Overbidding Stats for April Rise Again

Westcoe Realtors, Riverside California…According to the latest MLS statistics for the Riverside area, overbidding on real estate is continuing to rise, with the most recent numbers showing that 72% of all properties that closed escrow in April, 2010 closed at a price equal to or greater than the original list price.

With regards to housing, the combination of low supply and high demand has led to multiple offers on many of the homes available for sale.  Buyers find themselves competing with sometimes as many as 20 other buyers for the same property…and this competition leads to multiple offers, with many above the list price of the home…in essence, a bidding process ensues, with the property going to the “highest” bidder. 

For a prospective on the previous months of this year, for the months of January-April, the overbidding percentage numbers are as follows:  January 68%…February 69%…March 69%…and April at 72%.  These numbers are slightly lower for properties over the $350,000 price threshold, but the unit sales in that range represent less than 10% of the monthly sales.

As one might expect, this overbidding is leading to price increases in many areas of Riverside, but if you will read our latest blog post prior to today, the appraisal process that is required for the buyers new lenders will many times reduce the bid price offered by the buyer.  As an example, it is not uncommon for the price agreed to by the buyer and seller to be undermined by the appraiser for the buyers new bank, leading to either a “fallout” escrow, or the seller accepting less for the property than the buyer originally offered. 

The net result is that the ultimate close of escrow price is higher than the original list price, but less than the agreed upon contract price.  It is hard to predict what the near future holds for pricing and “overbidding” in our Riverside area, but until the supply of available properties for sale increases (or buyer demand decreases, which does not seem to be happening), these statistics show few signs of changing soon.

So…if you are looking to enter the real estate market as either a buyer or seller in the near future, strap on your hat and get ready for what lies ahead, because this market is challenging for everyone.