Buyer competition may get even stiffer in Spring – be prepared
In my post of February 4, I discussed how 2020 was a record-breaking year for Houston home sales. Well, all indicators point to that trend continuing at least through this Spring and likely beyond. There was a very low number of homes available for sale in January, which will likely cause prices to continue rising at least through Spring. As seen in the chart below, new home listings have dropped considerably across the nation from the previous year, while median listing prices have risen:
Realtor Magazine, February 2021
Realtors understand the importance of acting quickly in this kind of market, but not all buyers are aware of this urgency (especially first-time buyers). Many may have an unpleasant experience the first time they make an offer, when it turns into the inevitable “bidding war” with other buyers. That’s why it’s crucial that realtors prepare buyers for this situation by explaining the market, as well as the best strategies to get that home they want in such a competitive seller’s market.
Negotiation is certainly a big part of the process, but a bit of old-fashioned psychology and common sense comes into play also. How much do you want to offer initially? What’s the absolute highest you can ultimately go? Do you increase in large or small amounts? Will the home appraise for the highest amount you are willing to pay (of course, if you’re a cash buyer this isn’t a concern)? Are you willing to offer even more than what the home will appraise for, and make a larger down payment to offset the higher purchase price? And try to put yourself in your competitor’s shoes – they could be thinking just like you as far as pricing, or they could be a bit lower or higher. And are they automatically adding $5000 (a nice, round number) to their original offer, or tacking on substantially more?
It can be a bit nerve-wracking for buyers, but also for their realtors at times. It’s just all part of the business, so try your best to be prepared. You may end up losing a couple of homes to higher offers, but I promise you that you will ultimately win that dream home.