Most real estate sources seem to confirm one thing: the real estate market in Philadelphia is heating up. This means homes are increasing in value and selling for more than they would have a year or even a few months ago. Basically, it may be become what we call a seller’s market. But what does that mean for someone trying to buy a home, really? Here are 5 things to keep in mind if you’re looking for a new home in Philadelphia this summer.
1. You may pay close to asking price – or even more.
Unlike the typical (and desirable) buyer’s market, you might not feel like you get a good deal. Making an offer under asking price is usually not recommended for a typical, well-priced home (although your real estate agent can talk to you about a good offer). Expect to only be considered if your offer is pretty good – by which we mean close to asking. For the best properties, offers at or slightly above asking price will be the clear winners over those that are even $5,000 to $10,000 below.
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Your agent should still pay attention to the comps (comparable property sales) for the area to make sure the house is actually worth what it’s asking. In a seller’s market, it’s tempting for sellers to sometimes overprice their homes. If the house doesn’t appraise for the purchase price, your mortgage company will not approve the sale because the home won’t have enough equity to justify the loan.
2. If your budget is between $300,000 and $400,000, you’ll encounter the most competition.
The biggest seller’s market is happening in the median price range, where a majority of buyers have priced their comfort zone. This makes sense, as the average buyer will face more competition than those in niche markets, like low-priced flipping opportunities or expensive luxury properties.
Another place you’ll be up against a large group of potential buyers? If you’re looking to buy in Graduate Hospital, which is currently the most active market in Philadelphia. Yup, someone with budget of $350,000 in Graduate Hospital should expect a competitive market indeed, and might not always get the first home he or she bids on.
3. Expect to compete with multiple offers.
While three to four offers may be common, realtors in this price range are seeing as many as eight bids on a single home. To beat out your competition, don’t put too many contingencies on your offer. Your real estate agent will probably suggest you leave in an inspection contingency, which allows you to back out if the property ends up needing many more repairs than you realized. Unless you are paying in cash, a financing contingency is also fairly common. But for buyers who are trying to sell their own home, a home selling contingency may not be desirable for the sellers when up against offers without it. Similarly, a shorter closing period – as little as 30 days if possible – is likely better than a 90 day window if they are trying to get out quickly.
Establishing an emotional connection with the seller might help you win the house. If they raised their children there and you have small kids who want to use the yard, they may be sympathetic to you.
4. Put in an offer right away to beat the competition.
According to data compiled by Redfin, homes in the Philadelphia market are selling 20 days sooner than they were at this time one year ago: an average of 60 days on market as opposed to 80 last year. This means that as soon as you see a house, you should put in an offer. If you realize that house was more perfect for you than you thought a week later, it might not be available any more. You can almost always withdraw an offer if you have buyer’s remorse in a few days, but it’s less likely you’ll get the chance to snatch up that house if another offer has already been accepted. If a home meets most of your criteria, you should consider putting in an offer the same day. You will want to get your finances in order and get pre-qualified or pre-approved for a mortgage to move the process forward more quickly and so that you will be presenting stronger offer in the first place.
5. Realize you might still be getting a good deal.
If you plan to live in your home for 5-7 years, buying is a great investment. You can recoup your equity and move it to another home, allowing you to afford even more in the future. If trends keep up, you’ll even walk away with more than you’re currently investing. Buying a unique property, like a less-common architectural style, a fixer-upper, or a home with a really unusual feature, can also get you more bang for your buck. Just realize that if the property isn’t very competitive now, it probably won’t be when you go to sell it, either.
Are you looking to buy or sell a house in Philadelphia? Please contact me so we can talk about it! And remember, friends don’t let friends buy a home without Agent Lady!
About Agent Lady: Cherise Wynne is a leading real estate agent in Philadelphia, helping home buyers and sellers navigate the City of Brotherly Love, with a special focus on first time home buyers. To chat about getting started with your first time home buying experience, click here.
