Multiple offers making a comeback (Mainly Phoenix Metro Area Foreclosure Properties!) But highest bidder isn't always the winner
In the current home sale market, it might seem ludicrous to make an
offer on a listing if it means competing with another buyer. However,
multiple offers are on the rise in some markets( especially the Phoenix Metro Foreclosure Market). But, it doesn't always
mean that you need to pay a lot more than the asking price.
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Sellers are ever hopeful of receiving multiple offers. These
days, this is usually an unrealistic expectation. That is, unless the
listing is a prime property in a high-demand neighborhood where few
homes are being offered for sale.
Price is a critical part of the equation. Some sellers price
their homes low because they need a quick sale. If the price is below
market, multiple buyers could step forward with offers. Sometimes an
overpriced listing is reduced to market price or below and results in
offers from more than one buyer.
Most multiple offers today are on low-end foreclosure
properties. Investors make up a large part of the buyers in this
segment of the market. In some areas of California and Florida, prices
have fallen 40 percent since the market peaked in 2006.
HOUSE HUNTING TIP: Don't shy away from making an offer just
because there is more than one offer. In some cases, a dozen or more
buyers make offers on foreclosure properties that are listed at bargain
prices. But, the highest bidder is not always the winner.
Even in non-distressed-sale situations, multiple offers in
today's market don't always result in an overinflated sale price. For
instance, a charming older home on a sought-after street in the Crocker
Highlands neighborhood of Oakland, Calif., sold after only two weeks on
the market with multiple offers. The property was listed for $1.3
million, and sold for $5,000 above that price.
In another case, buyers from the East Coast bought a home in
Marin County in the San Francisco Bay Area. Against their agent's
advice, they offered less than the asking price even though they were
competing against other buyers for the property. Their offer was the
lowest of three offers, but it was accepted by the sellers. The reason
the sellers accepted the lower offer was that the winning buyers had
solid financial backing.
There are far fewer financially qualified buyers in the
home-buying market today than there were two years ago due to credit
tightening, more rigorous financial qualification requirements and
recent stock market losses. In some areas, as many as one-third of home
sale transactions fail to close, often due to the inability of buyers
to obtain the financing they need.
Sellers who receive more than one offer should carefully
consider all aspects of the offers, not merely the offer price. An
offer from an all-cash buyer who doesn't need a mortgage to finance the
purchase, and who can close quickly, should be taken seriously even if
the price is lower than the other offer(s). However, some all-cash
buyers -- who are fully aware of their strong position in this market
-- feel they are entitled to a major price discount.
Whether or not you'll have success countering for a higher
price will depend a lot on the profile of the buyer. Buyers who intend
to occupy the property for the long term are more likely to pay more
than will investors who base their purchase decisions on the numbers,
not their emotions.
THE CLOSING: Sellers should try to keep greed out of their
decision when faced with multiple offers. Today's buyers are willing to
walk away from a negotiation rather than pay over market value, or it
they think the sellers are unreasonable.
Copyright 2008 Dian Hymer