You know how the market goes: there’s a buyer’s market, and there’s a seller’s market. Not unlike the stock market, it waxes and wanes in either direction, which can make it difficult (if not impossible) to perfectly time a real estate transaction.
We spent a good number of recent years with buyers holding the upper hand in Chicago real estate, but as the market (especially the luxury market) continues to thrive, the advantage has shifted to the sellers. Even with an improving market, the inventory of Chicago homes for sale remains limited, so in turn, buyers are limited as well. With little supply and lots of demand, buyers are competing for homes to buy, and sellers end up with a higher sale price than they may have expected. Chicago Real Estate Selling Above Asking Prices
Crain’s recently reported that 20 percent of homes sold in the first quarter of 2014 went for more than their asking price—that’s the highest it’s been since 2007. I think there are a couple of things at play here:
• These higher numbers could be explained by a still hefty number of foreclosures and short sales on the market—these are priced low from the start, so there’s not a big surprise that they would sell above the asking price.
• But, even non-distressed sales-over-asking-price are up from last year. These are the types of sales most buyers are looking for, and they are in short supply. If you want a conventional sale, you’ll likely be bidding against one or many other buyers who do as well.
• Luxury buyers especially are moving not for the sake of it, but because they need something—more square footage, additional bedrooms, to escape the suburbs. These buyers want something on par or better than what they live in now, and those properties are also scarce in Chicago real estate.
With all of these factors at work, bidding wars are quick to creep in and drive up the price of the city’s desirable properties. So what’s a buyer to do? Or even a seller, for that matter?
If you’re a seller, you may have a decision to make when pricing your home for sale: price it low and hope it strikes enough interest and offers that will drive up the price. Or, ask for the amount you want up front, and hope buyers don’t think you’re priced too high.
If you’re a buyer, this certainly doesn’t mean you can’t get a fair deal. Don’t forget that a real estate offer isn’t entirely made up of dollars, and offering good terms can go a long way. An all-cash purchase, a short closing period, a pre-approval on a mortgage can all help you in getting a real estate deal done.
Also, I encourage buyers to really consider what is at the top of your wants/needs list in a new home. If you’re looking for the things other buyers want—a top neighborhood, ample square footage, new construction, etc.—expect that it will cost premium dollar. Prioritize your own needs and see if anything might help shift the expected price.
Of course, this isn’t anything a buyer or a seller has to go at alone. For nearly 25 years I’ve worked with clients in every state of the market, from good, to bad, to worse. The best course of action will vary based on your own situation, and the right agent will help you work through that. If you’re in the market for Chicago real estate, contact me to talk more about what you’re looking for. Call me at (312) 498-5080 or email me at [email protected]
Lake Point Tower, at right, is one of many buildings along Lake Shore Drive that offer incredible views of Lake Michigan. Image via Chris Walker/Chicago Tribune