While the market has generally been cooling down, there are still plenty of hot pockets and price ranges. Sharp move-in-ready properties continue to be highly sought after, with listing agents and sellers often playing the “highest and best offer” card. These competitive situations are packed with emotion, many buyers having often seen ten or twenty listings and the only one they really want.
Competitive offer situations are challenging for both buyers and their agents. How much should we offer? What will others offer? Will the property appraise? The higher the level of competition the more emotionally charged it becomes.
It’s best to keep emotions in check. Buyers and agents who understand there are things within their control and things that aren’t usually do best.
Start by setting aside the “list price”. Maybe this property was underpriced. After seeing several other properties at various prices within their range, buyers are often in a good position to rank how this property compares in value.
Next, they should ask themselves, “If we don’t get this property, how much will we likely have to pay when we find a home that we like as much or more?” If the buyer would need to pay more later, why not offer more on this one? Using a logical approach in an emotionally charged situation serves most buyers well.
When making offers, buyers should also be looking at comparable listings, pendings and sales—just looking at the ratio of listings to pendings provides insight as to market velocity.
When searching for sold comps, a local agent included a comparison of list price and sold price for the purpose of identifying full-price and over-asking offers. Looking at the difference gave the buyer the ability to see “how much over” some of the winning bids were in recent similar situations.
The table below was a sample exported from a “one-liner” MLS display of recent closed sales. The“Difference” column on the right shows the difference between the asking price and the closed sale price.
Of the 28 comparable sales:
• 11 sold for less than asking
• 6 sold for asking price
• 11 sold for more than asking
Of the 28 sold comps (on the original complete list goes back 3 months), 11 sold for less than full price,6 sold for full price and 11 sold for more than full price. The 11 over-asking sales were competitive offer situations. In this $160k price range, the highest offer was $10k over asking, the lowest was $100 over asking, and the median and mean were $3k and $4k over asking.
While every situation is different depending on the perceptions of the parties involved, seeing the difference between each asking price and winning offer helps provide relevant points of reference. In this case, the client bid $4,100 over. It wasn’t the highest bid, but hers was the best offer and she ended up owning the property.