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Bidding Wars Heat up Across Pennsylvania

By: Kelly Leighton on in

Inventory in most markets is lower than usual, and many buyers are finding themselves in bidding wars over properties.

A July 2020 Redfin study found that more than half of offers faced competition in that month, thanks to low mortgage rates and lack of homes on the market. Across Pennsylvania, many Realtors® have reported bidding wars in their markets as well.

Will Clauss, president of the Pike-Wayne Association of Realtors®, said he has not seen so many bidding wars in his 12 years in the business, but consumers can come out on top with the right plans.

“Use a savvy Realtor® who understands the local market, understands escalation clauses or other tactics to improve your offer and be prepared to move quickly if you find something that strikes your interest,” he said. “I tell buyers that I’ve had other buyers not find what they want when looking at the existing home inventory, so they decided to build. And they still didn’t get their house exactly as they want. So, unfortunately, there’s no perfect house out there. However, I used to tell them if something checks 80-90% of your boxes, it’s something worth strongly considering. In this market though, that has shifted to if something checks 70-75% of your boxes, you might want to seriously consider making a move if you are serious about buying a home.”

Kathy McGuriman, president of the Montgomery County Association of Realtors® said there has been an influx of bidding wars in lower-priced homes in the area.

“If the property is under $450,000, certainly we have multiples. But when you get to under $375,000, it’s crazy. [I tell] my buyers, you have to make the best offer immediately, and we add the escalation clause. I ask the listing agent when it’s most convenient for the seller to close. It’s most difficult for first-time buyers, as they may not have large reserves for deposits and they may be financing through FHA with seller assist. They will never get the house when there is a buyer with a large deposit and low loan to value of the home,” she said.

Central Susquehanna Valley Board of Realtors® President Aimee Buehner said that most properties in that area are receiving multiple offers within a day or two.

“The lack of inventory has created a very competitive market in our area, which is typically a pretty stable area,” she said. “Sellers must know that there will be a great deal of activity and the possibility of considering multiple good offers, and buyers must know that it is prudent to be timely and sometimes aggressive in seeing properties and making offers, and often there is a need to set out within hours of a property being listed.”

In Luzerne County, there are bidding wars on most residential and many multi-family dwellings, said Terry Solomon-August, president of the Luzerne County Association of Realtors®. She said sellers need to have their properties ready to go when they want to list.

“Price point is critical; you want to price it correctly,” she said. “Be prepared for many showings and hopefully many offers. This will drive your sales price higher. As for buyers, they should have their prequalification ready. As soon as a property hits the market be ready to view it, immediately. If it is the home for you, make your best offer first. Don’t try to lowball the offer and hope for a counteroffer, because someone else will purchase it first.”

Lehigh Valley is seeing bidding wars for homes, especially for homes under $500,000, according to Jack Gross, president of the local association.

“The final price inevitably exceeds the list price by tens of thousands,” said Gross. “Our inventory situation is as critical as I have ever seen, in some municipalities there are only one or two homes for sale at any given time and as soon as they are listed, the appointment slots fill up for days immediately. Now is an awesome time if you are a seller who does not need to immediately replace with another purchase. If you’re a buyer and wish to take advantage of the best mortgage rates we may never see again, be very vigilant and prepared to see a property at a moment’s notice.

Lancaster County Association of Realtors® President Ferne Silberman said, “There is a definite increase of bidding wars for all types of homes, single, detached, townhomes, duplex and residential investment units. The advice I provide to buyers is to go in as strong with a price as you are comfortable with. Some buyers are choosing not to do inspections, which is not what I recommend to my buyers. When sellers list, they might as well go stay at a hotel for a couple of days. Sellers need to have plans in place for where they are going, even if it means staying with family for a short period of time.”

In the southeastern part of Pennsylvania, Bucks County Association of Realtors® President Scott Geller said he has seen an increase in bidding wars, particularly for homes in the $250,000 to $450,000 bracket.

“In a buyer’s market, with five buyers looking at 10 homes, all five buyers determine the top two and those sellers get multiple offers, and eventually the rest sell. In a seller’s market, with 10 buyers looking at five homes, all 10 buyers determine the top two homes and those get multiple offers with favorable price and terms, and in short time, due to demand, the rest sell, but without the same frenzy or contract concessions,” added Geller.

“As I advise my buyer and seller clients, it doesn’t matter whether we’re in a buyer’s market or a seller’s market or a balanced market, the best homes priced best always go first and fast,” he said.

NAR offers advice on how to legally handle bidding wars.

Love Letters: Full of Risk or Reward?

When the market gets hot, buyers focus on what they can put in an offer package that someone else cannot. That leads to considering writing what some people call a love letter, a letter drafted by the buyer to the seller explaining why they think they are the right buyer for the property. The love letter has a lot of different potential issues, which can vary depending on what side of the deal someone is on.

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Comments (3)

Comments

  • Patricia Crane   September 3, 2020 at 8:54 am

    I would like to see the term “bidding wars” be removed from the industry’s vocabulary. For one thing, it is not an auction, hence no bidding involved. For another, it is not a war. Competition – yes. But, if we all act in a professional manner, it should not be hostile at all. It is a Realtor’s job to prepare our clients for multiple offers by a number of solid items, and it’s highest and best from the get-go with no opportunity for a second chance. “Bidding war” scares even a well-qualified buyer from not participating at all. “Multiple offers” is a good alternate term to use that labels the situation more correctly and sanely.

    Reply to Patricia Crane
  • cherry lorson   September 3, 2020 at 9:28 am

    And now the most recent trickle down effect is some of the Appraisal values have not caught up to the market driven sale prices! UGH! So frustrating! Multiple offer situations, most over the list price and a few of the Appraisers locally just won’t consider all of it as part of the sale value! We have the comps to support the sale price too! Very frustrating to Sellers (and listing agents)!

    Reply to cherry lorson
  • Gary Cassel   September 3, 2020 at 11:31 am

    Interesting article. In my experience, particularly representing Sellers, most of the time my client would have lost money if they would have accepted an offer with the escalation clause. And sometimes the Buyer with the escalation clause is not the most qualified Buyer. I have experienced “final & best” is a good strategy, but I obviously explain the options to the Seller and I let them decide. However, if I am representing a Buyer, some of my Buyers tend to like the escalation clause strategy. The Agent does need to be creative in this market, and the “bidding war” terminology I personally dislike.

    Reply to Gary Cassel

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