It wasn’t so long ago that homebuilders were practically begging hard-to-find buyers to visit their open houses by promising them everything from free refrigerators to thousands of dollars toward closing costs.
What a difference a few months — and an ultra-tight inventory of for-sale homes — makes. In the market of existing homes, would-be buyers are all but bribing sellers to choose them as the next owners of their houses.
Wine and cookies
KGW-TV in Portland, OR, reported that desperate buyers are delivering cookies and wine to just about anyone who plants a for-sale sign in the front yard, as the spring selling season has made it obvious there — and in many cities around the country — that the demand for homes is far outpacing the number of properties on the market.
One Realtor told the TV station that shoppers are knocking on the doors of homes they like — even if they’re not for sale — and asking the owners if they’ll consider parting with their property.
But the most effective tactic Realtor Mary Pahl told the station she has seen is the heartfelt, hand-written letter that one couple delivered to the owner of a for-sale home. It explained how much the young parents wanted to raise their children in that particular house. And it worked.
It’s a seller’s market, and the bidding war is officially back after a long, recession-induced hiatus.
Real estate brokerage Redfin reported this month that 61% of properties its agents wrote offers for had multiple bids, up from 57% in February. And while that’s down from 63% in March 2014, it could be because, despite tight inventory, slightly more homes are for sale this spring than during last year’s peak selling season, Redfin reported.
Still, those homes aren’t staying on the market for long. In Denver, where competition for homes has been fierce for months, the average home was on the market for just six days before snagging a contract, Redfin reported in a separate study.
Nationwide, there is about a 4.6-month supply of homes available for sale, the National Association of Realtors has estimated. And that’s not enough, the NAR says: A healthy market has six months’ worth of homes ready to sell.
The more buyers are willing to pay, of course, the higher owners price their properties.
Redfin reported that across the 19 markets its survey covered, 23% of homes sold above asking price. In ultra-competitive San Francisco, however, 72% sold for more than sellers initially advertised, by a median difference of 7%.
Still, the craze is limited to “hot” markets. Redfin noted that on Long Island, for example, homes are selling for 7% below asking price, and Chicago and Baltimore sellers are settling for 5% less than they want.
In inventory-starved markets, some conditions have returned to their pre-housing crash ways. For example, sellers are holding out for “customers” who are pre-approved for mortgages and are snubbing potential buyers who ask for a contingency — whether it’s because they have to sell another home before they can afford their next one or because they want the results of a home inspection before signing on the dotted line.
“Sellers want a sure thing,” Leslie White, a Redfin agent in Washington, DC, said in a release. “I’ve had sellers turn down an offer $50,000 over the nearest bid because it came with an appraisal contingency attached. A lower bid with no contingencies is sometimes more attractive to sellers who want to close the deal without hassles.”
And sometimes, waiting to qualify for a mortgage can be considered a hassle. More buyers — not investors, but owners who plan to live in the house — are offering to pay cash so they can promise a quick closing, Redfin reported. This is happening mostly in high-income areas like Silicon Valley.