UNDERSTAND and use Listing Prices IN NETHER PROVIDENCE TOWNSHIP
For generations, the process of buying and selling a home never really changed. A homeowner would try to estimate the market value of their house, then tack on a little extra to give themselves some negotiating room. That figure would become the listing price. Buyers would then try to determine how much less than the full price they could offer and still get the home. As a result, the listing price was generally the ceiling of the negotiation. The actual sales price would almost always be somewhat lower than what was listed. It was unthinkable to pay more than what the seller was asking.
Today is different. You may need to change the way you look at the asking price of a home.
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.
According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR):
“For every listing there are 5.1 offers. Half of the homes are being sold above list price.”
In this market, you likely can’t shop for a home with the former approach of negotiating to a lower price.
Due to the low supply of houses for sale, many homes are now being offered in an auction-like atmosphere in which the highest bidder wins the home. In an actual auction, the seller of an item agrees to take the highest bid, and many sellers set a reserve price on the item they’re selling. A reserve price is the minimum amount a seller will accept as the winning bid.
The graph to the left demonstrates what is happening in Nether Providence Township. From 2016 (and before), Average Sale Prices were always lower than the Average Original Listing Price. NO LONGER!!!!! Starting in 2020, Average Sales Price was right at 100% of the Original Listing Price. So far in 2021, it is actually higher at 101.6% of the original listing price.
When navigating a competitive housing market, think of the list price of the house as the reserve 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. Therefore, if you really love a home, know that it may ultimately sell for more than the sellers are asking. So, as you’re navigating the homebuying process, make sure you know your budget, know what you can afford, and work with a trusted advisor who can help you make all the right moves as you buy a home.
Implications are HUGE for both buyers and sellers.
- For Sellers, it is time to be aggressive with your original listing prices because buyers are hungry and willing to pay more.
- For Buyers, you need to be aware that to get that house you really want, you will probably have to pay more than asking price.
- How to make the most of these conditions for both buyers and sellers will be the subjects of a future blog post.
Confused? Don’t be. If you are thinking about buying or selling, give me a call or text (484-574-4088) and lets set up a time to talk.