Here’s how you can stay competitive in a complex-hot real estate market.
It’s no secret that today’s housing market is competitive for buyers. Because of this, many clients have asked me, “Is it enough to just offer the asking price?” There’s more to purchasing a home than offering more money, so today I want to give you some tips to compete in this hot market.
First, how complex is our market? Nationally, the average home receives five offers and only stays on the market for 17 days. However, the Phoenix market is even hotter than the rest of the country. Our average days on market is only seven, but since it takes a few days to negotiate in multiple-offer situations, it’s probably even lower than that. On top of that, supply is incredibly low; we only have 15 days’ worth of inventory right now.
Given all that, what can you do? First, you must get pre-approved, not just pre-qualified. There are a lot of cash offers out there, and you need to stay competitive. Also, consider finding a lender who can lock in an interest rate on your behalf. They’ve increased recently, and they might go up further. Locking in a rate now will allow you to have the most flexible budget possible.
Since our market is so fast, you need to move quickly. Work with a fantastic local lender and Realtor so that you can make a great offer as soon as possible. Smart agents are submitting offers even before open houses, so make sure you have the best representation possible.
Another thing you can do to stay competitive is submit a higher-than-average earnest money deposit. In the past, you would normally only submit 1% of the purchase price. Now, if you submitted enough to cover your entire down payment and closing costs, it would probably catch your seller’s eye.
Finally, consider offering to pay an appraisal gap. Homes are appreciating at a rapid pace, so low appraisals are becoming common. If you include appraisal gap coverage in your contract, you can pledge to pay the difference between the appraised value and sales price up to a certain amount.
So do you need to make an offer above the asking price? Even with all of these strategies, it might be a good idea. However, our market is shifting. Listings are up 16%, and new contracts are down 6%. Should you just wait things out?
In my opinion, it still doesn’t make sense to wait. Homes appreciated by 26% in 2021. It’s a safe bet that prices and interest rates will continue to rise. The longer you wait, the less affordable your new house will be.
If you have questions about today’s topic or anything else, please call or email me. I am always willing to help!