Question: I’ve submitted two offers on home this year and both times lost to multiple offers. Is this normal or is the market more competitive this year?
Answer: 2018 has been a good year for sellers and a frustrating one for buyers already. Generally, I don’t start seeing multiple offer deals until late February/early March, when it starts to warm up and days get longer.
However, about 80% of the listing and purchase deals I’ve been on this year have ended up with multiple offers. I even had a listing that had been on market for three months receive three offers in one weekend. My colleagues who work in new construction and generally have the best pulse on market pace have also been surprised by the amount of activity this early.
Here are some numbers in Arlington from January to back up the anecdotal evidence of a hot market:
- Supply Down, Demand Up: Monthly of supply measures how long it would take to sell all existing inventory at the current market pace (supply and demand) is down 21% YoY and at its lowest levels (1.31 months of supply) since March 2013 (1.22 months of supply)
- More Homes Under Contract: Over 200 homes went under contract in January (215) for the first time since 2012 (219)
- Homes Under Contract Faster: Of the 119 homes that were listed and went under contract in January 2018, 69% went under contract within one week. Over the last five years, 49% of homes listed and under contract in January went under contract within one week.
- Average Number Of New Listings: The amount of new homes listed on market in January 2018 (234) is about average for what we’ve seen over the last decade
Advice For Buyers
Periods of low inventory and high demand can be frustrating for buyers, so here are a few tips for buyers to create leverage for themselves without simply paying more:
- Quality Of Lender: Have a pre-approval letter from a strong local lender who has review all relevant documents, not just somebody who checks credit score and asks for basic financial information. A strong lender letter gives the seller confidence you will close on the home on time, without complications.
- Contingencies: Consider giving up your right to request repairs and credits after the home inspection and using a Pass/Fail contingency instead. This shows that you’re not interested in nickel and diming a seller, but just want to make sure there are no major issues. You can also offer to cover up to a certain dollar amount in the event of a low appraisal, if you are offering to pay above the asking price.
- Close Faster: Most homeowners want to close as quickly as possible. A good lender can have you ready to close in 20 days vs the more common 30-40 day close.
- Don’t Play Games: We all want to negotiate a great deal, but oftentimes a great deal is actually having your offer accepted not saving a few thousand dollars. When a seller has multiple similar offers, they often put more weight in who they think is most likely to close with the least complications. In that scenario it pays off to make it clear how much you love/want the home instead of acting like you could take it or leave in an attempt to negotiate a lower price.
- Days On Market: The number of days a property has been on market should dictate how you approach an offer. You won’t have much leverage in the first few weeks or after a major price reduction.
The spring market can be a great time for buyers who are prepared for competition because you’ll see a significant increase in inventory, so that illusive 2 bedroom + den or half acre yard with a deck is more likely to materialize.
If you’re not prepared to make a strong offer, the spring can be frustrating and defeating because you may watch your dream home(s) go to other buyers who have made smarter, but not necessarily higher offers.