Having trouble putting in an offer before a home goes under contract? Finding yourself in a bidding war once you do finally get an offer in? These are just a few of the tell-tale signs that you’re in a heavily competitive seller’s market. But, just in case you’re not completely sure, here are a few more indications to look out for…
#1: Cash is King
One major indication of a competitive market is when sellers can reasonably expect cash offers for their property. If you bring cash to the table, you’re going to most likely beat out a mortgaged offer every time. However, since most of us can’t afford to pay cash, it pays to work with a skilled real estate agent who can help alert you to new listings as soon as they come on the market. Acting fast is usually your best defense against cash investors, who are also ready to swoop in swiftly. You may also want to ask your agent to look out for homes that are listed under the Freddie Mac First Look Initiative. This initiative allows the home to be only open to non-investor offers for the first several days of it being on the market.
#2: A City so Hip, it Hurts (Your Wallet)
When a city becomes a wildly desirable place to call home, it inevitably affects home prices in the area. How do you know when your city has reached such a status? Look for a sudden boom in new industries, new companies relocating to the area, trendy stores popping up, and a lot of new construction activity.
#3. Bidding Wars
Bidding wars are yet another sign that the competition is fierce. This is when aspiring homeowners try to outdo one another in a battle over who can make the best offer. Bidding wars are common on properties with the trifecta of reasonable price, good condition, and great location.
#4. Escalation Clauses
An escalation clause may sound like a real estate elf from the North Pole — and it can bring you and early Christmas gift in the form of the house of your dreams. But all of this comes at a price. Escalation clauses are actually a legal condition added to a buyer’s bid that indicates you are willing to increase the offer up to a certain point if there are other, higher bids. Why would a buyer consider doing this? The answer is simple: Competition.
#5. All About the Extras
When the prospect of multiple bidders is likely, buyers may try to curry favor with an offer that makes a sale especially easy for the owners, or plays to their emotions. Buyers who writer a heartfelt letter explaining why they want the property may also give themselves a leg up.
#6. Sale Price Soars Above Asking Price
When the median sale price and the median listing price are extremely disproportionate (with the latter being much lower than the former), it’s a good indicator that you’re in a competitive market.
#7. Multiple Offers
When you’re a buyer, it’s never the more the merrier. Multiple, rapid bids on properties area sure sign that it’s a cutthroat market. So are packed open houses.
#8. Homes Flying Off The Market
You’re in a tight market when you search online and there’s just not very much to choose from. That’s due to the real estate inventory selling at a rate that’s faster than the rate new listings are popping up. In other words, the homes are flying off the market almost as soon as they arrive.
#9. “Tidal Wave” Neighborhoods
When one neighborhood becomes a hot spot, it’s not uncommon for the next one over to soon follow suit. With a major resurgence in urban renewal, it’s not surprising that these popular areas often top the list of competitive home markets.
#10. Offer Deadlines
As if buying a house weren’t hard enough, now some sellers are giving deadlines. This helps sellers separate the wheat from the chaff so to speak when it comes to serious offers that can be backed up with secured financing or cash.