Time for a paradigm shift in homebuying
March 29, 2021 | Dwell JC
For generations, the homebuying process never really changed. The seller would try to estimate the market value of the home and tack on a little extra to give themselves some negotiating room. That figure would become the listing price of the house. Buyers would then try to determine how much less than the full price they could offer and still get the home. The asking price was generally the ceiling of the negotiation. The actual sales price would almost always be somewhat lower than the list price. It was unthinkable to pay more than what the seller was asking.
Today is totally different.
The record-low supply of homes for sale coupled with very strong buyer demand is leading to a rise in bidding wars on many homes. Because of this, homes today often sell for more than the list price. In some cases, they sell for a lot more. This past fall I listed a single-family home in the Hilltop section of Jersey City and received multiple offers that were $100,000 (14%) over asking. In fact, I have had only had 1 listing in the past year that did not receive multiple offers.
According to the Home Buyers and Sellers Generational Trends report just released by the National Association of Realtors (NAR), 45% of buyers paid full price or more.
Be prepared to go over asking . . .
In this market, you can’t shop for a home with the old-school mentality of refusing to pay full-price or more for a house. If you are a buyer looking to enter this market, you will need to rely on your agent to help you evaluate the current demand and determine your best offering price.
Because of the shortage of inventory of houses for sale, we are beginning to see a shift where sellers and their agents are setting a “reserve price” on the home they’re selling. A reserve price is the minimum amount a seller will accept as the winning bid. You may see language like, “Offers starting at”.
If you are in a competitive housing market like Westfield, Cranford or downtown Jersey City, think of the list price as the starting price at an auction. It’s the minimum the seller will accept in many cases. Today, the asking price is often becoming the floor of the negotiation rather than the ceiling. So, when you find a home that you really love because it “checks off all the boxes” know that you will have competition and it may sell over asking.
Low supply and high demand has led to frequent and competitive bidding, which is creating an auction-like atmosphere in many areas of New Jersey. For the best advice on how to make a competitive offer on a home, please feel free to reach out to me. I’ll be happy to help you navigate this competitive market.