Buyer Competition Steepens in Tight Markets

DAILY REAL ESTATE NEWS | MONDAY, JULY 20, 2015

Some markets with particularly tight inventories of for-sale homes are seeing a significant uptick in bidding wars that are sending prices far beyond a property’s original list price.

Read more: Economists Pinpoint Inventory Shortage Causes

"In Seattle right now, it's usually more than two buyers," says Sam DeBord, managing broker at Seattle Homes Group, about bidding wars in the city. "We hear about a 20-plus offer bidding war weekly. In most cases, it's closer to five offers."

Debord, who is also the state director of Seattle King County REALTORS®, says that institutional investors often bid the most aggressively and get the higher-priced deals. But traditional buyers are involved in many of these bidding wars too, he says.

And they're increasingly finding themselves up against deep-pocketed investors for the same house.

"Occupant-buyers need to show somehow that they're more likely to close the transaction than an investor," says DeBord. "Cash and speed are to the advantage of the investor, but they're not as heavily invested in actually getting any single property they're writing offers for. Regular buyers should show commitment, whether by financial, logistical, or personal means to sway the seller – within legal guidelines, of course. Personal letters, earnest money increases, and waivers of contingencies can all show serious intent to close." Also, the timing of the closing can influence a seller too, DeBord says.

"For sellers, it's worth considering that the investor may be making offers on multiple properties at the same time," says DeBord. "Keep in mind that the well-financed traditional home buyer might, in some cases, be more likely to get your transaction to closing."

Investors tend to make all-cash offers, while non-investors are making offers that are often supported by a mortgage. Some buyers are also taking the appraisal amount and adding their own cash on top to try to edge out another bidder. These so-called hybrid offers are growing more popularity in middle-market bidding wars – under $1 million, says Mark Stark, CEO and owner at Berkshire Hathaway HomeServices Nevada Properties and Arizona Properties.

Source: "Bidding Wars Still Dominate Low-Inventory Markets," RISMedia (July 19, 2015)