Competition on Homes for Sale Heating Up: Are You Ready?
Recently, we’ve posted a few articles on the mixed blessing of low inventory. On the one hand, the shortage of homes available has helped buoy home prices on a national scale, but there’s also a lot of concern about a flood of shadow inventory (homes still in the process of foreclosure) that could undo some of the housing market’s recovery.
There’s no guarantee that the “foreclosure tsunami” is on its way at all, especially if you look at the recent reporting: new foreclosures are down more than thirty percent year-over-year, and mortgage delinquencies (the first sign of a budding foreclosure) are down, too. And if more foreclosures do hit the market, they may trickle into the most troubled markets.
In any case, sellers seem especially shy this spring. Maybe they’re waiting for pre-bust home prices, but there’s no denying that many markets are experiencing a severe inventory shortage, and in some markets, the return of bidding wars!
Know Your Neighborhood
Do your homework. I never get tired of saying that, because it’s the key to forming right expectations about the offer process where you are buying. Bidding wars are not going to be happening in every neighborhood at every price point. You need to know your local scene.
Spend some time researching similar homes in similar price ranges in the places you’re looking to buy. You can use online tools, such as Zip’s Price History tool, to track what homes are listed at and what they eventually sell for to get a sense if you’re going to need to offer over asking.
Let Your Agent Guide You
Have your agent prepare a CMA and talk you through the comparable numbers. Your agent is essential to figuring out what’s happening in your hyper-local market, especially because it could change quickly. If a glut of foreclosed homes hits your area, the balance will shift, even if it has not shifted the next neighborhood over.
For example, one of Zip’s agents, Guy Contaldi, recently wrote a blog post about how bidding wars and buyer demand is looking in Boston real estate. He compares and contrasts the housing markets in Malden, Cambridge, and Somerville. Though they are all experiencing inventory shortage, Malden is much better from a buyer’s perspective than Somerville.
Does this mean we are headed for a complete real estate rebound? Maybe. What it does say is that if your home is priced correctly and shows well, it will sell in this market and sell fast. Sellers who are realistic about their asking price and may have been on the fence should think about getting in the game. Buyers who have been holding off, now is the time. You will never know when the market is going up until the prices do; then it will be too late.
Whether you’re a buyer or seller, readiness is important right now. You should be ready to act when your local housing market favors you, ready to offer above asking if you’re hunting in a hot neighborhood, ready to accept multiple offers if you price your home correctly.
And you should be ready for your local market to change at any moment.
Over the next few weeks, we’ll be doing a few posts on how to compete in a hot market, how to make a quick and convincing offer, how to proceed if you find yourself in a bidding war, and more. Stay tuned for all these timely tips.
Sarah Louise Green lives in the San Francisco Bay Area and writes about national real estate trends, home financing, advice for buyers, and DIY projects for the home and garden. Follow Sarah on Twitter: @slouisegreen