Everybody’s talking about it. The real estate market has lost its mind.
Well, maybe.
True facts: Inventory remains tight, demand remains high, and buyers are bidding up the price of houses. Multiple-offer bidding wars break out with alarming frequency. Week-before-last I got a bound offer at $51,000 over asking price, with an escalation clause on top of that, and no appraisal contingency … in nine hours!
Not-so-true facts: We are in a hot air balloon, drifting farther and farther from earth, we are going to crash, and we are all going to die.
This market feels unprecedented – not to mention a little bit scary. And perhaps it is. But reality eventually imposes limits.
While bidding wars seem the norm these days, and sellers are on high alert for that (mythical) buyer from California or New York who will throw big bags of money at anything, overpriced houses DO NOT SELL.
Count on this!
Because things are so wild right now, we might need to define “overpriced” before going further. In my world, things are worth exactly what people will pay for them – no more, no less. What a buyer is willing to pay for a house today is what it is worth – to that buyer on that day. So what do we mean by “overpriced?”
Overpriced houses are the ones that don’t sell.
Do those even exist these days? You bet they do! This past fall I had an overpriced listing (seller’s choice on the asking price) and we had 77 showings in three weeks without a single offer. The seller agreed to drop the price to where it should have been all along, and we had two offers within 24 hours, both above the new asking price.
When a seller asks the market for a certain price, the market responds. Sometimes it responds with a bidding war. Sometimes with total silence.
So, how do we apply this to buying and selling? And maintaining one’s sanity?
For sellers: Don’t get greedy. Look at the comps, ask a good price, and accept the results. And be aware that the highest offer may not be the best offer. If it’s too high to appraise, everybody – including you – will likely get cranky in a big hurry!
For buyers: KNOW YOUR LIMITS! Focused searching, fast action, and aggressive offers are the name of the game, but know when to stop. Don’t let the excitement of the auction atmosphere lead you to an offer that will give you a hangover in the morning.
And – I believe I’ve said this before – let your realtor guide you to the best deal.