Thanks to booty juice for sending this in frombloomberg.com:
A week after Christine Lynch listed her house in the Brentwood neighborhood of Los Angeles for $3.625 million, she had seven offers. Within 10 days, a deal was reached for the five-bedroom, six-bathroom home — and for $225,000 more than she asked.
“My first reaction was, ‘Wow, I guess we’re really doing this,’” Lynch, 55, said in an interview. The all-cash transaction was completed on April 23. “I was really surprised by this level of interest and how quickly it sold,” she said.
Bidding wars are breaking out for luxury homes in such wealthy Los Angeles enclaves as Brentwood, Beverly Hills and Bel Air as an increasing number of buyers bet on rising home prices and investors return to the market. Even properties in need of extensive renovation are being fought over by shoppers who expect to resell them for more after a remodel or rebuild.
“The percentage of people who think prices are only going to go up is the greatest I have ever seen in my career,” said Syd Leibovitch, president of Rodeo Realty Inc. in Beverly Hills.
Sales of Beverly Hills homes priced at $2 million and higher climbed 11 percent in the first quarter from a year earlier to 39, according to DataQuick, a San Diego-based provider of property information. In Brentwood, whose residents include actress and singer Julie Andrews, they increased 56 percent to 25, and in Malibu they gained 64 percent to 23.
Hat tip to Mr. T for sending this along – excerpted fromBloomberg:
Matthew and Carina Hensley offered $10,000 more than the asking price for a three-bedroom house in suburban Seattle, then lost out to one of seven other bidders.
Their $270,000 proposal last month came with a family portrait and a letter introducing the couple, their eight-month- old daughter, Harper, and their desire to build a family in the Renton, Washington, house with a yard backing onto a woody hillside.
Bidding wars, absent from most parts of the U.S. residential market since its peak in 2006, are erupting from Seattle and Silicon Valley to Miami and Washington, D.C.
The inventory of homes hovers close to a six-year low, while an increase in jobs and record affordability are tempting more buyers. The number of contracts to buy previously owned homes jumped 14 percent in February from a year earlier, the National Association of Realtors reported yesterday.
“The housing crash is finally giving way to recovery in an increasing number of markets across the country,” Zandi said in an e-mail. “The decline in unsold listings and vacant homes and the increase in rents presage better times ahead for single- family housing.”
Asking prices tend to be higher and inventory tends to be lower from March through May, while sales peak by June and inventory reaches a top in July, said Jed Kolko, chief economist for Trulia, a consumer-oriented real estate information service.
“As housing comes out of hibernation in the spring, demand picks up,” Kolko said in a telephone interview from San Francisco. “Prices peak early in the season and inventory peaks later. Buyers should be more patient, but sellers should move faster.”
Agents encountered multiple bids on about half of offers in Seattle, Boston, Washington, D.C. and Oregon this year through March 15, said Tim Ellis, real estate analyst for online brokerage Redfin. In the San Francisco area, Redfin agents reported that three of four offers involved competition, he said.
One home in Palo Alto, California, received 38 offers and sold for $1.65 million, or $452,000 more than its asking price, said Ken DeLeon, a real estate broker in Silicon Valley since 2002. Another client paid $2.56 million for a home in 2007 and is listing it for $3 million, with the expectation of receiving higher offers, he said. The seller wants to use the proceeds to buy a home in Saratoga, about 18 miles southeast of Palo Alto, where the market hasn’t heated up yet, DeLeon said.
Prices are hitting all-time highs, above Palo Alto’s 2007 peak levels, in the 94301 and 94306 ZIP codes, as buyers rush to purchase in advance of an expected flood of newly minted millionaires when Facebook Inc. (FB) has its initial public offering, DeLeon said. The Menlo Park-based social-networking company filed paperwork in February for an IPO that may result in a market valuation of $75 billion to $100 billion.
The Hensleys haven’t given up on living in the Renton, Washington, area, where both sets of parents live. The winning bidder offered $15,000 above the asking price and didn’t make the sale contingent on successful financing or inspection, according to Kimberly Hobbs, the Seattle broker who represented the seller.
“From this experience we learned that we have to move fast, especially if a house is nice,” Matthew Hensley said. “The competition is fierce out there.”
We took four listings in a row and I was going to document the whole experience but it was turning into a feature-length movie. Here is the segment where we discuss the bidding war in Rancho Penasquitos, its failure, and how we handled the aftermath:
Facing an upsurge in housing demand across the country, many home buyers are finding themselves in bidding wars for the limited inventory on the market. To win, buyers are trying to find ways to entice sellers beyond price—and at times are taking it too far, real estate professionals say.
Mary Lou Wertz of Maison Real Estate in Charleston, S.C., talked to The Wall Street Journal about one couple relocating from New York who fell in love with a $1.2 million, four-bedroom home online. The seller had already accepted another offer, however. The New York couple offered to pay $10,000 more than the other buyers as well as offer their competitors $25,000 to walk away from the home. They also told the seller that they would make a $30,000 donation toward a hospital for cancer research since the seller had recently lost his wife to cancer.
Ultimately, the New York couple’s offer was not accepted. The offer seemed “a little over the top” to the seller, Wertz told the Journal.
Another couple shared with the Journal how they toured 50 Los Angeles homes, submitted 16 offers—sometimes above the asking price—and were outbid every single time. But they weren’t about to lose out on a three-bedroom home listed for $735,000 in the Northridge area. “We were turning up at showings, and there would be a line of people who were there before us,” Andrea Kissling of Los Angeles told the Journal. “These houses were getting 30 or 40 offers and going $100,000 over asking.”
The buyers noticed memorabilia around the house of the Harry Potter films. So they produced a Harry Potter-themed video for the sellers (one of the buyers provides design services for Warner Bros.). The video fawned over the home and showed the couple reading Harry Potter books to their children. The couple also offered to buy the sellers VIP passes to The Wizarding World of Harry Potter at Universal Studios Hollywood.
Despite all the work, the couple still lost out to a higher offer for the home.
Chris Furstenberg of Nourmand & Associates in Los Angeles told the Journal that one of his clients—a filmmaker—once made an offer that came with the promise of tickets to the Academy Awards. Still, the seller went for a higher offer.
Furstenberg says such enticements often only work to settle a tie in a bidding war. But if there’s a higher price, that usually always wins out in the end—no matter how much buyers try to sweeten the deal with other offerings.
The only thing harder than getting a listing is helping buyers win a house.
Last week I mentioned how there still isn’t any uniform process to sell a residential resale home – it is the wild wild west! Even when a listing agent tells you what they are going to do to you, it is always subject to change!
We found this fantastic video by a Colorado guy who outlines the best ways to handle a bidding war. Because I know that hardly any agents actually have a bidding-war strategy beyond spreading out the offers on the dining-room table, I have since been sending the video along with my offers. Because the video is done by a third-party guy, hopefully it is viewed as a powerful new solution by agents who tend to think they know it all just because they’ve sold a few houses in their life.
Here are my results:
The first listing agent who saw it took it well – he was the guy who asked if I utilize the same method (which I affirmed), and then proceeded to at least tell me what the other offers were. They were too high for us, so my buyers surrendered.
The next try was to send the video along with our full-price offer (different buyers) into what we knew was going to be a dog fight. There were at least 50-70 people at the open house when we were there, and the older house oozed with charm and character. The listing agent insisted that to present our offer, we first had to state in writing that we would not ask for any repairs. I replied that I’ve never heard that one before, but we complied just to see how crazy it would get. She didn’t respond to my second inquiry on whether she watched the bidding-war video. She said they would pick a winner on Monday, which came and went with no seller response. On Tuesday, she emails the buyer-agents stating that she had double-digit offers, and wanted everyone to submit their highest-and-best offer. Obviously she didn’t watch the video – in which he compared her strategy as being the same as telling race drivers to just keep circling the track and we’ll tell you when the race is over. My buyers loved the house on Saturday, but by Tuesday were fed up and we didn’t respond further.
On Monday afternoon a new listing hit the MLS which looked like a good match for a third set of buyers, and we were there on Tuesday morning to view. It met our criteria, and we knew it was hot, so we made a full-price offer that day with no appraisal contingency, no termite, no home warranty, and a month’s free rentback for the sellers if they needed it. The next morning, the listing agent said he had received four offers in the first 24 hours – and ours was the lowest! He watched the video but it was too late – the sellers had already signed the offer that was $50,000 over list.
Wouldn’t every party be better served if there was a uniform process?
Wouldn’t a live auction be the best solution for sellers and buyers? It would take all the uncertainty out of the equation, and allow all bidders to compete face-to-face, and be driven by the animal spirits to pay what it took to win!
A side note, and fourth example: Buyers who are moving here from out-of-state put their current multi-million-dollar home on the market last week in a town that has had a similar frenzy environment as San Diego. They were impressed with the immediate buyer traffic, and on Sunday an agent reported that he had a buyer who wanted to make an offer. He, like me and every other buyer’s agent, was inquiring how the listing agent was going to handle the process, to which she responded, “We’ll be reviewing all offers on Wednesday”. The buyer didn’t like that response, and went away. Here we are on Thursday, and no offers have been received.
While I need to keep getting listings just to maintain my own sanity, I will always have time for buyers who are blog readers here! Congrats to our frequent commenter Eddie89! We made offers on five houses before finally succeeding on the sixth. We offered 9% under list price – a daring low offer on a new listing – and when the sellers countered 3% below list it was close enough – we’re in escrow!
I am fortunate and grateful to have a group of home buyers willing to make offers during the off-season. To give you a feel of what to expect ahead, here are the results of offers made since December 18th:
Purchase-offers submitted: 11
Bidding wars: 9
Bidding wars won: 3
My buyers tend to prefer the premium properties, so no surprise that other buyers would also be interested. But to have multiple offers on 9 out of 11 properties during a historically quieter time in the market probably means that the selling season will be raucous and highly competitive – and it starts Monday!
I usually have a better win ratio with bidding wars, but we strive to get the right discount for fixers. Today’s frustrated buyers make hasty offers without properly assessing the cost of repairs needed, and once the bidding war breaks out, they end up paying too much just to win a house.
We received 16 written offers on the Bluff Ct. property – here are notes:
Five agents were from the LA/OC area. Because their MLS (CRMLS) covers most of the rest of Southern California, they were used to traveling to sell a house. San Diego home sellers want these LA/OC buyers to come here, because our prices look cheap to them.
The first three offers were all below list price. When it came time for the highest-and-best round, all three withdrew. I would have thought that the first offers submitted would be from the most motivated buyers?
The average down payment was 33%. There was one cash offer, and four that had less than a 20% down payment.
Five of the financed offers didn’t include a pre-qual letter.
Five buyers increased their offer during the highest-and-best round, by an average of $21,000.
List price was $749,000 – three H&B offers came in at $799,000 and higher.
My youtube video of the home’s defects is up to 335 views!
Stop me if this sounds familiar: You scour MLS for the semi that will rescue you from a life in a high-rise. Mortgage pre-approval in place, you bid well above asking, because you live in Toronto and that’s how it works. The selling agent comes back and says there’s another stronger bid, and couldn’t you do a bit more? You swallow hard and cough up another $10,000, sealing the deal, and only later wondering if there really was a competing offer in the first place.
It’s tough to know how often this happens, but with interest rates still rock-bottom and bidding wars turning post-war bungalows into million-dollar properties, the Ontario government is bringing in new rules to crack down on unethical real estate agents that try to pump up housing prices with “phantom” offers.
