You’re in a tough spot. You’ve been looking for a house for the past few months, only to watch several that you really liked slip away in a frenzied bidding spree.
Your agent tells you not to worry. Other houses will come along. But the market is really hot, and they end up selling a few minutes, hours, or days after being listed, before you can mobilize.
Across the country, many home buyers are facing similar situations. When the market gets tight, there are too many home buyers who want to purchase the few homes that are for sale. Competition for these good homes increases, and prices rise.
That can be a scary situation, particularly for first-time buyers and sellers who have lived in their homes for a long time. First-time buyers are afraid of over-paying for a home they don’t plan to live in for more than 5 to 7 years. Sellers who think they got an incredible offer for their homes, then start looking and realize they can’t buy much with what they received.
Here are some tips for surviving a tight market:
- Know the market inside and out. If you’re buying a home, you’;re going to want to know exactly what’s happening in the neighborhood in which you want to live. That means spending some time visiting open houses, even homes that you’re not interested in buying. What you’re trying to do is develop a base of knowledge about what homes are worth in the community. When you go to these open houses, you should also spend a few minutes chatting with the seller’s agent and gain his or her perspective of the market.
Once you’ve narrowed down your search from an entire city or suburb to a neighborhood or subdivision, take the time to walk the streets of the neighborhood and look at the housing stock. Do the owners take care of their property? Is the neighborhood changing? Are lawns neatly manicured? Are sidewalks shoveled? Finally, visit the local grocery store and service shops. Who is frequenting these establishments? Watch who takes the local public transportation and who gets off after the commute home.
These are telling clues about a neighborhood and can help you make a correct, swift decision.
- Know what the house is worth before you make an offer. Home buyers often get caught up in a bidding war without knowing where to stop. They figure as long as they can afford it, why not pay whatever it takes to buy that particular home.
But that kind of thinking can get you into trouble. It’s better to know what is the maximum amount you’re willing to pay for a home before you get into a bidding war. In other words, predetermine the value. That way, you know when to stop raising your offer.
Should you ever pay more than list price for a home? Perhaps, says Connie Schoch, a Coldwell Banker agent.
There are times, she says, when you should pay “whatever the market will bear.”If homes have appreciated greatly in a neighborhood, and everything is selling for more than list price, it’s possible that the agent has underpriced a particular home.
- Winning the multi-bid. If the home you want appears to be going toward a multi-bid situation, you have to get ready quickly, Schoch says.
“If there are many bids coming in on a property and you know you want it, definitely make your best offer first, even if has to be slightly higher than their asking price. You want to get their attention and that’s certainly the way you’re going to get it,” she adds.
Remember, money isn’t everything to every seller. Sometimes timing is far more important. If you’re flexible about when you’re willing to close — whether it’s in two weeks or four months — you may find the seller more flexible about price, or which fixtures and appliances will be left with the house.
- Enhancing your chances of selling. While the market is hot in most of the United States, and will probably remain this way as long as interest rates stay relatively low, there are some places and some houses for which selling remains a challenge.
If you’re in a situation where homes aren’;t selling quickly, there are some things you can do to enhance your chances of selling, says Schoch.
First, price your home right the first time. “Don’t try to get more than you know the property is worth because you’re going to lose that whole first couple of weeks on the market to buyers who will overlook your home because it’s overpriced,” she says.
Next, seriously consider every offer, particularly the first one. “The first offer is usually your best offer, and you should negotiate that offer as if it will be your first, last and best offer, because typically that’s what happens,” Schoch points out.
Finally, don’t be greedy. Think about a minimum acceptable price that you’d be happy to get for your home. Every dollar you get over that price should be considered gravy. Don’t hold out for every last dime, or you could drive away buyers.