Hot, Cold, or Neutral Market Strategies
One of the exciting things about the real estate business is that it’s always changing. Just when you think you’ve figured out all of the angles, a new one pops up. The market is always shifting, a Bull Market will be followed by a Bear Market. If covid taught us anything, it’s that NYC rebounds even in the worst of times.
Buyer Strategies for Hot, Cold, and Neutral Markets
In a hot market, the seller will call the shots.
Offering price: If competitive offers are expected, buyers need to put their best foot forward. This means the best offering price they can afford that is still reasonable for the property and the market.
Terms: Offer seller-favorable terms like shortened contingency periods, quick closing date, or a grace period for seller possession after closing. The cleaner the offer, the better.
Personal items: Don’t ask for personal items unless they’ve been listed in the MLS as conveying.
In a cold market, buyers can take advantage of the power position.
Offering price: Go low, as much as 10% below asking price. Buyers can get good deals if the house has been on the market a while—low-ball offers in a cold market usually get a counter-offer. If it’s new on the market, buyers may wait before making a low offer.
Terms: Ask the seller to pay buyer closing costs.
Personal items: Ask for appliances, gas grill, etc.
In a neutral market, expect some give and take.
Offering price: Provided that comparables support the list price, offer at or just below current price.
Terms: Offer standard terms (usual contingencies, reasonable closing date, and possession on day of closing).
Personal items: Be judicious in what you ask for.
Seller Strategies for Hot, Cold, and Neutral Markets
For sellers in a hot market:
Pricing: Price a little below market. When others are listing at or above market rate, pricing below market may incite bidding wars, fetching far more than pricing it at market rate.
Countering a lower-than-full-price offer: A lower-than-full-price offer may go unanswered entirely, because it’s likely that offers above list price are forthcoming. By not countering, the seller doesn’t have to wait for a response from a not-that-interested buyer. The seller can ask the party to resubmit a higher offer, however.
Multiple offers: Have all buyers submit their “highest and best” or accept the best offer and try to obtain a back-up offer from the second-best.
In a cold market:
Pricing: Price below market. This will help generate interest from buyers but don’t expect full-price offers—buyers may go even lower.
Countering a lower-than-full-price offer: This depends on how low the offer is. One approach is to select a midway point between the gap and add a small amount so that it would seem unfriendly to counter again. This works if that point is acceptable to the seller, and the buyer’s truly interested. If the offer is truly abysmal, the buyer’s likely fishing and not that interested. Counter close to list.
Multiple offers: This is rare in a cold market unless the property is priced significantly below market, to the point investors are interested
In a neutral market:
Pricing: Price below market. This invites interest in the listing and may prompt multiple offers, up to the listing price and beyond.
Countering a lower-than-full-price offer: If the offered price is close but acceptable, sellers may decide to accept. Check other terms first, though. Sometimes a lower offer is a better deal if another buyer has made a higher offer but is asking for seller credits or doesn’t have solid financing. Here's another option: If the seller feels strongly about the price, counter at or slightly below list price.
Multiple offers: Unlikely. If it does happen, go with the best offer and try to obtain a back-up from the second-best offer.