It’s a good time to sell a house, but a really frustrating time to buy.
In red light districts around Philadelphia and nationwide, single-family homes are selling fast – often with multiple offers driving the price up. In one extreme case, a four-bedroom home in a Washington, DC suburb received 129 bids and sold for nearly double its list price of $ 275,000, Redfin reported. A four-bedroom rancher in Boston recently drew 71 bids.
“If the house is even relatively decent, it will sell in two days,” said Andrew Black, a Redfin agent in Philadelphia.
Nationally in March, 59% of homes under contract had accepted an offer within the first two weeks of being on the market, according to a Redfin sales analysis in over 400 metropolitan areas, including Philadelphia.
“It’s definitely a sellers market,” said Holly Garber, a BHHS Fox & Roach agent in South Jersey. “If you have the space, if that’s what the locals want, you’re going to have bidding wars, multiple bids. … This is definitely a time of madness.
Garber, who focuses on Cherry Hill, Haddonfield, Moorestown and the Jersey Shore, has worked with around 10 eager buyers who are struggling to find homes.
A “seller’s market»Means that demand exceeds supply. The area’s housing stock was low even before the pandemic, so COVID-induced reluctance to sell, combined with the slowdown in new construction since the Great Recession, has left many interested buyers competing for very few homes.
Philadelphia has about three times as many buyers for each home as it does in a balanced market, said Bill Lublin, CEO of Century 21 Advantage Gold in Philadelphia. The suburbs of Pennsylvania and South Jersey have about six times as many buyers for each home.
“When the supply is low and listed homes are contracted quickly, it gives potential buyers not only to bid quickly, but also to bid higher than they would otherwise before a no other buyer beats them, ”Drexel University economist Kevin Gillen writes in Q4 2020 Market Report released in February.
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Cramped in tight quarters this past year, many buyers are looking for more and different spaces, including backyards, swimming pools, offices, gyms, and in-laws apartments. And “people who used to be happy with rentals aren’t happy anymore,” Black said.
For buyers, “mentally it’s a roller coaster,” he said. They can’t just love a house; they must be prepared to fight for it.
“You can make an amazing offer and lose,” Black said. “And then you have to start all over again next weekend. It can get very overwhelming.
Buyers who can bid for cash have a distinct advantage in this market, but most people need the product from one home to buy another. Agents help buyers craft flexible bids to maximize their chances of winning an auction war. Here are the strategies recommended by officers in the region.
Get pre-approved for your mortgage. “In fact, we don’t show properties now until people have requested and approved,” Lublin said. You can’t make an offer until you’ve been pre-approved, Garber said.
Work with a professional. Realtors have access to more detailed data than buyers can find on the internet regarding recent and comparable sales, upcoming homes on the market, the results of recent auction wars, and more, Lublin said. , who is also a board member of Bright MLS, which has 95,000 subscribers. In today’s market, buyers need to know the selling prices of six days ago, not six months or a year.
“Consumers are best served by choosing someone who they are really comfortable with, who is knowledgeable, who will work for them,” he said.
Adjust your budget. If homes are selling for 2% or 3% above asking price in a neighborhood you love, consider buying a home slightly below your maximum price, so you can participate in a bidding war.
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See the house in person as soon as possible. “You have to come in to view the property as soon as possible,” said Black. “You only have a few days.” Watch for “coming soon” announcements and be ready to jump.
While virtual tours replaced by a tour during the pandemic, agents now agree that buyers should visit in person. Sellers would be less likely to choose a bidder who viewed the house only online, Black said, fearing the buyer would return later.
Consider an escalation clause. For competitive situations, agents can structure a “climbing auctionThat automatically increases a buyer’s bid in defined increments from the highest bid – by $ 5,000, for example – up to a maximum price. This keeps a buyer in the game while minimizing exposure, Black said.
Modify the home inspection. Officers interviewed said they would never recommend forgoing a home inspection. It’s too risky, they said. Buyers might say, however, that they won’t order repairs below a certain cost, say $ 20,000, or they might limit the inspection to structural issues such as the foundation or the roof. Some buyers will agree to accept the house as is or to walk away if the inspection reveals something important.
“We tell our buyers not to be so picky these days,” Garber said.
“LEARN MORE: Home inspections are a bargaining chip in the hot Philly area real estate market
Forgo the possibility of evaluation. Buyers financing their purchase must have an evaluation before closing the sale. If the offer is greater than the listing price and the evaluation is at or below the listing price, the buyer may agree to compensate all or part of the difference in cash at the time of payment.
“If you plan to live in the house for 20 years and love this house, then it doesn’t matter” if you pay a little more, said Maria Quattrone, CEO of Maria Quattrone & Associates at RE / MAX in Creme Philadelphia. Especially with such low mortgage interest rates, you will get your investment back over time.
Increase your deposit. Serious money is a deposit that buyers put down to show that they are serious about a home. Typically, it is placed in an escrow account and applied to the purchase price at closing. Some buyers release these funds early as a non-refundable deposit within days of signing the contract. Others increase the amount. The risk for buyers is that if their financing fails, they will lose money.
Be flexible with the closure. Accept a settlement date that works for the seller, agents advise. Offer extensions or a rental option, if the seller needs time to find accommodation.
Buyers often become more flexible after going through one or two bidding wars, Garber said.
“Once they’ve lost a few houses, they’d be more willing to say, ‘You know what? We are going to go above the asking price ”or“ I will put more ”,” she said.
But Garber said she also warns customers when she thinks the price is too high. “If you have to sell it in five years,” she said, “you might be in a whole different position where you’re not going to take that money out.”
Some buyers will stop looking, at least for now.
“The typical family who are always on the hunt for an affordable home may have missed the boat,” said Redfin chief economist Daryl Fairweather. “First-time homebuyers who were already stretching their budgets will have to make bigger compromises on size and location or forgo renting for another year.”
If you buy now, said Lublin, “don’t take risks that you can’t absorb. Just make the best offer you can. “
“There will always be another house, you know?”