Buyers: Don't overreach
A bidding war might spur you to overspend, but paying an inflated price can make it tough to resell when prices stabilize or sink. (Read 2008-2009 real estate columns as a reminder.)
A decision to pay a premium isn't always an errant one, though, when you plan to live in the house long term. Rather than focus on overheated developments, look at comparable homes in neighboring areas with the same access to the schools and amenities that you value. Set a bid ceiling, and try to have a few other deals in the works so you're less inclined to overbid.
Sellers: Exercise your clout, but don't overplay it
If you set a price from 5% to 10% above the market, you're more apt to get an offer close to your home's real value than if you start much higher and force your listing to go stale. However, if your home has better qualities than area comps, you have a bit more latitude.
No need to pay closing costs or offer other incentives to the buyer, especially if it means keeping your in-demand home off the real estate market. For example, a sale contingent on the buyers selling their home is reasonable but only with a contractual escape for you, often called a "kick-out" clause. That gives you the right to continue marketing your home. If a less-encumbered bid comes in, you then offer the initial buyers a set time of 48 or 72 hours to withdraw their contingency.
Buyers: Be ready, be early, be flexible
Are the best houses still getting snapped up quickly? Then don't wait until you find a home to go loan shopping. Keep your preapproval letter, as opposed to a basic prequalification letter, in tow. Winnow your neighborhood choices before you shop.
Line up an action-ready inspector for an immediate property visit.
Have your agent ask what the sellers would value most in the sale. If you can accommodate a fast settlement or short-term, rent-back condition or fewer contingencies and conditions, that can make you stand out when that dream home is hanging in the balance.
Sellers: Know your agent's commission split
A heated market is causing sellers to question why they should pay the full 6% commission.
Hence, sellers' agents are accepting less, then offering less of a split to buyers' agents in a practice known as "sell to the commission."
When the co-op fee is low, buyers' agents tend to be less than enthusiastic in showing such houses, and yours will typically take longer to sell.
Buyers: Buying new?
Get what you pay for. Builders are cranking production to pre-recession levels. But some are cutting corners by hiring untrained help, not waiting for concrete to cure, painting walls without primers or quietly substituting cheaper materials such as a lower grade of countertop granite, or installing inadequate plumbing or HVAC units.
Consider hiring an independent inspector to oversee construction (at $400-plus). Builders may tell you not to worry because they'll hire one. Ahem!
And, be sure the builder is established and that you research online reviews, complaint pages and consumer ratings. Ask specific questions about the crew's experience and certifications.