With less inventory on the market, some homes for sale are seeing bidding war among homebuyers.
PAR Vice President Bill Festa said that he has seen multiple bids on nearly every property that he has submitted an offer on since early this year.
“I can’t tell you how many times while on the showing,I get a text from the listing agent that says, ‘There are multiple offers, give us your highest and best,’ or when I give the listing agent a courtesy call to let them know I’ll be submitting an offer, they inform me, ‘It just went under contract.’ My advice has been to buyers, if you want this home you should expect to offer anywhere from $5,000, which is extremely conservative,to $15,000, which is competitive, above the asking price. And you still might not get the property. If there are buyers who want to negotiate for best price and terms in this market, they are wasting everyone’s time,” said Festa.
However, some buyers are opting out of standard pre-purchasing protocols to snag the house they want. Is it worth it?
“My recent experiences with bidding wars reflect a number of strategies that on their surface sound good, but I am concerned in some cases of the long-term issues for some of our consumers,” said PAR President-elect Bill McFalls. “Such as, the recommendation to waive the home inspection contingencies to beat out the others, I personally put in the category of stupidity. As a listing agent, I will advise my client of the potential benefits and more likely the pitfalls of accepting this type of contract. While the seller thinks they may be able to hide some issues about their home in this situation, the reality is that the scenario may likely comeback to bite them. I think we, as professionals with a fiduciary responsibility to our clients, need to remember to make sure the transaction is a good one for our clients, not just ‘a win’ for a commission.”
PAR President Todd Umbenhauer said he advises his clients caught in the midst of a bidding war to structure their offers in ways that benefit the seller, but do not cost them anything as the purchaser.
“Determine the seller’s preferred settlement date and match that date if possible. I once had a buyer offer a purchase price less than the competition, but their agreement was accepted, because they agreed to allow the seller to extend the date for settlement by up to 60 days beyond the original settlement date. When the offer is made, provide a higher deposit than is typical in the marketplace. It is all about determining what is most important to the seller and providing those terms to the extent possible,” said Umbenhauer.
PAR Treasurer Chris Raad said that in his area, the Lehigh Valley, homes that are well-priced and “reasonably updated” are seeing multiple bids.
“The lack of inventory and high buyer demand is driving property values upward,” he said. To come out on top of a bidding war, Raad advises clients to get pre-approved by a local, reputable lender that would be known by the seller or the listing Realtor®. “If needing seller assist, try to explore other options of coming up with the funds, such as a family gift, a lender credit or borrowing from savings or 401k,” he added. “Have either the buyer or the buyers agent write a letter with a little information on the buyer, talking about their family, things they love about the home and their financing status.
“Don’t lose the sale over a refrigerator or clothes washer and dryer,” added Raad. “If the seller is planning to keep appliances, do not write them on the contract.”