How to Buy a House in a Super Competitive Market
By Tyler Harman
When homes sell in minutes and accept offers way over list price, how do you stand a chance? I work in one of the most competitive markets in the country and have seen how frustrated buyers can become. After seeing a few horror stories myself, here are five tips that will help manage expectations (for both buyers and agents) and make their journey smoother and more enjoyable.
The Learning Curve
In this new age of technology, buyers are drowning in information and starving for wisdom. The majority of buyers I work with today have done their homework, but unfortunately, they did all the work before the first day of class. As a buyer, you need to learn how to utilize your agent, your lender, your inspectors, etc., to get the information and guidance you need. Now, this isn’t to say you can’t get to the finish line all by yourself, but you’re going to wind up with a lot more gray hairs.
Obsession with Comps
In the market where I work (Los Angeles), I separate my buyer clients into two categories: New buyers and veteran buyers. A new buyer will ask questions like, “What are the comparable sales in this area?” “Isn’t that house overpriced?” “What do you think it will sell for?” New buyers want to know the exact “fair market value” of a home and not pay a penny over that amount.
A veteran buyer will ask questions like, “What do the sellers need from us?” and “What will it take to get this home?” They’ve gone through the romance of the process, written offers, and lost many times before. They’re tired of playing “arts and crafts” (writing offers) and ready to actually buy a home.
At the end of the day, one of these people will end up with a new house. The other will end up with an appraisal. Which one would you rather have?
Leverage Your Agent
As a buyer, your agent might know the listing agent and have insight about how they operate. Even though the seller is calling the shots, the agent will find ways to add their flavor to the negotiations. Every agent has his strong suit, so make sure you leverage it as a buyer.
For example: Are they good at numbers and finance? Have them use that skill when writing offers and communicating that value with the other side. Are they funny and likeable? Make sure they’re on the phone with the other side as much as possible building a relationship. It really isn’t about “playing hardball.” All things being equal, people do business with people they like.
Oh, and let’s talk about the “Listing Agent Groupies.” These are buyers who go straight to the listing agent. It sounds good because the agent gets a big incentive to “double end” the deal and increase their income. But just so you know, the agent’s allegiance is to their seller. Also, in a competitive market, you’ll find fewer and fewer listing agents who want to represent a buyer.
My advice: Find an agent you trust and would like to represent you throughout the entire process.
The Disappearing Price Range
In a very hot market, you can almost see the prices moving upwards. For example, in 2014, an online brokerage named Eagle Rock, Los Angeles the No. 2 most popular neighborhood in the entire country. Later that year, we heard people say things like, “One of the last homes under $500,000.” As you might imagine, that home didn’t stay on the market very long and probably sold for well over $500,000.
If that was your budget, you were an “endangered species” and would soon find yourself completely priced out of the market. When that happens, you either raise your budget or you find a new place to look.
Expect Issues during Your Transaction
When it comes to buying and selling real estate, there is one thing that I am sure of: there will be issues. I can almost guarantee that at one point of the transaction, the whole thing will be hanging by a thread. This is very common and is almost expected. (You’ve been warned.) Just like on an airplane, keep your seatbelt buckled because there will be turbulence. When things get bumpy, look to your agent for advice or even to simply hear someone say that everything is going to be OK.
Now, you might hear other agents talk about a smooth transaction, but just know that phrase is relative. A smooth transaction to a real estate agent might be a deal that closes and the house is still standing afterwards. Your definition might be a little different.
Obviously there are a million other tips that we could go into about buying in a competitive market, but the main takeaways here are to be reasonable, roll with the punches, and work together with your agent. Most agents live and breathe real estate, so hold them close as your most valuable resource.
Tyler Harman is a Los Angeles real estate agent focusing on the hottest and busiest areas of Los Angeles including Highland Park, Eagle Rock, Los Feliz, etc. Tyler follows city-wide real estate trends and writes about the popular neighborhoods in L.A.
This post was originally published on RISMedia’s blog, Housecall. Check the blog daily for top real estate tips and trends.
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