5 Tips for Making an Offer in a Hot Real Estate Market
Steady demand. Limited supply. That’s what we are seeing in real estate markets across the country right now. Inventory is particularly tight within the lower price ranges. “The starter house is nearly missing in some markets,” according to Jessica Lautz, managing director of survey research and communication for the National Association of Realtors.
Of course, conditions can vary from one city to the next. But the overall trend in housing markets across the country is that supply is still falling short of demand.
Given these conditions, it’s important for home buyers to make a strong, smart offer when the right house comes along. Here are five tips for doing exactly that.
1. Understand the supply and demand situation in your area
According to housing experts, a so-called “balanced” real estate market has five to six months of supply. This means, in theory, that it would take five or six months to sell off all homes currently listed for sale if no new properties came onto the market.
Many real estate markets across the country have less than a three-month supply right now. And some cities have less than a two-month supply.
The first step to making a strong offer is to understand the supply-and-demand situation in your area. We are still seeing sellers’ market conditions in many cities, as of spring 2018. And this could persist for some time.
2. Study recent sales prices in your area
This is something a real estate agent can help you with, but you can do some of it for yourself. The idea here is to get a good understanding of recent sales prices in the area where you want to buy.
This will help you in a couple of ways. It will save you time during the house-hunting process, by eliminating the need for repetitive research and pricing “sanity checks.” It will also help you make a strong, realistic offer backed by recent sales trends. And speaking of offers…
3. Make a strong and timely offer, backed by comparable sales
In a slow housing market, where sellers are ready to jump on the first offer that comes along, home buyers have the luxury of taking their time. A buyer might start off with an initial offer below the asking price, just to open negotiations. The seller would probably come back with a counteroffer or accept the first offer.
But it doesn’t work that way in a more competitive real estate market with limited inventory. In a tight market, buyers are better off making their first offer as competitive as possible. Otherwise, the house could go to a competing buyer.