Bidding Wars Breaking Out for Local Homes
Most of the market reports that have come out so far this year show that the real estate market in Philadelphia is heating up. Inventory and days on market are falling in several city neighborhoods, and prices are rising.
At least one real estate agent hereabouts, though, reports that it’s hotter than you might think.
“In the last month, I either settled or accepted offers on 12 homes, and 60 percent of these were incredibly competitive, which is significant,” said Jennifer Seal, an agent with Redfin who sells homes in the city and surrounding communities.
And what does she mean by that? “They’re either multiple offers, or they’re sold before they hit the market, or they sell on Day One or Two — and those would have had multiple offers had the buyers not been so aggressive with their initial offers.”
Of those “aggressive” buyers, she said, “What I hear from those folks coming in is that they lost a bidding war previously and aren’t going to lose again.”
The result is great news for sellers: homes going for well above asking price.
Where, and in what market segments, might these lucky sellers be found? Seal said that the greatest competition for properties is occurring in the middle of the market. “Everything with extreme interest is in the mid-$300s,” she said. (Data from another national real estate search site back her up, by the way.)
“If a home is priced right in this market, which has low inventory, it will generate a lot of interest. But some homes are ludicrously priced because the sellers know it’s a seller’s market. If you’re dreaming of $100,000 over asking, you won’t be part of this market.”
Seal said that while she has seen the fiercest bidding wars in Graduate Hospital, she added that this was because most of her business is focused there. “I also do business in the suburbs, and I’ve seen this everywhere,” she went on to say. “I’ve seen it in Collegeville, in Havertown — I’m surprised at how hot all these markets are.”
According to data compiled by Redfin, homes in the Philadelphia market are selling 20 days sooner than they were at this time one year ago: an average of 60 days on market as opposed to 80 last year.
So what are buyers to do if they have their hearts set on a particular property? And how can sellers make sure they sell their homes quickly for the best price? Seal has tips for both.
Sellers, she says, should “still pay attention to the comps [sale prices of comparable homes in their area]. We price homes at what we think they will sell for; that way you get multiple offers. On average, I get three or four; the most I’ve ever gotten was eight.”
And for a buyer making one of those offers, Seal advises that price may not be everything. Establishing an emotional connection with the seller may win the day even if others top the offer. “On two properties I listed, the price got bid way up, but the seller chose not the offer with the highest price, but one that came with a letter that they felt an emotional connection to, or they met the buyer and established an emotional connection. People overlook that factor, and if a buyer can tap into that connection, it’s powerful.”
At the same time, she advised buyers to protect themselves from wildly overpaying for a property by establishing an upper limit on what they’re willing to offer. “Creating emotional appeal is important, but having an escalation clause is also big,” Seal said. “A buyer needs to figure out the top amount they’re willing to pay and go for it. If they’re going to kick themselves for losing out over $1,000, they should be willing to raise [their offer by] $1,000.”
Escalation clauses, Seal said, protect both the buyer and the seller. If a seller gets multiple offers with escalation clauses, for instance, “everything tends to lock in around the highest price, then [the buyer considers] who has the highest price on the escalation clause.” On the other hand, buyers also protect themselves from overpaying: “If they’re willing to pay $350,000 on a $300,000 offer, they can offer $350,000 without having to actually pay that if no one else is willing to go near that figure.”
Buyers might also want to consider waiving their right to an appraisal or other contingencies to sweeten the deal. While Seal said that most buyers still insist on home inspections to protect themselves against unwanted surprises in the home they want to buy, if they can assure sellers that they will be able to make their offer even if an appraiser values the home for less, their offer becomes more attractive.
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