Rising to a Challenge: How to respond When Buying a House in the Most Competitive Market in the Country
Alexandria and Arlington are THE most competitive markets in these United States according to Redfin. It’s no surprise to our team or our buyer clients who have been in this market place balancing their desire to place a winning bid while staying within their financial limits. It reminds me of that scene from Trading Places when the Dukes tried to corner the market… It’s rough out there.
Here’s the list of the top 10 most competitive markets in the country according to the article:
- Alexandria, VA
- Arlington, VA
- Grand Rapids, MI
- Tacoma, WA
- Oakland, CA
- Beaverton, OR
- Lakewood, CO
- St. Paul, MN
- Woodbridge, VA
- Littleton, CO
The main reason for the competition is what they’re calling, “the Amazon Effect” where the market generally expects prices to increase substantially over the next years due to Amazon’s HQ2 announcement. Buyers are eager to get into ownership at today’s prices before prices climb too much. Meanwhile fewer people are deciding to sell now, thinking they’ll get more in the future. These two factors result in lots of buyers competing for few houses… low supply, high demand… prices increase.
But what are we to do when we’re facing this challenging landscape?
Should we pass out and get out of the fight like Wilson did (see picture above)? HELL No! We dig deep and get in battle stance.
Top Strategies When Buying a House in a Competitive Market
Know What the Seller Wants
Agent-to-Agent conversations are meant to help make a deal happen, while protecting our client’s interests. We call and really LISTEN. A good listing agent will tell you what’s most important to their clients so they can actually get it. You’d be surprised by the simple things that make a big difference. A little flexibility in closing date so the seller can find a new place, or an increase in sales price in exchange for a seller subsidy might make your offer stand out.
Deadlines for Offers and When to Submit
Obviously we want to make sure we get the contract in before the deadline. But some gamesmanship can work in our favor. If you’re one of the first offers in, it’s possible that the listing agent might hint “ball park” numbers to other interested buyers about what number they’ll have to beat to win. It’s in their clients’ best interest. By making an offer early, you’re in the conversation but we want to save your escalation or best bid until right before the deadline.
Include a Professional Summary
Agents have a great deal of influence over their clients and which offer they’ll select. Agents want to work with a professional that will help make their deal go smoothly. A summary message outlining the highlights of the offer is a practical, effective communication tool that can go a long way towards winning the listing agent’s trust.
Offer Above List Price from the Start
A serious buyer will kick themselves if you lose a house over $500 or even $1000. But it happens every day. In a competitive market, you compete. If your offer isn’t serious, the next buyer’s offer will be. Consider the bold move of offering above list price. Make sure you are aware that there may be appraisal issues later.
Use the Escalation Addendum
The Escalation Addendum is a special tool you add to your offer that automatically sets up some rules that can change your offer. Every offer has a sales price, but with an escalation addendum, you can offer low, and increase the price to your actual limit. It’s like buying on ebay. For example, you want to buy a house that’s listed for $450,000, and you expect that there will be other offers. You can offer $440,000, with an escalation addendum that goes up to $460,000, beating any offer by $1000. So if an offer comes in at $455,000, your offer automatically goes up to $456,000 and you’re the highest.
The disadvantage of this is that you let the seller know how high you’re willing to go. It’s also important to be clear about whether we’re waiving appraisals or not, and to ensure that the seller will accept these kinds of addenda.