Are Multiple Offers Common?
I was surprised when I looked at the calendar this morning and realized that about half of the year has passed. We are in the summer months and the real estate market feels a bit like the wild, wild west. Buyers are currently fighting each other over homes for sale like the famous shootout at the O.K. Corral as seen in the 1993 film Tombstone. Meanwhile, sellers are profiting like a prospector who hit a gold mine.
If you have not been following along with our blogs, we have been stating that the housing market in Pitt County is a seller's market. A seller's market occurs when there are more buyers in the marketplace than there are homes for sale. A seller's market also indicates that homeowners have more leverage during negotiations than potential buyers. In fact, there are so few homes for sale that buyers are finding themselves in multiple offer situations.
A multiple offer situation is very simple to understand: there is more than one offer on the table for a certain house. For example, I have a buyer that has submitted five offers over the past week. All of the homes she has attempted to purchase received multiple offers within twenty-four hours of the home being listed. One home had ten offers (including my buyer's) within four hours of being listed. Since homes for sale are scarce, multiple offers have become a norm in Pitt County.
For sellers, this is very advantageous. In a seller's market, families listing their homes are able to get top dollar (if not more) for their homes, and most homes will not sit on the market for more than a couple of days. The time is perfect for selling homes. However, if you are a buyer or a seller that is also looking to purchase, a hot, seller's market is less than ideal.
In order to "win" the home, buyers are having to concede more. Items such as a home warranty paid for by the seller, seller paid closing costs, and a pride reduction is typically not items the buyer is able to negotiate during a seller's market. Offers with contingencies are also not very enticing to a seller and can be the reason why a buyer loses out on a home to other offers. In order to gain a strategic advantage over the competition, some buyers are taking drastic measures. For instance, some buyers are skipping the viewing stage and submitting an offer without even setting foot inside the home. Other examples are paying way over list price and offering more due diligence money. Submitting an offer over list price is a good idea. However, it can get tricky. Since homes in a seller's market are probably going to be priced at the top of the price point, buyers electing to pay over list price could run into a problem during the appraisal. If a buyer agrees to pay over list, and the appraisal comes in under the agreed-upon sales price, the buyer might have to pay the difference in price at closing. Likewise, increasing due diligence money increases the financial risk to the buyer, as buyer will lose the due diligence fee if the buyer were to terminate the contract, regardless of still being in the due diligence phase of the transaction.
If multiple offers are becoming the new norm in the housing market for Pitt County, what can buyers do te ensure they have the best chance of placing the winning bid? For starters, buyers need to be prepared. The very first item buyers need to be prepared in having is a pre-approval or proof of funds letter ready to turn in with any offer. Buyers must also be prepared to have more financial risk with increases in due diligence money paid. For sellers, due diligence money automatically compensates the seller for taking their home off of the market. The higher the due diligence fee, the higher the financial risk for the buyer. And, the higher the risk for a buyer allows the seller some comfort in knowing that the probability of the buyer backing out of the transaction is limited. Lastly, buyers need to be prepared to lose the home. Buyers need to have other houses on their list to view, in case their offer does not get selected.
In addition to buyers being prepared, buyer's agents need to be prepared, also. Tyre Realty Group agents are taught to keep blank offer contracts with them, in case they need to put in an offer while showing a home. TRG agents are also prepared in knowing how much a buyer can increase an offer without putting the appraisal in jeopardy for a home in a certain neighborhood. This helps the buyer save time since the buyer will not have to wait for the agent to complete a comparable market analysis and finding comparable properties to compute a sales price that will beat out other offers but still appraise. Lastly, buyer's agents need to be prepared to see homes with their clients as soon as the client can schedule a viewing. During this type of market, speed to the offer helps create a little bit of an advantage.
There are also other strategies that buyers can implement to help make their offer standout amongst the others. At TRG, our agents are well-seasoned in multiple offer situations and can help coach buyers on other techniques. Contact us today to speak with one of our buyer's agents for your free home buying consultation!