(MCT)—I was talking with real estate agent Jane Wellbrock a few weeks back about the increasing number of multiple bids for what are, in most of the Philadelphia region, too few houses for sale.
Wellbrock was lamenting the “quieter second quarter” she was having compared with the last couple of years, but she provided an example of a 25-year-old house that went on the market for about $500,000 and had five offers in the first week.
“There’s just no inventory,” Wellbrock says, and she and other agents are resorting to “cold calls”—telephoning neighbors of recent sales to see if they are ready to list.
The answer, she says, is usually “not ready.”
Though economist Kevin Gillen, of the University of Pennsylvania’s Fels Institute of Government, continues to point out that “home sales overall remain below average,” some of what is selling is being fought for.
I hate to use the phrase bidding war, but as most agents will tell you, buyers’ search for bargains, coupled with tighter appraisal standards, tends to keep final sale prices at or just slightly above asking price.
Bargain hunting leads many agents to list houses a little below asking, in the hope that buyers show up and boost the sale price near that level or above.
Real estate professional Sharon Ermel Spadaccini told me about a house in Bucks County that sold, after multiple bids, for $189,000. One offer came in for $205,000, however.
“I asked the agent where he had gotten those comps ,” she says, “because I knew that it would never appraise at $205,000.”
One problem with appraisals the last few years was that there were not enough comps to support what agents considered reasonable offers.
But agent Kit Anstey says that because of the run-up in sales in his market, at least, there are enough comps for appraisers to look at now. “We only had one problem in the last year,” he says, a far cry from December 2012, when even reasonable offers were affected.
Although the market continues to sputter in many areas of the region, sales remain historically low, and prices, according to Gillen, are about what they were when they hit bottom two years ago, multiple bidding — much restrained from the excesses of the boom years — has become more common as inventory stays low.
How can you emerge victorious in a multiple-bidding situation in today’s market, given all the caveats I have listed?
Don Frommeyer, president of the National Association of Mortgage Brokers, says buyers need to set themselves apart with competitive bids.
An escalation clause offers $1,000 above the highest bid and automatically kicks in when other offers are present, he says.
A buyer can set a cap on the close, so it doesn’t go above his or her comfort level. The seller realizes the seriousness of the offer, and the buyer is protected from random counteroffers, Frommeyer says.
A cash offer with proof of the funds is very valuable because it involves fewer obstacles and makes it more likely to close, he says.
“All-cash offers don’t mean no financing is required – buyers may be using alternate forms of financing that count as cash by leveraging assets,” Frommeyer says.
Finally, he says, try to engineer a quick closing:
“Have all financials in place before placing an offer,” Frommeyer says.
“A preapproved loan and regular contact with a lender can show the seller how serious the bidder is.”
©2014 The Philadelphia Inquirer
Distributed by MCT Information Services
