WASHINGTON, DC—With a historically low inventory of homes for sale, and an ever-growing number of prospective buyers, Washington DC-area residential real estate is the midst of one of the most competitive markets ever.
“The competition among home buyers is probably the highest I’ve seen in four decades in the industry,” says Scott Avery, president of Tysons Corner, Virginia-based AveryHess, Realtors. “These days, it’s not uncommon for a good listing to get 5, 10, or more offers.”
According to the Northern Virginia Association of Realtors, low mortgage interest rates, fewer new home developments being built, and the trend of owners opting to stay in their homes longer or pass homes on to their children, are among the factors contributing to the short supply—particularly homes in the entry- and mid-levels.
“We are in a ‘multiple contract era’ where we will often receive several contracts within days, or even hours, of a listing being placed on the market,” says Sheila Carney of the AveryHess Tysons Corner/McLean Office. “I recently received 17 offers on a home I had listed, which was great for the seller who was able to get above list price, however you also have to realize that while there was the one winning offer, there were 16 people who did not get the house.”
“The prospect of getting excited about a home only to have their offer rejected can be frustrating and heartbreaking for a buyer,” says Karen Janson with the AveryHess Fredericksburg Office. “I’ve had a number of clients come to me after working with another agent and losing out on house after house. More often than not, it’s because they didn’t have a strategy for writing and submitting a winning offer.”
Buyers often don’t realize how much more competitive the market has become over the last two years. Many first-time buyers have a hard time reconciling paying above list price as well as navigating the other challenges that may be necessary in order to compete.
Whether finding a home online or through other advertising, some of the common mistakes that result in a buyer losing to competing offers include:
- delaying viewing the property
- waiting for an open house
- taking too much time to submit an offer
- offering unrealistic terms
- working with out-of-area lenders, banks and credit unions can also be an issue
- low earnest money deposit
- having a “qualifying” lender letter as opposed to an “approval” letter
- not having a trusted, well-known settlement company
Those mistakes, coupled with working with a low-producing or poorly-trained agent, can significantly impact the buyer’s chances of submitting an offer that will get them the home.
“My advice to prospective buyers is to first find a full time knowledgeable great agent,” says Avery. “In this current climate, a well-intentioned relative, friend, or casual acquaintance with a business card might not be enough. The professionally trained active and productive agent with the right strategy can, and will, make all the difference.”
AveryHess provides its agents with specialized training focused on writing and submitting offers. Titled “Writing Offers to Win” some of the areas covered include:
- Establishing a relationship with the listing agent – this will set a positive, professional and productive tone, and show you, and the buyer clients are easy to work with and reasonable.
- Find out what the seller wants and what is important – Oftentimes there are factors beyond asking price. For example, the sellers might need to adjust a settlement time frame to accommodate, for whatever reason, a quicker or delayed date. Convenience of their move can be a big factor.
- Line up a reliable LOCAL lender and loan pre-approval – this will reassure the seller and Listing Agent that the process will be smooth, well informed and funds available to close on time.
- Be prepared to offer above list price – in a multiple contract situation, going in with a low offer could result in an immediate rejection. Even when a full list price offer is submitted, if there are multiple offers, it’s likely you will encounter other offers with escalation clauses which can get very creative.
- Be willing to negotiate beyond price – examples might be: shortening the timeframe for inspection/s, waving inspection/s, waving contingencies, bridging any gap between appraisal and sales price, or offering to pay some of the seller closing costs.
- Submit a well-written, complete, clean and clear contract – if the seller has multiple offers, contracts that are sloppy, confusing, or incomplete are more likely to get bounced.
- Communicate — When the offer is presented, explain the benefits of the offer, the ease of working with the client, and the reliability of the lender. Be available to answer any questions.
Looking at the most recent market data, Avery predicts that inventory in the Washington-area market will remain tight for at least the next two to three years. The crux of the issue, he explains, is that the economy has had several years of household formations well outpacing housing starts.
“Despite the competition, buyers shouldn’t be deterred from pursuing their dreams of home ownership,” says Avery. “All it takes is one winning contract.”
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