Naming names of homes sold in bidding wars
I pay attention to your requests. Really!
Gus and others want me to talk about specific properties that have sold in competition. Once a property sells, I can tell you what it sold for and what happened in the marketing, since telling you can no longer interfere with a contract that is in play.
Below are the stories of four homes, all sold in competitive offer situations where I was personally involved in preparing an offer:
77 Trowbridge in Arlington is the bidding war I wrote about on June 3rd
I have already told you all about it. These buyers have since lost again in competition and are still looking.
35 Russell Place, also in Arlington, sold over a weekend in April. Our buyer had a solid down payment and a flexible closing date. He was unwilling to go over asking price, and I supported his intuition on that. This buyer is still looking.
22 Winter Street, in Medford, was a nice house, but significantly overpriced, IMHO. My buyers offered $455,000**, which I had calculated as a few thousand over what it was worth. They also have a solid down payment and flexible closing date. These buyers are still looking.
**TYPO! The buyers offered $445,000. corrected 7/17
146 Randlett Park, Newton, sold in a huge hurry. When I asked about showing it, the broker advised me to show it at the broker open house. One of my buyers had to leave work mid-day to see it; he had meetings all afternoon into early evening; his wife had more time flexibility. I did the market analysis, made recommendations for an offer to “Mrs.” Buyer throughout the afternoon. I met with both buyers again in the early evening -- against an immediate deadline since offers were being presented that night. We began to write up the offer. I felt the tension. I asked them to stop, take a breath, to consider what they are doing. We all agreed: this is no way to buy a house. I went home. These buyers have since pursued a short sale, but gave up due to the bad karma and the bureaucracy involved. They are cash buyers.
So, I have done a lot of work for no sales. That’s okay with me. Even in competition, I advise my buyers to keep their eyes on the true value of the property. Sometimes they will lose, in the short term. My hope is that they win in the long run.
I am watching the properties from the survey and post those soon.
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Bidding wars are really mostly unimportant. Its final price that matters. If the price is higher than would be expected a year ago, or 2 years ago- that is meaningful. If it is lower than a year or 2 ago, that is meaningful.
How the price is arrived at is only tangentially important.
Once again, if I put a one bed south end condo up for sale for 100,000, there would be a bidding war no doubt. But if the price ends up at 200k, for a condo that would have sold 2 years ago for 450k, is the bidding war meaninful, or the final price trend?
Charles, bidding wars are awfully important to the people who want to buy, yet find all their suitable housing being marketed this way.
Readers of this blog have finally stopped calling me a liar for saying it is happening.
What should these buyers do? The answer "just don't buy" is not acceptable to those who still intend to buy. So, given these stories, do you think I gave the wrong advice? Should I be more encouraging so that my poor, tortured buyers can get a house?
No, Rona, you mistake my point. I'm not calling you a liar, I've no problem believing bidding wars are occurring. I would have a problem believing that they were the norm, of course.
What I am saying is that they are fairly meaninless in any concrete sense. A reasonable buyer should care about value, not how the price is derived. 25% off original list means nothing, and that's equally true for a bidding war, the converse.
What should your buyers do? Move on to the next house. Time is on their side (of course if they asked me I'd say "don't buy now" in all likelihood). There will always be an equally good house - better in some respects, worse in others. People who get emotionally hooked on a specific house pretty much get walked all over financially.
Rona, I couldn't agree with you more - well stated!
As a first time buyer, I could care less what the property would have sold for 2 years ago. If I find a one bedroom condo in the south end priced at $100K, put in an offer, and lose out on it because it goes for $100K over asking price, I consider that to be a bidding war. I think most people would. And guess what? To me, who just lost out on what I was really hoping would be my new home, that actually is important and meaningful.
You have to wonder about 22 Winter Street, Medford because Zillow says the home sold in April for $450,000. Obviously, the $455,000 was right on target, in fact, slightly better than what the sellers got in the end. If the home is worth what people pay for it, you were right that the amount your buyers bid was in the ballpark.
So I'm wondering what happened there...did other buyers have more cash, or?
Charles,
I wish to agree with you, but I cannot. I am a buyer in this market. I desperately wish for low prices. But what I get instead is bidding wars… What does it mean?
Several things:
1) This is not the market that media described… where tons of houses are sitting on the market; everyone is waiting for any offer, sellers dream to unload their houses at any price. For me the market (I know about Newton and Brookline) just does not look like this. There are not much inventory for some reason…I don’t know why… But it’s very difficult for prices to fall if there is no oversupply.
2) Buyers’ negotiation position is not as strong as I wish it’d be. I wish, I can go from a house to a house (assume even they are overpriced) and low-ball until I find a seller in urgent need to sell… Unfortunately, I even cannot find a house I slightly like which is sitting on the market. Every time I liked the house (6 times already), I found myself in a bidding war. By the way, majority of bidding wars I participated ended up slightly below asking price- so buyers are not shy to bid below asking. To my opinion, it means again – not much inventory…
Bottom line: this is just not a buyers market. Hopefully it will come…
I must say that it's incredibly heartening (to sellers and homeowners, at least) that bidding wars are still breaking out all over the inner-128 areas of Massachusetts. I mostly work in the Golden Triangle of Back Bay/South End/Beacon Hill where bidding wars are the norm. I was under the impression that less desireable areas of our Commonwealth (such as Medford) were experiencing serious declines in home values. Looks like I was wrong!!!
Could it be this whole media brouhaha over a "bursting bubble" is merely a myth? I'd like to offer the sellers hearty backslapping congratulations on their successes. Rona I'm certain you must be having a tough time consoling the disappointed buyers in this booming market. Trust me, I spent a *large* percentage of my time having to play therapist to my buyers who have had their dreams crushed over and over again. If this is a declining market, all I can say is "Bartender, make it a DOUBLE!!!"
Hi Charles,
Just to clarify, you have too high a level of discourse to ever stoop to saying that facts at hand do not exist. In other words, you don't call me a liar. However, I got a steady stream of accusations from others. I was being called a stooge for MAR every time I said something other than the market had gone to Hell in a hand basket. The bubble-mongers don't care for nuance. It took months, and the support of readers who were seeing the segmented market, to drown out the steady gloom and doom.
The true gloom and doom for buyers: some parts of the market have low inventory, the media focuses on the recession, friends and family don't believe the conditions here, would-be homeowners waste their Sundays running around with the likes of me instead of being in their own homes.
First time buyer, I recognize you are viewing this as an emotional decision. For me it is a financial one. You would be well advised to get good financial advice.
Anna - you don't actually disagree with me. I agree this is not a buyers market yet. That is why prices will continue to fall. You describe the denial stage of market readjustment, if I can paraphrase and move over Kubler-Ross stages. We are still in the pre-crash period in Massachusetts, or the beginning of the crash, if you would.
Hence my ongoing prediction for summer 2009 as bottom - it'll take another bad spring market for sellers to throw in the towel. I grant 2009 may be too optimistic - I have been consistently wrong in my predictions of how fast people would "get it"
Low inventory is a standard part of this stage of the market cycle, as discretionary sellers have withdrawn from the market in the hopes of improvement in the future.
Sunshine and Lollipops - 285 Columbus still sold out? I wish the developer would catch on.... How about Penny savings Bank? I seem to recall you posting both had sold through...
Charles, I have a bachelors degree in economics from Harvard and an MBA from Sloan. Thanks, I appreciate your concern, but I think I can take care of my own finances.
charles - you mentioned in previous posts that you're currently renting? what exactly then is your expertise in the real estate industry?
First time buyer, I find that truly startling. I will be harrassing some of your professors when I next see them. "To me, who just lost out on what I was really hoping would be my new home, that actually is important and meaningful" is an extraordinary statement for a quant school grad.
Curious - real estate developer for the last 10 years or so. I sold out in 2005 because the numbers showed the market was going to crash. Am hanging out on the beach waiting for it to do so, so I can get back in - I love real estate.
Before that I used to be a lawyer. Hated that with a passion, but it comes in handy.
as a post-script to #14 - Credentials don't really matter, they are just an indicator. I have multiple undergraduate and graduate degrees from various Ivy league and equivalent universities. But so did many of the people at Bear Sterns. What matters is the quality of my analysis, not my background.
I live 6 states away, but I just can't get enough of the comments field. We need to have meet-up, like the netroots do. Is Buff's Pub still around?
Now I can see why Rona hates these wars...it's clearly the best way to get the most for your property, but being so close to a sale, man oh man.
Some random thoughts -
Anna, yes, exactly - just because prices have dropped some does not mean that there are now plenty of ripe-for-the-picking, quality homes out there, particularly in prime locations. In my humble opinion, there are still many homes which just don't offer very much which are priced as if they were the ideal first-time-buyer home. I don't know if there are better values upmarket because they were "more overpriced" before the slowdown, because I can't buy a >$500,000 house anyway, but I still think too much of the lower end has delusions of grandeur.
So yes, there are bidding wars, because if they are desirable properties to a bunch of similar people, that's what you'll get regardless of the fact that a whole ton of other homes have had to slide in price to sell in this market.
Rona- these bidding wars are definitely interesting to hear about against the backdrop of the overall slide. I think you gave the right advice, even if it means having to cut budding emotional attachments to prospective homes several times before finally managing to buy one. If I walk into the store looking to buy Cheerios, and I reach for a box, only to have several other people appear grabbing at that box, saying "that's the one I wanted!" and pulling out a dollar more is probably not a good idea.
I certainly hope I don't get into one of these when I decide to go for it.
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