Ridiculous offers by desperate buyers competing over the one house that seems to be available in today’s market.
In talking to homeowners and interested homebuyers there seems to be a number of common misconceptions, half-truths, and myths about the state of our local housing market.
We’re here to address these misconceptions and add some clarity to the wild Dane County housing market of 2017:
Misconception #1: Everything is Selling Overnight and For Way Over Asking Price
Not really. Markets vary by price point, community, school district, neighborhood, age range, lot size, etc…It’s certainly true that pockets such as Madison’s west side have created hugely competitive bidding wars on properties. It’s also true that many homes are selling over the weekend.
Yet many great homes throughout Dane County aren’t seeing 15 offers and 1 day of showings. In the last two weeks alone we’ve written 4 accepted offers on homes in Oregon. Only one went over asking price (by $100), and only two of them were competing with other offers. Hardly the wild west style market we are hearing about.
Bottom Line: Just because PARTS of the market are ridiculously competitive doesn’t mean ALL of the market is ridiculously competitive. Know YOUR market.
Misconception #2: It’s Not a Good Time to Buy
True…maybe. There’s no question that some segments of the market may be best to avoid if you can. Madison’s west side under $300,000 can be pretty cut throat right now. A client of ours recently lost out on a home only to find out the winning bid was $31,000 over asking price, a $20,000 non-refundable earnest money check, no appraisal, and no inspection…all this on a 65 year old home near Odana Road.
Offers like that are a big risk, but unfortunately it’s what is required in some areas to get the house. If you have time on your side, and if this isn’t going to be your final dream home, it may very well be a decent idea to wait until things slow down or to look in other locations to live for a few years while building equity before moving into your ideal neighborhood.
On the flip side it’s generally still a great time to buy. Assuming a modest 3% appreciation and the possibility for interest rates to hit 4.5% by next year, waiting until 2018 to buy could easily cost you an additional $100/month when looking at a $300,000 home. For this reason alone buying this year, despite what feels like crazy prices, could make the most long term sense for your pocketbook.
Bottom Line: Yes, prices are rising and competition is fierce, but not every part of the market demands competition or high offer prices. With rates still low today may actually be the BEST time for you to buy a home depending on what you are looking for.
Misconception #3: I Shouldn’t Put My Home on the Market if I Don’t Have a Home to Buy Yet
It depends. If you are moving up to the $400,000 or higher price point in most locations this may potentially be an acceptable play. But if you are looking to buy a home in the $300,000’s or lower you really may be hurting yourself with this strategy.
Around $400,000 is where most markets start to stabilize and balance the power between buyers and sellers. Under that and we see strong seller markets across the board. This means higher competition for the buyers and it’s likely that buyers who need to sell but haven’t listed their home yet may have a hard time writing the winning offer when they finally find a house they fall in love with.
The major fear here is that given the speed of sales the home will seller faster than the new home can be found. Sellers this year have had a little more leverage to negotiate opportunities to avoid the double move by renting back after closing or extending the closing date out with flexibility to move it to an earlier date. We’ve also had clients list their home with us privately (not on the public market) in an attempt to find the right buyer to offer them exactly what they want.
Bottom Line: If you’re prepared to fall in love with a house only to see it disappear from your reach then waiting to list your home may be ok. However, if you want to be prepared to stand out as a strong buyer in this competitive market then selling your home should be your first priority.
Misconception #4: The Market is About to Crash
Not likely. We have a long way to go for a bubble to burst because we are extreme on both ends in a manner that promotes sales to take place. The last time our bubble burst we had a lot of homes available to choose from and terrible financing practices in place. Today we have a shortage of homes on the market and stronger regulations in the mortgage industry leading to more financially stable buyers. Each of those lead to an increase in demand. Add to this that Madison was recently voted one of the countries most stable housing markets and we feel fairly confident that things aren’t quite ready to come crashing down on us yet.
Bottom Line: Markets always correct themselves, and this one will eventually, but we have a long ways to go before the market crashes or a bubble bursts. Until inventory can get to a more balanced level expect to see prices continue to rise and competition to remain fierce.
Misconception #5: The Market is so Hot All I Need is Zillow and My iPhone to Sell My House
Maybe. Once again, in certain areas and price points you could sell anything if you priced it appropriately. Be advised that it isn’t just getting an offer on the table that is the challenge. Homeowners that are really taking advantage of this market are still taking proactive preparation steps, including staging, before hitting the open market and are using professional photography and agent marketing resources to get the highest number of eyes on their property while increasing demand for their home. All this often leads to a higher offer price.
Even when you get an offer on the table it certainly doesn’t mean the deal is over. The next steps include weeding through the pros/cons of multiple offers, inspection or appraisal negotiations, and managing paperwork and deadlines to avoid potential legal issues before you ever get to the closing table.
There are many reasons why selling on your own may be a bad idea, but the biggest reason is that in the end sellers who sold without an agent rarely save the amount of money they think they are going to by not hiring a full service agent.
Bottom Line: A full-time, full-service broker is more likely to sell your home faster, with fewer headaches, and for more money than limited service or for sale by owner options. Before trying to go at it alone, have the conversation with a professional and make sure you ask how they will help you keep more money in your pocket than if you sold on your own or with a discount broker.