Buying or selling a house this year? Then you’re probably trying to wrap your head around all the real estate jargon. No doubt you’ve heard of a buyer’s market and a seller’s market. (A buyer’s market benefits buyers, and a seller’s market benefits sellers.) But have you heard of a stratified market?
Don’t worry—this is one of those terms that, while not immediately obvious, sounds a lot more complicated than it is. In fact, a stratified market means a city or town that isn’t categorized as just a buyer’s market or seller’s market—it can show differing levels of supply and demand in different areas based on price range.
Because variables make all the difference in a stratified market, there are a few key things you should know about navigating one and making it work for you. Here’s what you need to know about buying or selling a home in a stratified market.
What is a stratified market?
Identifying a market as stratified is a helpful organization tool for real estate agents.
“Certain parts of a city can vary drastically in home values, types of homes, and whether folks are moving in or out,” says luxury real estate agent Jamie Safier of Douglas Elliman. “A good example would be when an unusually large amount of wealthy buyers begin picking up [$1 million-plus] homes, creating a seller’s market, and at the same time, more modest homes under $500,000 experience sluggish sales, which would be a buyer’s market.”
This would be considered a stratified market because both of these things are happening in the same metro area at the same time. Knowing this information isn’t just helpful for real estate agents; it can also improve your chances of getting the best deal on a home purchase or on the sale of your current one.
What you need to know as a buyer in a stratified market
Whether you’re a buyer or seller, getting the most out of a stratified market is all about understanding which segment you fall into.
“A buyer can make more efficient use of their time by understanding what neighborhoods and areas of the city will have the home types and sizes that they are interested in and can afford,” says Matt Fuller, co-founder of Jackson Fuller Real Estate. Buyers should focus on these areas, he says, to more fully understand things like pricing dynamics and available inventory.
“When deciding on offer strategy and price, make sure you’re comparing your potential home to the right type of properties in the relevant neighborhoods,” he says.
What you need to know as a seller in a stratified market
As a seller, you’ll similarly want to look at what segment of the market your home falls in, since this can help you and your real estate agent come up with the best pricing strategy.
“Make sure you’re basing your asking price on homes that are similar in location, size, condition, and finishes, and of the same property type,” says Fuller. “In my market, homes that are underpriced will be corrected by the market within a short time frame, while overpriced homes will languish before inevitably having their price cut or being withdrawn.”
Understanding the patterns and trends of your current real estate market will help you and your agent come up with an effective marketing strategy, and ultimately help you sell your home at the top of its value.
Home prices are on the rise, climbing another 3% year over year, according to S&P CoreLogic Case-Shiller 20-city home price index from February released this month. Still, that growth is slowing and some experts are predicting that we’re increasingly entering a buyer’s market.
And that means sellers who want to get a premium for their home may have to work for it. So MarketWatch dug into the research and asked experts what really moves the needle to get you a better-than-average price for your home. Here’s what we found.
‘By listing during the week of March 31 to April 6, sellers are able to take advantage of a sweet spot in the season that offers high buyer demand, less competition, quick home sales, and strong price.’
Sellers got a premium in other spring and summer months too: May (7.4%); July (7.3%); April (6.4 %); March (6.1%); August (5.8%); meanwhile December, January and October sellers got less than a 4% premium. ATTOM’s Chief Product Officer Todd Teta says that this is because demand is much higher in spring and summer in part because school is out and winter is over so people are out and about.
Pause before you renovate. While you might be tempted to put in a top-of-the-line kitchen or a fresh bathroom, most of the time you don’t recoup the costs of a big-time renovation when you sell, according to a study of 22 major renovations. Indeed, with the two renovations where you recoup the highest percentage of your costs — garage door renovation and manufactured stone veneers — you’re still out of pocket at least $100.
So if your house is in decent condition, you may be financially better off making smaller cosmetic updates that don’t cost much. “If the house has ‘good bones’ — which refers to items like structural integrity, a solid roof, well-functioning windows and sufficient HVAC (heating, ventilation and air conditioning) — then upgrading the FF&E [finishes, fixtures and equipment] may be very worthwhile,” says Justin Riordan, interior designer, architect and founder of the Portland-based home staging company Spade and Archer Design Agency. That might include “fresh interior paint, new carpeting, refinishing wood floors, replacing outdated countertops, painting cabinets, and installing new appliances and light fixtures. Recouping the cost of these items is easy provided the bones are good and the house is beautifully staged and presented to potential homebuyers.”
Set the stage. Nathan Garrett, owner of Garretts Realty in Louisville, Ken., says that you should both “create more floor space and room by removing any unnecessary furniture” and “create more closet space by packing away 50% of your belongings so it looks like there is plenty of storage.”
And if you can find an affordable staging company — or do it smartly yourself for little money — that’s a good bet too, according to a study MarketWatch recently reported on. Kati Baker, a luxury home staging specialist with Downtown Realty Company in Chicago, says you should take a lot of your personal effects out of the home: “Today’s buyers want to walk in the door and immediately envision themselves in the space. So, we start with a blank slate – paint the walls a neutral color, remove personal photos and knick-knacks, haul non-essentials to off-site storage, clear all countertops – and then we add visual items to highlight the space and make it interesting.” That means putting up a few mirrors (which can make a space seem bigger) or neutral and tasteful art pieces (think abstract canvas art), especially large artwork “as too many small pieces in one space can create visual clutter and look messy.”
Another pro tip: “Set a vignette that highlights a favorite feature of the home. For example, we might arrange a tray with two glasses and a bottle of wine on a bar countertop or place plush towels, bath salts and a candle on the ledge of a soaking tub,” says Baker.
‘Sure, you have a fancy camera and you take great photos of your cat, but you’ll garner much more interest in your property and make more money if you leave the listing photos to the pros.’
Call in the pros for photos. Fully 90% of homebuyers searched online for a home to buy, according to data from the National Association of Realtors — and that showcases just how important good photos are towards getting people into your home for a viewing.
“One of the first things a potential home buyer will do is see photos of the house online before they even see the house. First impressions are crucial in garnering interest from the largest number of potential buyers and therefore creating competition that drives up the sale price of the home,” says real estate investor Ryan Substad, owner of Northwest Property Solutions.
That usually means hiring a pro: “Sure you have a fancy camera and you take great photos of your cat, but you’ll garner much more interest in your property and make more money if you leave the listing photos to the pros,” says John Graff, the CEO and a broker at Ashby & Graff Real Estate Los Angeles. “Depending on the real estate in question it may be worth paying extra for virtual tours, drone videos, and other creative ways to generate interest in your home.” Indeed, pros can make small rooms look bigger, dimly lit areas brighter and more.
“Taking your own photos (or having your agent take photos) might save you $100-$200 but in the end it might cost you thousands of dollars on the back end when you end up selling your home for less,” says Substad.