Change is in the air in the Sedona real estate market, in more ways than one. Today I’ll give you my thoughts on the direction of the market and on a new business model that’s starting to gather attention, i-Buyers.
Let’s begin with the market. So far, it has been a stellar, sellers’ market for about three years, with Sedona prices rising almost 30% in that period in many price ranges below a million dollars. These price increases have been driven by pent-up demand as home-building has lagged population growth, as inventory levels have hit historic lows and as interest rates have made home buying a very low risk financial transaction. However, the word on the street amongst agents is that we are seeing a slowdown in “pending sales”, which will show up in 30-60 days as a reduction in closed sales units.
Nobody knows for sure of course, but I have a few ideas which I’ll share. Yes, the market is probably “taking a breather” as buyers adjust to rising mortgage rates – which was The Fed’s intention all along – and it may last a few months or even a year or so. During that time, prices may slip a little as motivated sellers undercut the competition to garner a quick sale, but I believe any adjustment will be 10% maximum. If buyers continue to hold back, more homes will sit on the market, giving an edge to buyers for a change, and so the real estate cycle will begin afresh. If you are a prospective seller, now may be the time to sell at or near the top.
Now for i-Buyers. These are national companies such as Opendoor, Purple Bricks and Redfin that make sight-unseen offers to purchase from homeowners and promise a quick close. They arrive at the price via sophisticated, computer algorithms then deduct a commission and also a margin of profit (whose combined total is between 10% and 15% of the price), conduct an inspection and adjust the price again for repairs and then close for cash after 30 to 60 days.. As the companies exist to make a profit, the costs are significantly higher than in a standard transaction but for some sellers the speed is worth the cost – maybe sellers in distress or in a situation where time is lacking.
Unfortunately, I don’t know of anyone offering this service in Sedona and I’ll explain why in a moment. From the calls that I made, this new business model is a “referral model” in Sedona: the i-Buyer company takes the prospective sellers’ contact information and then “sells” it to several local agents in exchange for a percentage of the agents’ commission if the client chooses to do business with them. Personally, I’d prefer to choose my own agent.
The model probably doesn’t work here because of the custom nature of our market. If you are a Phoenix seller who lives in a subdivision of tract homes where there are 5 or 6 basic models to choose from, a computer can come up with a pretty accurate price estimate – think Zillow’s “zestimates” – but in Sedona that is not the case. Here, most homes are one of a kind so adjusting the price for different views, levels of finish, amenities, lot size and location is beyond the capabilities of a computer and a flesh and blood, experienced agent can do a far more accurate price opinion, as well as charging less.
This month’s Real Estate Review was written by Andrew Brearley, manager of Coldwell Banker Residential Brokerage in Sedona. Andrew can be contacted at 928 300 2973 or by email at firstname.lastname@example.org.