In early 2020 it was common for buyers to say that they were putting their search on hold to wait for prices to come down. Most of them regret that decision. Median home prices increased almost 10% last year, and the competition for limited inventory has intensified. Today the question is how do you compete and win in a market where good homes are selling in as little as a few days? Whether you are buying your first home or stepping up to your dream home, here are 4 keys to success in a highly competitive market.
1. Get the Right Support
Real estate is a team sport. It takes practice, expertise, creativity, finesse, professional networks, and trust. Like a Sherpa orchestrating your ascent of Mt. Everest, your agent should be right there with you in the planning, preparing, and navigating of every step to the summit.
Conditions can and do change quickly on real estate mountain. A good Sherpa will be there to address all obstacles as they arise, and help you continue safely on to your goal.
Finding homes for sale is easy. Everybody sees the mountain range in the distance. It’s when you strap on your cleats and start trudging up the snowy slope that having a great Sherpa makes all the difference. (Geez, how many mountain climbing analogies this guy going to throw out? 🧗🏻♂️)
2. Be Prepared
Success is 1% inspiration and 99% perspiration. One thing is certain; when you do find your home, the process will roll like an avalanche, and being fully prepared is the key to a safe journey and quality experience. There are 2 important pieces to this preparation: get familiar with the process and get pre-approved for a loan.
First, get familiar with the process. When the sellers sign your offer, you are bound by a legal contract. Your agent should have intimate knowledge of these contracts and accompanying disclosures, but writing an offer shouldn’t be the first time you see them. Even a little time spent together upfront to understand key contractual terms, and how to interpret critical reports will help you make faster and better decisions.
Second, get pre-approved for a mortgage. Planning for a new house is fun. Getting a mortgage is not. But for most people, you don’t get one without the other. If you want your offer to be taken seriously you must have a true pre-approval from a reputable lender. This means you have submitted a complete loan application with all required financial documents, and it has been reviewed and approved by an actual underwriter. You will not have time to do this once you find the property you want to buy, so do it right away and have the pre-approval letter in hand.
3. Know Your Market
You don’t need to be an expert. That is your agent’s job. But you do need to understand current market dynamics and have realistic expectations. I did say finding homes for sale is easy but given how fast homes sell in our market your agent should be closely tracking homes that you might like and bringing them to your attention immediately. If you like it, don’t hesitate to at least check it out. If you do it might be too late You also need to understand current market pricing. Your agent will guide you on what price to offer, but don’t get hung up on asking prices. Multiple offers and overbids are common, but local dynamics vary even across the Bay Area. Despite strong competition and rising prices on the peninsula, the average sales price in 2020 was only 2.5% above the asking price. Just across the bay in Alameda County, the premium was closer to 7.5%. There are a lot of variables behind these averages but understanding this is key to writing a strong offer. In the past couple of weeks, I have noticed a material rise in preemptive offers: meaning offers are being made before the home hits the public market. This a sign of rising competition, and a sense of desperation among buyers. Not all sellers will accept this but talk to your agent about navigating this potential climbing hazard.
4. Make Your Offer Stand Out (Hint: it’s not all about price.)
This is where you and your Sherpa need to be in sync. Knowledge is power, and your agent should be developing a strong rapport with the listing agent and discovering as much as possible about the sellers’ motivations. Sellers and their agents want confidence that an accepted offer will close as agreed.
When it comes to negotiations, remember that it's not combat. Sellers want to sell, and buyers want to buy. The rest is detail. Be flexible with time frames, possible rent-backs, and try to minimize your contingencies by evaluating all disclosures ahead of time, without prejudicing your situation of course.
Lastly, packaging counts. As a listing agent, when I receive an offer that is fully and properly completed, with all accompanying disclosures and addendum reviewed and executed, it gives me confidence that I’m dealing with a professional and I pass that confidence along to the sellers. Sadly, this is not always the case. I have seen many sales where the highest price didn’t win because the sellers and their Sherpa didn’t have confidence that the buyers would perform, or be easy to work with.
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Even if you do everything perfectly you might lose a bid or two before you get your home. Always know your price-of-no-regret; that's the most you’re happy to pay for a given property such that if somebody pays a dollar more you walk away with no regrets. Above all, have patience. Your journey might be short or it might be longer, but it’s worth it.
Just wait until you see the view up here!
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