It's March Madness once again which means that it's time for everyone in the Gardner family to fill in their winning brackets. Not surprisingly, I'm forced to guess at who the winners might be - basketball being of little to NO importance to me. "Ummm - Go Wildcats?"
"What's the ranking?" I ask Cliff as he forces me to pick a team.
"Number 14 plays number 12, number 7 plays number 10, number 3 plays number 5 . . ." and so it goes.
"I'd like to phone a friend." I say.
"No," he replies, "you have to pick your teams now."
As self-appointed "Commissioner for Life," Cliff is really starting to get on my nerves.
While I've learned a bit about baseball over the years, neither of my boys actually participated in basketball, which means any interest in the game is purely manufactured by my overly-enthusiastic husband. Sure, I suppose all that action is exciting, but that doesn't mean I follow the college teams OR have an inkling of how one will fare against another - nor do I much care. (Now talk to me about who will win "The Voice" and that's another conversation altogether.)
Here in the world of Real Estate, we've got our own version of March Madness taking place as the market continues to heat up and more and more Buyers join in the game. In many cases, these new Buyers are just now entering the big leagues, but for others, this isn't their first time shooting for the hoops. In short, many have come to play and they are looking for a decisive victory.
In case you think only Buyers are feeling the heat of the moment, Sellers too, have their fair share of pressure. Caught up in the whirlwind of expectation, Sellers can find themselves disappointed when only a few great offers present, instead of many. Purchase offers which would have been considered home runs in any other market (yes, I'm mixing metaphors here) are now viewed with distress and displeasure. (Sigh.)
What's that mean?
It means that expectations need to be managed on both sides of the transaction. Buyers need to be clear about what they can actually afford (understanding that most houses are selling significantly above the asking price) and Sellers need to realize that the market DOES have a breaking point. In other words, your house isn't selling for a million dollars over the list price simply because you want it to.
How do we compete?
Serious Buyers have done their homework upfront, understand market value, are preapproved through their lender, and are willing to write a highly competitive offer that's meant to be a clear winner. (Don't stand at the free-throw line if you aren't aiming for the basket.) Honestly, if you're not tossing and turning just a little bit at night, you probably haven't offered enough. (Gulp!)
But how does that make sense?
It may not in the short term, but buying a home isn't meant to be a short-term investment. (Some would tell you a home isn't meant to be an investment at all.) Moreover, buying a home in a quickly escalating marketplace often means that you are buying future appreciation and that's a BIG-PICTURE concept.
If you plan on staying 7-10 years in the property, paying "too much" in today's market is of little consequence. If, on the other hand, you may be looking at a job transfer a few years from now, renting is going to be a much safer bet. Think long term and let that be your guiding force. (BTW- paying "too much" is largely a matter of perception and fear. Buyers pay what the market will bear and there's no shame in that.)
What about if I find a "fixer" and remodel instead?
Now you're talking my language, but don't bet on it. "Fixers" are highly popular and you'll nearly pay retail for the privilege of promise. Moreover, they rarely pencil out. Buy a "fixer" if you love the process and have the means to actually "fix" the house, otherwise, leave it to the professionals and find something more "turn-key" and far less stressful to meet your housing needs.
How about if we sit on the bench for awhile?
It's an attractive idea in the face of all the high-level competition, but time is money. Had you bought last year, you'd have undoubtedly spent far less than you will this year. Additionally, none of us knows what next year will bring. Certainly, the market is continuing to trend UP and has been for the last several years, but if you want to be a spectator for a year or two, no one would blame you (certainly, not me).
On the flip side, "timing the market" is an impossible feat; I've yet to meet the person who can outsmart the marketplace (and I know A LOT of very smart people). The truth is, we only ever know the market trajectory in hindsight (yes, even those of us who work in the business). Those who bought at the bottom may be congratulating themselves, but realistically, they were often more lucky than right. They took advantage of good timing and that's great, but the ONLY time, you really need to concern yourself with the "value" of your home is when you GO TO SELL IT!
Surely the bubble will burst at some point.
If history serves as a marker, you are probably right, but just when is anybody's guess. Short of a major disaster, the market doesn't appear to be waning anytime soon (It takes FEAR to significantly impact the marketplace.) but historically, even when the market corrects, it tends to rebound with force within a few years (again, think long term). With strong Bay Area employment, improved job growth, low inventory, amazingly affordable interest rates, and year-round sunshine, it's tough to beat the California dream. (Have you seen the weather on the East Coast this year? Brrrr.)
I'm not sure I can handle the intensity.
Don't worry, you're not alone; I'm on your team and as your coach, I'm going to encourage you to do the best you can, play your hardest, lead with your heart, and fully commit. Anything less is bound to bring half measures.
At least with the majority of opportunities, we will know who and how many other buyers are competing, we'll look at comps and measure the nearby sales, we'll read the disclosures carefully, we'll strategically write an offer that's meant to carry weight, and then we'll proceed with good faith and speed, knowing we've done everything we can. After that, the rest isn't necessarily up to us, and while the news may prove frustrating on some houses in which you bid, even defeat prepares us for the next round.
Hey, let's hit the court running. Nothin' but net!
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Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.