It seems that the typical question we hear in the "buyer's market"...how much less will the sellers' take (or some variant)...is being replaced. The new questions are:
- Will an offer at the asking price be good enough?
- Should I make an offer over asking?
- How much over asking should I go?
While this is not the commonplace question for your typical sale, it IS for the REOs and the short sales these days. Buyers are competing with 5, 10 and more offers on the typical distress sale (I heard of one with 45 offers just yesterday), and while they don't all sell at an above asking price, it seems more and more are doing so
Not all buyers are on this bandwagon, of course. There are still low offers coming in, from what I hear. But those who are serious and want to buy a home, particularly in the lower price ranges, have no choice but to play the game.
Unfortunately it's not easy, and there is never a guarantee.
Some things to be aware of with regard to short sales, pre-foreclosures, and REOs (bank-owned properties):
1. Banks will sometimes counter the offers, but not always. They may just counter a particular offer (perhaps the highest).
2. Looking at comparable sales will often not provide you with guidance to make an offer
3. Cash buyers often have an advantage, within reason. A really low cash offer won't cut it, but banks are accepting cash offers that are less than other offers with financing terms in some cases (this from a number of other agents I have spoken with). They can get their money sooner and there is no risk associated with the appraisal and getting a loan. We are seeing more investors, making it tougher for the typical buyer.
4. Appraisals can become more of an issue in these so called bidding wars where the prices are escalating above asking, and some are coming in below the purchase price. It may or may not be an issue. It happens with non-distress sales, too. But it can jeopardize your purchase unless you can negotiate a different price or bring more money to the table.
5. You MUST act quickly as a buyer. Offers are coming in on the day properties go on the market.
6. Don't give up until it's over. Buyers sometimes back out, or don't get their loan approvals, so the top offer may go away. Naturally the odds are worse if you are one of 10 or 15 offers, but it ain't over till it's over. But you do have to decide what you are willing to wait for, knowing there is a good chance you may not come out a winner. And depending on your personal situation a long wait may not be feasible.
7. Don't jeopardize your offer with a lot of contingencies. On the other hand, be realistic - you will not, unless you are a cash buyer, likely be able to close in 3 weeks, and FHA loans for non-FHA approved condos will take closer to 45 days.
Make sure you spend some time in discussion with your REALTOR acting as a buyer's agent who can ask in your best interest. And be prepared to make a few offers before you win, at least in some markets, if you are in the lower price range (in the SoCal area, under $500,000 in general).
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Jeff, good advice for those trying to buy an REO. Most buyers don't believe it when I tell them the house will sell for full price. - Until they lose the house they want by under bidding!
Maria - well that seesm to be happening alot around here. And I suspect you find that after a loss or two then most buyers realize what is going on and approach the process differently. It's frustrating...but now we are seeing articles in the media about this.
Jeff
Whoa! OK. I'll say it again. I want to be in your market area! We're still getting the low ball offers, and we still have too much inventory. Thankfully, the inventory vs sale gap is closing (Yay!) So we are getting there, slowly but surely.
Lisa - well there are some ugly areas, still. But in certain market segments it is getting nuts. Hope it continues.
Jeff
45 offers! That's nuts and great (depending who you are) We are seeing 5, 10, even 15 on REOs and buyers can't believe it. Nuts it is :) ~Rita
Hey Jeff,
Good info for anyone. Just today I wrote an offer 103% of asking and it wasn't a repo. I hated to tell the buyers (before we viewed) that after 2 days on the market there were already 5 offers, we were number six.
That is fantastic news for your market! Congrats for making it through to the other side!
Rita - and I heard the same sorts of stories from a number of agents when I was north of LA the other day.
Lynda - I have done the same. I always tell buyers now they need to be prepared for this and move quickly. We wrote a 113% offer on an REO and someone else got it. All the offers per the agent were over asking.
Teresa - well there are still lots of issues, and short sales are still taking a long time to sell, but the REOs are moving pretty well.
Jeff
if i am the first to make an offer that is the sellers asking price what is the chances that seller will accept the offer or will they wait a period of time to see what everyone else offers
greg
Greg - good question. It depends. I suspect many would accept it in a market that is not competitive, but in this market, esp. at the lower prices points, selelrs are getting more than asking for real sales (versus short sales and REOs). It likely will depend on your local market, so I would seek gthe advice of a knowledgeable agent.
Jeff