We’ve finally made it to May! The housing market has been pretty active, but under the surface, there have been a couple of issues facing buyers in the current market.
We have a large imbalance between quality inventory and the number of buyers. There are a lot of buyers chasing increasingly limited inventory, which creates multiple bid situations where buyers are learning the hard way that offering under asking price and hoping to get a good deal is not working.
I’ve been following this for quite a while, and I think I’ve unraveled the buyer psychology behind it.
When buyers enter the market, they bring with them the mindset from the market in years past, meaning that since the financial crisis, we have been in a predominate buyer’s market. Buyers would offer about 10% below the asking price and then close the gap with negotiations.
Now, however, we are transitioning into an extreme seller’s market. The days on market for an average property has been dwindling. The average monthly inventory is down to a 10-year low at this point. Market conditions like this overtly favor a seller.
Buyers who are actively participating in the market are facing a learning curve. They go in the first time and bid lower on the property and, not surprisingly, they get outbid. The second time they go in, they lead with a stronger offer. When they offer something closer to the asking price, they tend to be more successful.
Here’s my advice when you’re making an offer on a property: Listen to your agent. Your agent knows the market and is talking with other agents; they have a better grasp on what is working and what is not working for a property, given the comparable sales. Don’t be nervous about taking an agent’s advice—the difference in the commission earnings an agent makes between going below asking price and above asking price is pretty insignificant. At the end of the day, they truly want to put you in a position to win your offer.
As of late, I’ve noticed that not only does the offer you make in terms of sales price have an impact on your ability to win the offer, but the type of financing and who your lender is also impacts the listing agent and seller’s comfort level with pursuing your offer.
In order to maximize your ability to win with your offer, we are:
- Offering to do an underwriter-level pre-approval, which, in most circumstances, is accepted similarly to a cash qualification because it’s subject only to a contract when you’re making the offer.
- Willing to lend you our services as a local lender with great brand recognition. A lot of listing agents know how fast we can turn around and deliver on our promises.
Sellers and their agents are looking for a stable and attractive offer, using the terminology “highest and best” when vetting different offers. They want to know that the lender has a great track record and that they’ve ensured the loan on the offer they’ve accepted is viable.
If you have any questions or are in need of advice about how to win in a multiple bid situation, please feel free to reach out. We’d be glad to help you.