As listing inventories have grown in most markets around the country, multiple offers have waned. However, affordable housing markets like Salt Lake City and Albuquerque, N.M., are bucking the trend.
Demand in these more affordable housing markets is high relative to the inventories of homes for sale-a condition that often leads to multiple offers. So if you’re buying in one of these markets, you could find yourself in competition with other buyers.
Even if you’re buying in a higher priced market that has cooled off, you may still find superior listings that attract attention from more than one buyer.
There is a definite advantage to being the only buyer making an offer. When there’s competition, there’s pressure to make snap decisions. Contingencies for lining up financing and inspecting the property are often left out of the offer to make it more tempting to the sellers.
When you’re the only buyer, you have the luxury of negotiating to reach an acceptable purchase agreement. There’s no need to waive contingencies or accept unfavorable terms or conditions like a very short close of escrow or an excessively long seller rent back.
Therefore, some buyers will only make an offer if they are the only buyer. They refuse to participate in a multiple offer situation. If they hear there’s an offer that’s about to be presented, they back off and wait to see what happens. Is this a wise strategy?
By overlooking the listings that receive multiple offers, you may be missing out on the opportunity to buy the best houses that are offered for sale. Although there are exceptions, listings that attract multiple buyers are usually either well-priced, well-located and in top condition, or they are fixer-upper with a lot of upside potential.
Buyers don’t like multiple offer situations because they’re afraid they’ll pay too much. This needn’t be the case, unless you make a wild over-bid that can’t be supported by the comparable sales data.
In the hot seller’s markets of the last several years — where the inventory of homes for sale was at historic lows and multiple offers were common — some buyers offered considerably more than the list price. In some cases, the bids were for more than $100,000 above the next best offer.
One such buyer who bought a home in Berkeley in 2000 recently resold the house for $100,000 less than he paid. Market values in Berkeley have gone up appreciably since 2000. Clearly, this seller overpaid when he purchased.
HOUSE HUNTING: Buyers who are wary about making offers in competition should be aware that in a more balanced market, competing with another buyer doesn’t necessarily mean that you’ll end up paying more.
Recently, a Piedmont, Calif., listing that had been on the market for a few weeks received two offers. Neither of the offers was for more than the asking price. If you had been interested in the property and didn’t make an offer because you thought the listing would sell for over list price, you would have lost out on the opportunity to buy a house you liked for a reasonable price.
There’s really no reason to compete to buy if the kind of house or condo you are looking for is abundantly available. However, if you’re a buyer who wants a scarce commodity like an end unit condo or a house with a panoramic view, you are more likely to run in to competition.
THE CLOSING: Rather than shy away from offering on a listing you want just because other people also want it, set a price above which you won’t pay. Then make an offer.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.