So my last blog was about the return of multiple offers, a sure sign of an improving market, but now there's a new twist, and one we've rarely seen before. It's call an "escalating offer", and essentially it says that the offerer will exceed any other offer made on the property, sometimes up to an amount certain, and usually for a specific amount over the other offer. For example, if the home is listed for $550,000, I might offer $5,000 over any other offer, up to $600,000.
These escalators are problematic, legally and ethically. If I'm the listing agent, I can't exercise your higher bid without proving to you what the other offer is. Does that violate the privacy of the first buyer? Also, how do we know what makes a better offer? Will you also match the mortgage, inspection, and closing clauses? If the first offerer responds in kind, don't you now have an advantage, since you know what the terms of the first offer are?
Additionally, if I am the listing agent, acting on behalf of the seller, shouldn't I be assuming that your offer is for the highest amount that you'll go? So, if you say you'll match up to $600,000, and an offer needs a fixed price to be legal, wouldn't that be the only fixed amount you've indicated? So isn't your offer really $600,000, since you've indicated that that's how high you'll go to get the property?
All of these questions are food for thought, and likely to be settled over time through a combination of convention and controversy. In the meantime, however, I just wanted to make readers aware of the newest trend in real estate offers. And show you how complicated it is!
Wednesday, March 27, 2013
Wednesday, March 20, 2013
Bidding Wars Return
When I ran this morning, it was 29 degrees, with wind chill that made it feel like 17 degrees, so it didn't seem like the first day of spring, but it is! And with spring comes the spring real estate market, which we are definitely seeing. The surest sign of an improving sales environment is to have a listing come on and receive multiple offers right away, and that's happening. Although we don't yet have the shortage of supply that other markets do, it's true that most of what is selling has just come on the MLS, and is garnering attention immediately.
Buyers have been coming in close to asking price on properties correctly priced to sell. In more cases than we've seen in a long time, several parties have come in at once, leading to situations where buyers have been asked to produce a "highest and best" offer. Just to be clear, that does include price, but it also considers terms, so offers that are cash, or that don't have inspection clauses, are usually favored over offers with contingencies. We realize that buyers often doubt the veracity of real estate agents who say that they have another offer, so I'm using this forum to make sure that everyone knows that it is indeed happening often these days. While there may indeed be cases where an agent claims to have another offer coming in to raise or accelerate a bid, it is true that, even with properties that may have been languishing for months, there are instances of multiple bids.
What does this mean for sellers? First of all, it doesn't mean that you underpriced your property. Things priced to sell quickly go for more than those set higher, even though that may seem counter-intuitive. Buyers go higher when they perceive that the price is attractive, because buyers today are well-informed, and they know what properties are worth. Also, since mortgages require appraisals and appraisals depend upon comparable sales sold recently, rising prices mean difficult appraisal situations, since appraisers can only use closed properties as comparables, and those contracts are already several months old when they close. So, you can hold out for more money, but your buyers may not get a mortgage for the higher amount.
And what does it mean for buyers? You'd better get out there soon...and don't fool around. Offer what you would be sorry to hear that someone else bought it for, and do it quickly. Make your offer as clean as possible, and don't ask for contingencies you don't need. You'll never borrow again at rates this low, so be happy and buy now!
Buyers have been coming in close to asking price on properties correctly priced to sell. In more cases than we've seen in a long time, several parties have come in at once, leading to situations where buyers have been asked to produce a "highest and best" offer. Just to be clear, that does include price, but it also considers terms, so offers that are cash, or that don't have inspection clauses, are usually favored over offers with contingencies. We realize that buyers often doubt the veracity of real estate agents who say that they have another offer, so I'm using this forum to make sure that everyone knows that it is indeed happening often these days. While there may indeed be cases where an agent claims to have another offer coming in to raise or accelerate a bid, it is true that, even with properties that may have been languishing for months, there are instances of multiple bids.
What does this mean for sellers? First of all, it doesn't mean that you underpriced your property. Things priced to sell quickly go for more than those set higher, even though that may seem counter-intuitive. Buyers go higher when they perceive that the price is attractive, because buyers today are well-informed, and they know what properties are worth. Also, since mortgages require appraisals and appraisals depend upon comparable sales sold recently, rising prices mean difficult appraisal situations, since appraisers can only use closed properties as comparables, and those contracts are already several months old when they close. So, you can hold out for more money, but your buyers may not get a mortgage for the higher amount.
And what does it mean for buyers? You'd better get out there soon...and don't fool around. Offer what you would be sorry to hear that someone else bought it for, and do it quickly. Make your offer as clean as possible, and don't ask for contingencies you don't need. You'll never borrow again at rates this low, so be happy and buy now!
Friday, March 8, 2013
National RE Report
Since I'm here with all my meetings cancelled, during yet another snowstorm, I have time to update this blog on my recent trip to our network's annual conference. We are a proud member of Leading Real Estate Companies of the World, a group of independent brokers who together have the largest share of the U.S. market, outpacing all of the franchises. The entire group meets once a year, to brainstorm, compare note, and give out performance awards.
Pearce was a big winner in the awards line-up. We won in almost every category, and we won the overall "Crown of Excellence" in our size division. Maureen Campbell, our Relocation Director, also won for her community service to the industry and the network. It was an exciting night! It shows that you don't have to be a mega-company, or a franchisee, to master the art of moving families across the country and around the world. It also proves that our long-term strategy of corporate calling and relationships with local businesses and organizations, which Paula Feeney has been spearheading for many years, really works. We outperformed people in markets with much greater potential, and did it with glowing evaluations.
While we were there, we had the chance to attend many sessions and roundtables on the industry and current conditions. It's clear that Connecticut has a long way to go, before we catch up to the rest of the country. The big news everywhere else was lack of supply. Many markets only have a month or two of inventory, and homes going on the market can receive up to 50 offers! Our market has 7 months of supply under $300,000, 15 months over $300,000 and under $1 million, and 31 months over $1 million. That's really different.
The other consensus was that 2012 was a very good year for the companies present, although, as with many other industries, it had more to do with cutting costs than in increasing sales. I'd say that most people saved $2 for every $1 they made with improvements in sales figures. There is also a trend toward fewer agents doing even more of the business. It used to be that, as in almost any set of statistics, the 80/20 rule. 80% of the business was done by 20% of the agents. Now it's about 83% done by 17%. To make that point even clearer, 46% of all agents in the industry did not make any money at all in 2011, the last year for which figures are available. That shows you that we are truly a profession where "you eat what you kill".
We came back very optimistic about 2013, however, and ready to go out and win those awards all over again! There is clearly a need for great real estate service, and we want to provide it in ever increasing amounts for our region.
Pearce was a big winner in the awards line-up. We won in almost every category, and we won the overall "Crown of Excellence" in our size division. Maureen Campbell, our Relocation Director, also won for her community service to the industry and the network. It was an exciting night! It shows that you don't have to be a mega-company, or a franchisee, to master the art of moving families across the country and around the world. It also proves that our long-term strategy of corporate calling and relationships with local businesses and organizations, which Paula Feeney has been spearheading for many years, really works. We outperformed people in markets with much greater potential, and did it with glowing evaluations.
While we were there, we had the chance to attend many sessions and roundtables on the industry and current conditions. It's clear that Connecticut has a long way to go, before we catch up to the rest of the country. The big news everywhere else was lack of supply. Many markets only have a month or two of inventory, and homes going on the market can receive up to 50 offers! Our market has 7 months of supply under $300,000, 15 months over $300,000 and under $1 million, and 31 months over $1 million. That's really different.
The other consensus was that 2012 was a very good year for the companies present, although, as with many other industries, it had more to do with cutting costs than in increasing sales. I'd say that most people saved $2 for every $1 they made with improvements in sales figures. There is also a trend toward fewer agents doing even more of the business. It used to be that, as in almost any set of statistics, the 80/20 rule. 80% of the business was done by 20% of the agents. Now it's about 83% done by 17%. To make that point even clearer, 46% of all agents in the industry did not make any money at all in 2011, the last year for which figures are available. That shows you that we are truly a profession where "you eat what you kill".
We came back very optimistic about 2013, however, and ready to go out and win those awards all over again! There is clearly a need for great real estate service, and we want to provide it in ever increasing amounts for our region.
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