The Northern Virginia real estate market is shifting. What are the top eight things for sellers to know about what's happening?
1. Causes And Effects of The Market Shift
A little background about what happened in the past couple years, after the pandemic started in 2020 for the first two or three months things were really uncertain with the Northern Virginia real estate market as it was across the country.
However, after that first two to three months, the market started taking off like a rocket and it never started slowing down, until recently. With the lower interest rates that were happening in 2020, tons of buyers jumped in the market and we saw a seller's market in Northern Virginia like pretty much no other. We saw buyers literally waiving every single contingency and every property selling for $50,000 or $100,000 more over list price. It was an amazing time for sellers.
However, due to the rising interest rates, the Northern Virginia real estate market has started to shift significantly. To put this in perspective of what sellers and buyers are experiencing right now right now is if we look at an example regarding a mortgage amount. So, if a buyer gets a $500,000 mortgage, a few months ago (when rates were still really low) buyers would be looking at about a $2,000 a month payment from that $500,000 mortgage. Now that rates have gone up significantly in the past few months, a buyer is looking at about a $2,900 a month payment for that mortgage amount. That's a big deal to most home buyers. Keep in mind it hasn't become a buyer's market overnight or anything. Technically, with the inventory levels the way they are right now, even though inventory has picked up in a lot of areas - they're still fairly low so technically on paper it's still a seller's market right now. It's just a much less crazy seller's market that it was a few months ago
2. You Can't Get Away With Overpricing Like You Did a Few Months Ago
During the real estate boom in the Northern Virginia real estate market from the past couple years, a home seller could get away with overpricing their single-family home or townhome. They could look at the recent comparable sales price above the recent comparable sales and still know that they would likely have a bidding war on their hands (just due to the supply and demand). Now, the market is not like that. It's very important to price well and to price according to the shift that's happening.
One reason you're seeing so many price reductions right now is not because the bottom of the market's falling out or anything, it's just that many sellers are pricing according to what they thought would be this never-ending stair-step effect that has been happening in the market from 2020 into 2022. They’re pricing according to these recent comparable sales that closed in May/June. We're not in that market anymore, so sellers who are pricing too high are having to reduce their prices to get out ahead of the reduced buyer demand. The market is not becoming a buyer's market. It’s just normalizing right now.
3. Property Condition is More Important in Today's Northern Virginia Real Estate Market Than it Was a Few Months Ago
During the Northern Virginia real estate market boom from 2020 and early 2020, a lot of sellers weren’t bothering to update properties because they were able to sell an outdated property (or fixer-upper) and still do very very well and still often have a bidding war on their hands. With the shift that's happening right now, yes properties that are overpriced are staying on the market longer but properties that are also more vulnerable to this current market are places that need work - properties that are outdated or properties that are fixer uppers. It's just very important to price a property well, especially if it’s not completely move-in ready. Bottom line, the properties that are selling the fastest and for the most money in the current Northern Virginia real estate market are move-in ready/remodeled properties that look amazing. We're still seeing a good number of bidding wars for these types of properties in this market.
4. Staging is More Important Than Ever
A lot of people don't realize the value of a staged home. Let me put it this way: Many buyers just don't have the imagination to really envision the space when they walk into a home. It helps to have a staged home to help them visualize where they would put their furniture and how they would live in the space. It helps home buyers to get emotionally invested in the property when you have staging. Staging doesn't necessarily have to be a fully staged home - it can be accent pieces and different things in different rooms and then just maybe have a couple (two or three) main living spaces that are better staged. Keep in mind every little bit helps in this current Northern Virginia real estate market in terms of helping your property stand apart from the competition.
5. Offering a Good Buyer Agent Commission
During the boom from 2020 leading into early 2022 we started seeing reduced buyer agent commissions. A very common buyer agent commission right now is somewhere around 2.5 - 2.75%. We were seeing some sellers during the boom from 2020 to 2022 who were starting to offer very low buyer agent commissions in the MLS (2% 2.25%). Sometimes, they were getting away with it because there was such a stark contrast between the number of buyers and properties available. However, in this shifting Northern Virginia real estate market, it's very important to offer a good buyer's agent commission to set your property apart from the competition. Buyer agents are a very important part of the home selling process, and you want to give all of the buyer agents who are showing your home to their buyer clients every incentive possible.
6. Work With a Northern Virginia Agent Who Knows How to Market Effectively
In this shifting market, it's important to get as many eyes as possible on your property in order to stand out from the competition. It's important to work with an agent who knows how to market effectively online, how to navigate pay-per-click ads, social media ads, organic traffic on search engines, as well as blogging.
7.There Are Still Bidding Wars Out There
It's still very possible for your Northern Virginia home to sell in a bidding war, however the bidding wars that are happening right now look different from the way that they were happening in 2020-2022. We are still seeing waived contingencies but just not as many as we were back in 2020-2022. Sometimes a bidding war that might happen in today's Northern Virginia real estate market might very well mainly just involve a buyer making some changes to the sales price they are offering, and maybe waiving a contingency or two, but not waiving everything. We're still seeing bidding wars, but the bidding wars are different and are most often happening surrounding properties that are completely move-in ready (remodeled, look nice, very attractive to buyers).
8. Sellers: You’ll Probably Need to Accept Contingencies in Offers
Keep in mind, most buyers out there will still be able to have most or all of their contingencies in an offer situation. It's surprising to a lot of sellers right now that they might have to accept a contract that has contingencies, such as a regular home inspection contingency that involves negotiation. A buyer in this current Northern Virginia real estate market can often negotiate for repairs or for monetary credits after the home inspection. That wasn't happening at all during the boom from the past couple years. Keep in mind, sellers are still getting great prices on their properties - it's just the dynamic has shifted some and buyers have more power than they had as recently as just a few months ago.
Thinking of selling your Northern Virginia home? Call me at 703-462-0700 or email me at firstname.lastname@example.org for a no-obligation comparable market analysis and consultation!