How Hot Markets Can Hurt Sellers

Even though the market is red hot, it doesn’t mean it will be a breeze for you. It’s not always smooth sailing, so be prepared for some situations that may cause you trouble.

Trying to sell in a red hot market might seem like the best move of your life. Let’s face it, at the rate homes are selling lately, faster this year than last, signs are quite promising.

The key is to get your home set and ready to sell in a competitive market, but you should know what that means. Typically a hot market is one that sells homes within two months. The supply of inventory is a crucial factor in determining how hot it is. As more homes arise, demand seems to fall, but with fewer homes to choose from, demand rises.

Homeowners love hearing it’s a seller’s market, but that doesn’t mean all the cards are stacked in your favor. As in every big venture, there are risks; risks definitely worth considering. Below are five potential problems for sellers, as well as how to ease this burden.

The appraisal is below expectation

Offers are rolling in and they are way more than the asking price! Your big break, not so fast! If the home appraises low, buyers may take a hike. If this is the case, your best bet is to ask what the problems are, and fix them. You also have the option to renegotiate, or get yourself a second appraisal.

From For Sale to Sold

It’s totally possible you may sell your home faster than you can find one for yourself. Unless you have a super sweet deal, or somewhere to stay for the meantime, you will need to buy a second house. A portion of sellers find homes they want before listing their own, but in a true seller’s market, you will be among the buyers and bidding for homes too.

You should always have plan B, as in temporary housing. Moving twice is okay, and you’ll be glad you did it instead of rushing into something. A popular option is the lease-back option. This allows sellers to rent the home from the new buyers until they find a place of their own. Obviously, this has to be agreed upon by the buyers first.

Terrible offers everywhere

People in real estate can’t be flaky, and make promises they don’t keep. With so much happening, sellers could agree to a contract and back out a few weeks later. This isn’t a good look, as if it’s sitting on that offer, buyers may begin thinking there is something wrong with it. Avoid this issue by requiring mortgage preapproval on all offers.

Beat the 1031 Tax Code

Section 1031 of the U.S. Tax Code permits the sale of one investment property while buying another investment without paying taxes on the sale. The catch to this is it has to happen within 45 days.

Seller’s markets make this tough because they have to find a property and qualify for everything within that short amount of time. Once you find a property, your window is lifted to 180 days to close.  

Your Ego

You don’t always get homes more than your asking price in a hot market. A lot of sellers “have a good feeling” in competitive markets, but that feeling can fade quickly. If an offer comes in from a strong buyer who meets all the requirements, don’t be so quick to turn them down if their asking price is lower than expected. If you do turn it down, your home sits on the market and can become stale, and lose value.

Selling in a hot market can be tricky, so don’t lose sight of the basics:

Cheaper homes sell fastest.

The hottest times are the start of spring and through the summer. The downtimes are the winter months. Some states with certain weather temperatures do not see this though.

FHA loans let people buy homes with as little as 3.5% down.


Good luck in selling your castle!

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