This spring, I spent a lot of time talking my clients off the ledge. They were annoyed and frustrated by bidding wars. They needed advice to determine which houses are likely to sell immediately, and which had seller’s agents who were playing games. Although there are still some bearish voices who growl that it is all made up – that there are no bidding wars and all prices are going down – those bears have not been out in the metro-Boston market.
The biggest problem is that the supply of housing that matches current demand is low. There is a surplus of housing that does not suit current buyers. So, with uneven demand comes uneven prices. It is the high-demand housing that is sending buyers to the ledge. At the same time, there are run-down places and places in B, C or D locations that are sitting around waiting for some buyer demand. Buyers, with or without agents, have the task of knowing which kind of housing they are looking at.
Experience in the 2012 market:
On the same day, these two Offers were negotiated. These two properties were within ¾ of a mile from one another. The demand zones are very sensitive. What is acceptable condition varies, too. Neither of these properties has closed yet, so I can’t report on final sale prices. (example 1 is still for sale.)
One buyer had an Offer on a condo in very nice condition in a C+/B- location. The asking price was roughly $20,000 over market value, in my opinion. My client made a market-value Offer of $19,000 below that inflated asking price, best and final. The seller’s agent called to ask if the “best and final” was negotiable, and that the seller would not accept an offer less than about $5000 below asking. “The seller doesn’t need to sell,” she informed me. I double checked with my client, then called back to let the agent know that “best and final is best and final.” My client moved on. The seller doesn’t need to sell, and the seller won’t sell…
The other buyer put in an Offer on a two-family in an A- location in lousy condition. Their final Offer was $26,000 above asking price in a bidding war. The market value was about $10,000 below that, in my opinion. They didn’t get the house. The listing agent reported that their Offer was way at the bottom of the pack.
Most recent S&P/Case-Shuller Home Price Indices report shows that prices in their Boston area region went down slightly, but was basically flat this spring. The gains and losses nationally that are quoted are quite modest (below three percent in either direction.) Yet, some properties around Boston are going at inflated prices, while others are going begging. Some of the beggars are selling for less than expected prices and some are not selling at all.
What I am seeing is a neo-bubble. This is a recipe for the birth of another generation of new owners who are angry when they can’t sell at a profit in two years. My task, as a buyer’s agent, is to figure out what kind of demand there is on a particular property and advise my clients. My advice has been consistent through the Big Bubble and now in the neo-bubble:
If you are going into a bidding war, be armed with the best analysis of recent sales that you can find. An agent can do a Comparative Market Study for you. If you have the skills, do the math yourself. Once you know where the “too high” point is, that will help you keep your head.
Buy for the long term, or focus on getting a good rental.
Be careful out there.
Tomorrow, I am posting the list of bidding war results from properties that my agents or I have direct and personal experience with. These are sales where our clients participated and did not win; therefore we are sure that at least one additional Offer was in play (our clients.)
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