For the past 18 to 24 months, our housing inventory in the Metro Atlanta area has been significantly and historically low. With interest rates also staying low this has meant a few things:
- Buyer demand is still up, due to the attractiveness of interest rates and how "cheap" it is to borrow money
- Sellers are motivated to sell, especially if they've been thinking about a move to buy something else, because low inventory has meant rising prices
- Almost across the board and in almost every price range, we see the possibility for multiple offers (a.k.a., bidding wars)
It's all about supply and demand -- think back to your high school economics class. Supply is down and demand is stable or up, so prices rise and interested buyers are willing to go further, pay more, and take less in order to prevail.
If you're thinking about buying a home (or you watch shows on networks such as HGTV), it's likely you're somewhat familiar with bidding wars -- or as we like to call them, multiple offer scenarios. Most people have heard of them, but few people really understand what they mean.
First, multiple offer scenarios should not keep you from making an offer on a home that you like.
Far too often, I hear real estate agents say things like, "my client doesn't want to get in a bidding war."
A good REALTOR® will find out (to the best of their ability) if the houses you're touring already have any offers on them; that's just part of the job. (It is dependent on the listing agent being communicative and responsive, so your REALTOR® may not be able to find out 100% of the time before you view the home...and there may not be offers before you viewed but one may come in while you're viewing!) A great REALTOR®, however, will find out if there are still opportunities for you to put in an offer to be considered, either before the seller has accepted an offer (meaning you can get your offer into the "bidding war" and be considered) or potentially after the seller has made an offer and you could have a fantastic opportunity to be in the back-up position!
Second, in multiple offers remember: it's not always 100% about the price.
The other thing I hear a lot from other agents is, "we're going to move on and keep looking -- my clients don't want to 'overpay' for the house." While making an offer in multiple offers can usually mean bidding over the asking price, it almost never means overpaying. The most important piece of that puzzle is (a) making sure your REALTOR® takes a thorough look at the comps before you write the offer, (b) making sure your REALTOR® has a tried-and-true multiple offer strategy (ask us about ours!), and (c) making sure your offer includes an appraisal contingency. These three important steps are ways that you will be protected from "overpaying" for a home.
A good REALTOR® will make sure you're not overpaying and also will make sure that your price bid is realistic and in line with the market. A great REALTOR® will know that there are so many other factors that make an offer attractive to a seller and know how to position your offer to make it stand out.
Third, listen to your REALTOR® when they advise you about multiple offers.
As long as you have hired a REALTOR® whom you feel you can trust -- and you've made sure that they have a firm handle on the contracts and have a lot of multiple offer strategies up their sleeve (again, ask us -- we are experts at multiple offers!), you should feel comfortable that you are putting your best foot forward -- making your best offer -- and if you are meant to "WIN" that house, you will!
Finally, consider the option of being a back-up contract.
If you really want the house and your offer is not chosen by the seller as the primary (or number one) offer, don't be afraid to have your REALTOR® ask the seller if you can be considered as a back-up contract. There is absolutely no risk and no obligation to be a back-up contract. Does it sound too good to be true? It's not! Here's what it means: if, for any reason, the contract with the primary buyer (the buyer the seller chose as their first choice) does not work out (for example, if the buyer terminates the contract during due diligence or their financing doesn't work out), if you are in "second place" you automatically move into the primary buyer spot.
Why is this a win/win? You can keep shopping for a home while you are in the back-up position, and if something better comes along during that time, you can simply rescind your back-up offer and make an offer on the new house you've found. If you get notice that the primary buyer's contract has not worked out and you are still waiting in the wings, you automatically move into that "number one" spot, without the home going back on the market and without having to potentially battle it out against other buyers in another bidding war.
I can never quite believe it when a buyer has been interested enough to make an offer, even offering over asking price, but has no interest in being a back-up contract! So many times have I seen the number two or even number three position buyer be the one who gets to the closing table to buy that home that they initially didn't "win" in multiple offers...
If you have questions about the way we handle multiple offers, the strategy we have honed over the years OR if you are simply interested in starting the conversation about buying a home, call us at 404-994-2181 or email Maura(at)BuySellLiveAtlanta(dot)com. We'd love to help!