Home Buyers Secret: How To Win The Bid
Frank and his wife were living in a small starter home in Fenton, MI. With three children and a fourth on the way, they had outgrown house and were looking for a big upgrade in Green Oak Twp.
Frank had already secured a mortgage and was “armed and ready” to secure a contract. He had bid and lost the bidding war on two other properties at this point and was cautious about getting his hopes up again. Read how he secured his dream home, despite losing the bid.
2018 saw a change in the type of buyers out there. There are fewer buyers looking to upgrade compared to the huge influx of first-time homebuyers.
Take, for instance, Caitlin & Chris. This young couple was looking to secure their first home in Livonia, Michigan twenty minutes outside of Detroit.
Despite actively searching and bidding on five different properties over the summer months they were unable to secure a purchase prior to their September wedding. It was in December, when buyer activity drops prior to the holidays, that they secured their first home. Watch their video testimony below.
Millenial home buyers have been out in force looking for a first home and more are on their way. The challenge is that the inventory of homes for sale in the first time home price range of $100-$250K has not kept up with demand, which has led to A LOT of competition for the move in ready homes that are available.
Bidding wars happen when there are two or more home buyers all vying for the same property. Often times, this results in purchase prices exceeding the original list price. Today’s booming economy and high employment numbers have generated a new generation of home buyers and price battles within the market.
Realtor.com went on to explain why we are seeing Millenial buyers flooding the market:
“A booming economy and stable employment in most parts of the country have created a new generation of eager home buyers – and led to fevered price battles spilling over into some unexpected, smaller markets.”
Bidding wars have grown into a fever pitch in many markets across the country and in some unexpected areas as well. The multiple offer scenario is now commonplace and turned into somewhat of a “blood sport”.
Javier Vivas, Director of Economic Research for Realtor.com had this to say:
“Multiple-offer scenarios are no longer reserved to the usual big, fast-moving markets…demand for homes has spilled outward into secondary, smaller markets, and more buyers are gearing up to face fierce competition in more places around the country.”
Realtor.com identified ten of the hottest bidding war cities across the nation as follows:
1. Akron, OH
- Median home list price: $150,000
- Share of homes selling above list price*: 20.6%
- Increase in the share of homes selling over list price: 91.7%
2. Worcester, MA
- Median home list price: $286,400
- Share of homes selling above list price: 41.5%
- Increase in the share of homes selling over list price: 88.1%
3. Lexington, KY
- Median home list price: $287,200
- Share of homes selling above list price: 22.7%
- Increase in the share of homes selling over list price: 86.4%
4. Irvine, CA
- Median home list price: $950,000
- Share of homes selling above list price: 30.3%
- Increase in the share of homes selling over list price: 85.5%
5. Greensboro, NC
- Median home list price: $201,700
- Share of homes selling above list price: 29%
- Increase in the share of homes selling over list price: 81%
6. Sioux Falls, SD
- Median home list price: $240,000
- Share of homes selling above list price: 32.8%
- Increase in the share of homes selling over list price: 74.2%
7. Madison, WI
- Median home list price: $317,000
- Share of homes selling above list price: 40.9%
- Increase in the share of homes selling over list price: 73.4%
8. Louisville, KY
- Median home list price: $242,000
Shareof homes selling above list price: 26.1%
- Increase in the share of homes selling over list price: 69.9%
9. Tacoma, WA
- Median home list price: $290,000
- Share of homes selling above list price: 56.5%
- Increase in the share of homes selling over list price: 68.4%
10. Little Rock, AR
- Median home list price: $176,100
- Share of homes selling above list price: 13.5%
- Increase in the share of homes selling over list price: 67.5%
A Common Scenario
The National Association of Realtors talks about the frustrations many home buyers are experiencing:
“Realtors® in areas with strong job markets report that consumer frustration is rising. Home shoppers are increasingly struggling to find an affordable property to buy, and the prevalence of multiple bids is pushing prices further out of reach.”
Annette Hibbler, a Realtor in Southeastern Michigan relays this all too common story. Aubrey and Sean were looking for a small lakefront cottage in and around Green Oak Township Michigan. They found a 900 square foot cottage on a hill giving it a beautiful view of the all sports lake below. The house needed some updating but was conveniently located to nearby Brighton.
The cottage was listed at $185,000. Having lost one bidding war, they decided on a more aggressive approach and bid $205,000. “I thought this was a solid offer sure to win. They had their pre-approval which we submitted with the purchase offer and I provided the lender’s contact information as well.” You can read her experience on the selling side of multiple offers, “Getting Selling A House Quick” and what goes into choosing one over the other.
Despite the $20,000 bid over asking price, they lost the bid. Bidding wars are becoming an all too common scenario even in secondary markets outside of big cities.
“It’s not uncommon for home buyers throughout areas in Michigan are losing three to four bids before finally securing a purchase in this market.” – Annette Hibbler, KW Realty Livingston County Michigan
More Purchase Bids Exceeding List Price
Millennial first time home buyers have to come onto the market fully prepared to compete. Annette states, “Here in Michigan, we are seeing purchase offer bids go as much as $15K to $25K over asking price in the first home $180K to $225K price range.”
- Single Family 806 Fairway Trails Drive, Brighton – List Price $134,900 – Sold Price $147,500. Sold in 3 Days
- Single Family 4033 Jewell Road, Marion Twp – List Price $137,500. Sold Price $150,000. Sold in 2 Days
- Single Family 7400 Centerhill Road, Hamburg Twp – List Price $159,900. Sold Price $175,000. Sold in 5 Days.
Bidding wars are common in the first time home buyer price range of $150K to $250K. In sharp contrast to the premium and luxury markets which have not enjoyed the same influx of buyers and instead, prices have softened in 2018. Currently, these markets have much longer days on the market and slower sales.
Leave A Comment
Share your experiences in real estate as a home buyer or home seller. What challenges have you faced and what was the final outcome?