Your property search is fully underway. You’ve seen everything from tiny homes in East Nashville to waterfront property in Old Hickory. New construction, midcentury renovations, a yurt in Ashland City. And then it appears. The ONE. Your trusted real estate adviser schedules the first available showing timeslot. A rainbow appears, unicorns swoop low, and before you’ve stepped in the front door, you’re ready to make an offer.
You and perhaps a few other prospective buyers. Or 10. Or 20!
More people than ever are moving to Nashville, major businesses continue to fill the relocation pipeline, and real estate investors show great favor toward the Nashville market.
But hey, you’re pre-qualified and a lender’s dream: perfect debt-to-income ratio, excellent credit score, solid cash position for down payment and closing expenses. How could you possibly not win the contract? Right?
It will come as a surprise to, well, literally no one reading this article that the supply of houses currently available for sale in the Nashville-area market (“inventory”) is fairly low and demand is pretty darn high.
Real estate analysts use several indicators to assess the competitive balance in a local real estate market. As a rule of thumb, inventory of greater than six months indicates a buyer’s market, while inventory of less than three months indicates a strong seller’s market. 2021 year-to-date inventory for Davidson County residential listings is 1.4 months and 1.1 months for Williamson County.
Absorption rate is another measure of supply and demand important in evaluating the real estate market. Take the number of homes sold in a month and divide that number by the number on the market, and a percentage of 20% or more indicates a “hotter” real estate market with rising home demand and home prices and, most notably, quicker sales. For Davidson County in October, there were 1,977 residential properties for sale and 1,319 sold — 1,319 divided by 1,977 yields a 66.8% absorption rate. For Williamson County, October delivered an 81.6% absorption rate.
In a seller’s market, it’s common for a listing to receive several offers to purchase in the first few days on the market, creating what’s aptly known as a “multiple offer situation.”
As a buyer, a multiple offer situation is less than ideal because you’re competing with other buyers to secure a contract, not merely negotiating a deal with a seller.
So, here are a few things to keep in mind when buying real estate in a seller’s market:
For properties that are appropriately priced, multiple offers may be received within the first day or two of being listed, so you want to be ready to move quickly when you find the right one. Complete as much of your pre-offer due diligence before you begin your property search in earnest — and not just getting your finances in order.
For example, the listing says “All offers due by This Day at This Time,” and by the time you submit your offer the property is already under contract.
Yes, that can happen. A seller can decide at any point to change the terms of engagement. Perhaps they received the “perfect” offer and don’t want to review others, or perhaps Michael Corleone made them an offer they couldn’t refuse.
There’s a phrase bouncing through the Nashville real estate community that if you sleep on it, you won’t sleep in it. While this in no way advocates shortchanging your research and preparation, don’t dilly dally, either. Have all your ducks in a row and be ready to strike when you’ve found the property you want.
Purchasing real estate in a seller’s market brings a unique set of challenges to buyers and investors, but having a strategy, as well as a plan and the resources to execute on that buying strategy, will place you in the best possible position for winning the contract and securing your own piece of Nashville.
Rebecca Cooper is a practicing real estate broker with VILLAGE, a licensed instructor for the TN Real Estate Commission and a card-carrying Realtor whose love language is real estate contract terms and data analysis. Reach out to her at rebeccacooper615@gmail.com with any questions, comments or real estate conundrums.
