For decades, the process of buying and selling real estate never really changed. A property owner would contact a REALTOR® who would help establish the listed price. It was not unusual to add a few thousand dollars to the listed price to give the Seller a cushion for negotiating. The Buyer would then try to determine how much less they could offer to satisfy the Seller in order to purchase the home. Multiple offers were highly unusual, and although there could be some price negotiations, it was extremely rare for a Buyer to have to pay over list price to become the new owner. The listing price was the ceiling in the negotiations and paying more than list price was unthinkable.
Fast forward to today where a record-low supply of inventory coupled with high Buyer demand has led to all-out bidding wars. It is no longer unthinkable for a Buyer to offer over list price, even guaranteeing to pay the difference between appraised value and contract price in cash, leaving some Buyers unable to compete or losing out altogether.
According to Lawrence Yun, Chief Economist at the National Association of REALTORS® (NAR), “For every listing there are 5.1 offers. Half of the homes are being sold above list price.”
Therefore, our decades-old approach of shopping for a home and negotiating to lower than the list price, especially in such a competitive market, has truly little chance for success. Today the listed price is more like the floor of the negotiation rather than the ceiling. As a Buyer in today’s market, it is more important than ever that you know what you can afford, get pre-approved if you need a mortgage. Work with a trusted real estate professional who can provide great advice on how to make a competitive offer and is quick in getting with you when properties meeting your criteria hit the market.
Additionally, as the Buyer do not be surprised if the Seller calls for highest and best by a certain date and time. This happens usually when a property is receiving a lot of showing activity and multiple offers have come in. If this happens be prepared by again, knowing how much you can afford, and then working with your agent to discuss your options so you can make your highest and best offer.
Buyer fatigue is also real so by relying on your trusted REALTOR®, talking through the process and next steps, creating a plan, and remaining focused on your ultimate goal of homeownership, and staying the course, you will eventually win.
Resources: National Association REALTORS®
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