Bidding Wars - NOT for the Faint of Heart
More and more often, Home Buyers that are actively seeking to purchase a home in the current market and looking at a price range below $300,000 are finding themselves in a “Bidding War” – which in real estate terms is a multiple offer situation. This equates to a seller receiving and considering more than one offer at the same time. This allows a seller to not only consider an offer but to compare it to one or more others. It can happen that when you see a home advertised on the internet and call for an appointment within days, you are told there are already several offers on the table. It can be discouraging, especially for those who have run into this situation more than once.
Why is this happening? Real Estate, like many other industries, works on the basic principle of supply and demand. For at least the last 2 years, statistics have shown that there is a shortage of good, affordable, move in ready homes below $300,000. Although the quantity of listings in this price range is plentiful, most of properties are foreclosures, short sales or otherwise distressed homes that are in need of thousands of dollars of repairs and updates. Most buyers don’t have room in their budgets for another $50,000 - $75,000 to renovate these types of houses. I like to think of it as $350,000 houses masquerading as a $250,000 houses – and that gives buyers an distorted perception of what they can buy on their budget. The reality is that the list of viable, move in ready homes is limited, which means the supply is down. When supply goes down, price goes up and the competition for these homes increases accordingly (and can be fierce at times).
Typically, a seller who has been given several offers will request your Highest & Best offer by a specific date and time. It’s important to note that the highest offer is not always the best – and the seller can choose whichever offer they find most appealing. For example, one buyer may offer less than full price, a large deposit, no mortgage and closing in 30 days. Another buyer might offer $5,000 over asking price, a minimal deposit and would need 45- 60 days to finalize a mortgage and close. It’s not that one of these options is inherently “better” – it’s the seller’s perception of “better” that determines the decision. If the seller is in a hurry, he/she might settle for less. If the seller wants more cash, he/she will wait for a mortgage to be processed.
So, is there a point to even making an offer if there are multiple offers? Absolutely yes! Someone is going to buy the house and that someone might be you. There’s an old saying – if you don’t play you can’t win (or is that the lottery?) If you find yourself in a multiple offer situation my best advice is:
[if !supportLists]1. [endif]Don’t panic. This may be the “House of your Dreams”, however experience has told me there is another “House of your Dreams” coming on the market in the very near future. It’s encouraging and comforting to know the real estate market is not fixed – it is constantly changing.
[if !supportLists]2. [endif]Even if you aren’t accepted as the initial buyer, many times the first offer does not go to into contract and the Buyer relegated to a backup position is contacted later to move forward. This happens more than you think – although there is no guarantee.
[if !supportLists]3. [endif]Highest & Best means just that. Don’t try to save money thinking you can make a higher bid later or expect a second chance like you can in a negotiation. This is a different process, and you probably won’t be given that opportunity.
[if !supportLists]4. [endif]Highest & Best bids are blind. You don’t have any information about the other bidders or even sometimes how many bidders there are. My rule of thumb for your best offer – pick a dollar amount that is within your means and also appropriate to your interest in securing the home. That way, if you don’t get the house and look back, you won’t have any regrets that you didn’t put your best foot forward - no Buyer’s Remorse.
And if you have been unlucky in your past offers, don’t give up. As homes are Sold – the pool of buyers in a specific location starts shrinking and the competition will decrease (although it’s never zero). Keep your eyes on the new listings in the market, have a current mortgage pre-approval letter in hand and plan to skip work when you see the next great possibility pop up – i.e. schedule a showing appointment ASAP. You may not win the battle, but you will win the war with persistence. Please feel free to contact me with all your questions, concerns and topics you would like to see covered in future Pawling Record columns.
Judy Albert is a Licensed Real Estate Salesperson for Berkshire Hathaway HomeServices
Hudson Valley Properties in Pawling. Licensed in NY & CT, SRES, Relocation Certified
Email your questions to firstname.lastname@example.org
Call 845-855-8500 Ext. 301 or 845-283-7865
Visit my website at judy.albert.bhhshudsonvalley.com