What is your definition of a 'sellers market' in the RE world? Does this type of market exist only in Class A and B neighborhoods?

I have a newly rehabbed 3/2 house right now which needs to be either rented out or put up for sale. It is was rehabbed to Class B standards but it is still located in a Class C hood though.

To me, a true sellers market would be where houses sell quickly (less than 60 days) and at near their asking prices. If you have sold a Class C house lately, I want to hear from you.

Morning Roy,

Sellers market is roughly whenever demand to buy exceeds supply, as defined by the absorption rate. This is defined as the number of weeks it would take to clear all of the inventory currently for sale.

In my town, the average absorption rate is 6-8 weeks. If the # of weeks goes lower, it's a Seller's market. Houses are selling quickly and you better get your bid in fast, close to or above asking, and don't ask for Seller paid closing costs. The opposite is true: if the rate goes out to 10+ weeks, there is a glut of inventory and Buyer's can pick and choose. Sellers offer incentives like carpet allowance or up to $XXXX prepaids/closing costs.

Sellers market means houses are selling fast,put a listing on the MLS and lots of buyers are looking at it within a day or two and multiple offers and selling for above asking is common.In a class c neighborhood the buyers come from out of the area and buy with cash for investment purposes,in my case they come from NYC and sometimes dont even come see it.Class C houses are affected by a sellers market in that they sell more similar to a class a or b during a sellers market in that they get sold by just putting them on the MLS,you dont need an owner or agent who knows how to sell a low end house by marketing it properly.Sellers market also means i am getting considerably less calls on my advertising to buy houses,i am not needed in the market because everybody wants to flip a house right now.I think the market is starting to slow down in the last couple weeks

You can use whatever label you want to describe the market. It doesn't change the fact that it is simply a matter of prices dynamically adjusting to changing supply and demand.

Last June, after hearing rumors of a 'hot sellers market' in my town, I put one of my Class C rental houses up for sale and did not get one offer. After 60 days of being on the MLS and no offers, I fired my agent. 3 days later, I rented the house at market rent.

David,

I did that last summer. My asking price was based on what other similar houses (comps) in this hood where selling for.

Most recent example. (Sept.2020)

3/1, 120 year old, 2 story.

No driveway or garage.

28' x 75' postage stamp, city lot.

Polished that Pig for rental market.

12- year run.

Self managed and maintained.

City issued 6-year code compliance.

Collected (well over) one hundred thousand in rents.

Paid $18.500, Cash. (08')

Had 20+ come look at it.Owner to look at offers in 5 days.

3- written offers.

Went with a cash offer of $115.000 (Was NOT the highest)

No strings attached to offer.

Closed 10- days later.

All part of MY exit plan.

One less Tenant,Toilet and Tax.

Dowhatyagottado.

Tonia,

With any agent that I list with, I tell them I will give you 60 days max to sell this house on the MLS. After that and with no pending offers, I will rent the house out. IMO, all unsold MLS listings become 'stale' after 60 days,..especially in a hot sellers market.

Does anyone except for investors ever buy in Class C neighborhoods? Investors will never pay full price.

A crappy house that sits almost out in a four lane road got sold in a month next street over. There are contractors looking for homes to rehab and flip since people are not working, or just don't want anyone coming to their home. Not sure where the money is coming from. I know about the grant program that has been available for about 5 years or so. Maybe contractors are driving this trying to keep their people working. There were those govt. business loans given out if you keep your people and don't fire them. That may be the source of the money.

They will still need to pass bank underwriting!

Class C and lower are a different story, as they are usually:

1) Cheaper. Many banks won't mess with properties under $50,000...too small of a spread.

2) Don't meet guidelines for FHA/VA, the average first time borrower's loan product of choice.

3) Often are only attracting investors. I disagree though that "investors don't pay full price." Sale price IS full market price, by definition, unless you are selling under pressure. See the standard def of market price. It just so happens that cheaper houses sell for cheaper prices. That is built into the market already. That's why I say the only time I have successfully bought "at a discount" is when there were few/no other bidders. Exposure = more buyers = better price.

To get a higher price, you can try selling on owner finance like or using the RTO option. That scenario comes with its own risks and the reward is built into the price/terms.

Let's say you believe an investor might pay you $50,000 for your house "as is", but you haven't gotten any offers. Have you offered your property for sale like this?

"For Sale Owner Finance. $2,000 down; payments of $600 for 120 months. Start your journey of being a homeowner today!"

$2,000 down + ($600 x 120 payments) = $74,000.

Roy, would that not be overbuilt and then cost you in a sale?

Mine are selling in days. I am class C - both my multi units and single family. I price them fairly.... a good deal for me and a good deal for the buyer (since they're all investors). I do not own properties that "homeowners" want to live in. Local investors are offering me well less than 1/2 my listing price. My investors have been from out of the area/state and see what a great deal they are getting. Mine are all priced a little lower than other similar properties in the area.

Could I hold out and get a little more? Probably but I am a "bird in the hand" kind of person. My goal is to sell so I am selling.

Tonia: what you need is an "unconditional withdrawal".

Your exposure for commission is only if someone that the Realtor has shown the property to buys the house within a contractually mandated period of time, then you will owe them a commission. This also goes for any prospects that got a showing from a participating broke/agent.

The state specific answer will lie in your contract with the Agency. Do not let them BS you, or drag it out. Too, if you make this request you may get a coupla BS "deals' dragged in by the agent to forestall the withdrawal. Those deals fall apart a few weeks into the escrow process.

Thanks Sid for that great explanation of the Class C selling market. You nailed it!

My experience says that people who can qualify for a traditional mortgage and can get those record low interest rates are generally only looking in Class A and B hoods. They may currently rent in a Class C hood but with a 2.5% mortgage, they can now move up to Class B hood.

My pleasure, Roy.

Btw, I reverse engineered my example in an amortization calculator and the $600 pmt over 10 years works out to around 7.75% interest rate, which is probably too low given the risk. Hard money lenders in my area want 1% per month simple interest or 12% per annum, so if you were going to get "market" rate then that would make each monthly payment around $720, for a total "Sale price" of around $87,000.

Hmmmmm

C neighborhoods are working class blue collar workers. These folks do work. I am not sure why you would think these folks can't get a loan from a bank......perhaps not from a mortgage broker as the loans are smaller.

Roy,

Rates are so low and mortgage rules have relaxed so they don't bother looking at a class C.

Local banks are advertising 2.5%, 30 yr fixed, so they can get a $200,000 4 bedroom, 2 bath, 2 car garage, curbs and sidewalks house where all the mailboxes match for the same $790 payment per month I charge for a $50,000, 900sf, 1 bath, no garage, gravel driveway rental house

Realtors don't want to mess with low end houses - little to no commission. And they tell me selling a $300K house is EASIER than a $75,000 house.

If homes won't sell, consider upping the value with seller financing or creative terms. MOST low end home buyers cannot qualify for a bank loan.

RTO does GREAT for us. People just keep putting $1000-5000 Non-refundable Option Fee each time it turns.

BRAD

Brad20K,

You nailed it too. My only point with this post was that a 'hot sellers market' only seems to exist in Class A & B markets where all of the cheap mortgage money is.

In Class C markets, things are different. I have sold houses in Class C hoods, but they were only sold to other investors who had cash.

The reason $300K houses are easier to sell is because the realtors are not having to deal with rookie first time homebuyers who need a realtor to hold their hands. Buyers for $300K houses are more seasoned, mature and are willing to put their money where their mouth is.