Here is some bright news for buyers, according to Realtor.com, new MLS listings were up in early to mid-April by about 40% over last year. But that statistic needs to be kept in context. At this time last year, pandemic fears were in full swing. Listings dropped while people tried to figure out what was coming next. Then the residential market rebounded quickly. What you can learn from this is that if new listings continue to outpace last year’s listing going forward, it will indicate relief for buyers is on the way in the near future. If new listings stay flat or decline, it will continue to be an extreme challenge for buyers.
Either way, prices are still very high and going higher. In March, the year-on-year median price for an existing home was up 17.2% at $329,100. The market remains tight and expensive but it could be opening up to at least give buyers a larger selection to choose from.
One strategy for buyers in this extreme seller’s market could be taking a bit of a risk. The risk is sitting on the sidelines for a month or two to see what the market actually does. Right now, we are in what is traditionally the hottest market of the year. Sitting on the sideline does risk that prices will be even higher and there will be fewer listings two months down the road. Or, prices could stabilize and in two months there could be a wider selection with less competition. No one has a crystal ball but here are a few tips to help you figure out what might work in your situation.
Learn the statistics and trends in the specific location where you want to buy. Learn the number of new listings that have come on the market in the past month or six weeks.
Learn the number of days these houses have been staying on the market before an offer is made. This is called days on market or DOM. Learn if the offers have been below the asking price, full asking price, or if a bidding war took place. Look for the trend over the most recent few weeks. Of course, these trends are only relevant to houses in your price range.
Make sure you understand your personal dollar numbers thoroughly. Not just the down payment required and purchase price that you are approved at. Learn the tax rate and insurance rates in the neighborhoods where you are looking. Get down into the nitty-gritty details to learn the rates for sewer, water, trash, etc. And of course, any HOA fees that will apply. The more you know about your future costs and your current income, the more accurately you can calculate the maximum purchase price that you can afford.
Save your energy and sanity by not going to every open house or personally touring every new listing. Take advantage of virtual tours so that you only personally look at houses you are truly interested in.
But do sign up on real estate websites to be notified whenever a new home comes on the market in your area. Be prepared on short notice to go view a new listing that interests you.
By having a thorough understanding of your finances, you can gather any needed information specific to a house that you are interested in and quickly calculate the maximum offer you can make. You don’t have to start with a maximum offer but you need to know what your maximum can be.
By knowing your neighborhood and the trends, you will know if you have an advantage or are at a disadvantage. You can work closely with your real estate agent to structure an offer that will gain the attention of the seller based on contingencies, concessions, and anticipated closing date.
Be patient. Even if you are outbid, make your best offer a backup offer. Many buyers are desperate. Some buyers will offer more than they can deliver. The house might not appraise at the highest offer. Your backup offer could become the best offer the seller can take to the bank.
Don’t settle. Even if you have to move to a new town on a deadline, you can always rent until you find a house that is right for you and that you can afford. Buying a home is a huge investment. You want to get this right even if it means waiting for a slower market this fall or winter.
If you are in an extreme seller’s market, you might want to go in with your eyes open to bidding wars. You need to be looking at homes listed well below the top end of your budget. In the end, it comes down to the numbers. Winning a bidding war means that you have to want the home more than the other guy does and that you can afford to pay more than the other guy.
What tips and experiences can you offer buyers an extreme sellers’ market? Please share by leaving a comment.
Also, our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions, inquiries, or article ideas to [email protected].
Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
