Sellers often say to us, “Of course I’d take the highest offer on my house, that’s the best one, right?”
Well, the answer is “Maybe. And maybe not.”
In today’s market, it’s not unusual for Sellers to sell above list price. In the lower price ranges, buyers are frenzily (is that a word?!) competing for homes. It reminds me of the way you see people in the grocery store the day before a snow storm, tripping over one another in the aisles, making sure they have enough milk & toilet paper. People start acting a little bit crazy when the shelves start getting empty.
Guess what, the real estate shelves are pretty bare right now. (In Vienna & Oakton for example, housing inventory is at 1.4 months). That means we’re seeing some crazy things.
One example is that Buyers are so desperate to win out in competitive situations that they are sometimes signing escalation clauses that are well above what they are comfortable paying. (An example of an escalation clause would be something that says the Buyer will pay $X above the next highest contract up to a maximum price of $Y.) A Seller might respond, “Well, who cares what they are comfortable with? I just want the highest price I can get.” But here’s what we have seen happen recently.
Contracts come in. The price is bid up. The Seller chooses the contract with the highest price. BUT, it is subject to the home appraising for the sales price. The buyer has talked to their lender ahead of time (and the lender to their appraiser) and everyone (except the Seller with the inexperienced listing agent) pretty much knows the home will not appraise for full price. So the Buyer writes the contract with a big escalation clause, pretty much betting that they will never have to really pay that high of a price. The contract is ratified and the Seller takes the home off the market. They wait 21 days for the appraisal. And Boom. Guess what happens?The appraisal comes in low.
At this point, the Seller may already be packed & ready to move. Could they put the home back on the market? Yes. Do they want to go through the hassle? No. Do they possibly need the proceeds from their current home to go to settlement soon on their next home? Yes. And so – they often re-negotiate with the existing buyers rather than put the home back on the market. And sometimes they even end up selling for less than what the 2nd best original contract price was.
There are a number of things that could have been done to avoid this problem if they had been handled up front. But if they’re not, it puts the Seller in a less than desirable position.
Another thing we are observing in today’s crazy market is that Buyers are being forced to move quickly, usually more quickly than they are comfortable with. As a result, a large percentage of contracts are falling apart and buyers are voiding contracts because of “Buyer’s Remorse”. Again, there are strategies that a top-notch agent can assist you with that can mitigate this problem & protect you in case it does happen. But many agents have not worked in markets like this and don’t know all of the options.
When the market is “good”, people often think it’s easy to sell and so their choice of agent is not a big deal and/or they decide to sell themselves. But the reality is that your choice of Realtor & their level of experience and creativity will directly influence not only your bottom line return, but whether you actually get to closing on time or at all. A small investment into paying a commission to the BEST real estate agents you can hire can bring a big payoff.
NOW – Here’s what’s happening in the Vienna & Oakton housing market.
(Call us at 703-242-3975 if you need real estate stats for Reston, Fairfax, Herndon or any other area of Northern Virginia).
Last week in Vienna Real Estate (22180,22181, 22182):
- Number of Contracts: 18
- Average Days on Market for Active Listings: 103 days
- Average Days on Market for Listings That Went Under Contract: 36 days
- Inventory: 115 homes on the market
- Number of Months Supply of Homes (Based on past 90 day contract rate): 1.9 months
- Number of Months Supply of Homes (Based on past 30 day contract rate): 1.35 months
Last week in Oakton Real Estate (22124):
- Number of Contracts: 6
- Average Days on Market for Active Listings: 94 days
- Average Days on Market for Listings That Went Under Contract: 125 days
- Inventory: 56 homes on the market
- Number of Months Supply of Homes (Based on past 90 day contract rate): 2.1 months
- Number of Months Supply of Homes (Based on past 30 day contract rate): 1.4 months