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Interest rates are low and home prices aren't escalating at the rate they did a couple of years ago. In some areas, prices have even come down. The market has improved for buyers, particularly in high-priced housing markets like the San Francisco Bay Area where just two years ago it was common to find dozens of buyers competing to buy a single listing.
However, these improved market conditions are bringing buyers out in droves. Many prospective buyers are once again finding themselves making purchase offers in competition with other buyers.
Should you back off from a multiple offer competition? Multiple offers usually drive the price up. So you usually can count on paying more than the asking price if there are more than a few offers on a listing. Recently a listing in Oakland, Calif., received 15 offers and sold for more than $100,000 over the asking price.
Did the listing sell for too much? The lender's appraiser didn't think so; the property appraised for the purchase price. Was the listing under-priced? The seller, who wanted a quick sell, set the price. He had already closed on a new home and didn't want to own two homes for longer than necessary.
A change in market conditions was responsible for this bidding frenzy. Inventories of homes for sale dropped in January, which is typical. However, the number of buyers entering the market soared, which is not typical for this time of year, creating an imbalance between supply and demand. Multiple offers become more common in this kind of a market.
HOUSE HUNTING TIP:
One option to avoid multiple offers is to wait to buy until later in the year when there is likely to be more inventory. Another strategy is to focus on listings that other buyers are passing on, either because they're not priced competitively or because they're cosmetically unappealing. Just make sure that you don't buy a home that has an incurable defect, like a lousy floor plan, or one with a serious structural problem.
If you do decide to jump into a multiple offer fray, set parameters for yourself. Resolve to pay no more than you can comfortably afford. And, don't pay more than the listing is worth.
But, overpaying a modest amount for a home you love and that will last you a long time isn't foolish. One buyer felt she over-paid when she bought her home for $240,000 in 1981. Today, she still owns the home, and it's worth more than $900,000.
Get a head count of the number of offers ahead of time. If there are 10 offers, or more, and you can't pay over the asking price, it may not be worth your effort. Although there's more to an offer than the price, price usually carries the most weight.
Ideally, your agent should present your offer in person to the sellers and their agent. However, some seller agents may prefer to have the offers dropped off rather than take the time for in-person presentations. In this case, include a summary of your offer and a brief biography to distinguish yourself from the pack. Some buyers include a letter to the sellers along with personal photos.
The homes that attract multiple offers are usually priced competitively, well located and in good condition. There is a comfort in buying a home that is in high demand. Your resale prospects should be good.
THE CLOSING:
The agent who's representing you can make a difference. Listing agents like to work with agents they know will get the job done. So, pick your agent carefully if you're working in a competitive market.
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