply drop me a note and we'll address the questions that you have.

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