Bidding “Battles” the Norm, not the Exception

Westcoe Realtors, Riverside California…According to the latest MLS statistics through February, 2009, multiple offers and buyer bidding battles continue to be the norm for purchasing homes priced below $350,000.  In fact, for the first two months of 2009, approximately 60% of all homes priced below the $350,000 level closed escrow at or above their list price.

This 60% level for “overbids” continues a trend that was established through the latter part of 2008, and is a direct result of the radical lowering of prices by the bank repos that are foreclosed upon and then offered back for sale to the general public via the Realtor MLS system.  Home prices are now being offered for sale at levels unimaginable just a couple of years ago.  While this is true of all price ranges, the frenzied activity of buyers jostling for available properties in the range below $350,000 is astounding.  It is not uncommon for a well priced bank repo to generated 6-10 offers from buyers or investors who want to purchase homes at these very low prices.  This large number of multiple offers allows the banks to issue counter offers to some or all of the potential buyers asking for each buyers “highest and best” offer…which results in eventual sales prices above the original list price.  Hence, the statistics of 60% quoted above.

 In many cases, the bank will intentionally set the listed asking price at a level lower than what the property is worth, and then insist that the property remain on the market for 7-10 days…thereby creating this deluge of interested buyers.  Once all the offers have been forced to wait the 7-10 day time period, then the “bidding” process begins…with the ultimate highest bidder being awarded the property.  This may not seem fair to the other non-winning buyers, but our experience is that the bank has generally lost so much money on these homes at this point, they are uninterested in “fair”, and more interested in minimizing any additional losses.  In most cases, the ultimate sales price is still a very good value for the property, but what buyers and agents must go through to get there is becoming more frustrating every day.

While this process is becoming the “normal” way business is done in this topsy-turvey market, the frustration for agent and buyer alike is off the charts…but there is little that can be done until bank repos stop dominating the resale market.   Right now, banks understand that they are totally driving the real estate bus, and therefore they set all the rules.  While there are no hard stats available to determine the percentage of homes for sale in the under $350,000 range that are bank repos, an educated guess would be somewhere between 75-80%.  That is a huge number for one particular type of seller.  Granted, they are all different banks, but their approach is the same…”my way or the highway.”  In the end, buyers and their agents have no choice but to put up with the demands of the banks until the banks get out of the real estate ownership business.  The good news is that they don’t want to be here any more than we want them here, so everyone is working towards the same goal.

In the meantime, as we continue to tell our buying clients, while the frustrations are numerous, the rewards are great…because anyone who purchases a home today will be thanking themselves profusely 5 years from now when home prices have risen as history tells us they will.   SO…hang in there, and if you are trying to buy a home in this market, remember the 60% overbid number…it’s here to stay for a while.