I have written here, quite infrequently as of late, about how difficult it has been to blog because of the amount of time and energy that each and every transaction demands in today’s residential market place. That said, there are some things that I’m seeing which further elucidate current market dynamics.
One change that I’m experiencing, which is a huge shift from conditions of the past decade are bidding wars. Now before you start screaming at me that I’m full of you know what, I’m talking about bidding wars orchestrated by buyers. I have been on both ends of this phenomenon lately and here is how it goes:
- As Seller’s Rep: I have a property that I’m representing that received a bid about one month ago. The seller countered but not to the prospective purchaser’s liking. While attempting to negotiate a fair price, another similar unit came on the market in the same building. Needless to say, the prospective buyer immediately informed us that he was bidding on that unit also. This morning I received a phone call from that buyer stating that he "wants to hear from each seller with their very best/bottom price before end of day Tuesday at which time he will decide which unit to purchase." Who woulda thunk it?…a buyer with leverage. Oh how things they are a changin’!
- As Buyer’s Rep: I recently submitted 3 bids on behalf of a buyer fully disclosing to all agents that three bids were being submitted. The offers were made with an expiration time of 5PM the same day they were made. The buyer received an accepted offer of $1,300,000 on a property asking $1,795,000.
Now this may sound incredibly optimistic for buyers who are considering taking the plunge into home ownership here in Manhattan. But not so fast! There are 2 major factors that determine the success of the bidding process in today’s real estate market:
- Seller Motivation: Although there are very few sellers in this market who are testing to see what they can get for their homes, there are many who just don’t want to accept how much the market dynamics have changed in the past 6 months. Sellers who can appreciate the shift in market psychology are much more likely to entertain low but "reasonable" bids making them also more likely to actually sell.
- Seller Agent Expertise: Unfortunately, some agents can’t handle the pain of being the bearer of bad news and do their sellers a disservice by giving them false hope that a better offer will come along. This is almost never intentional in my opinion but something happens in the communication that leads sellers to believe that they should wait for something better. Often times, the first offers are the best and something better may never arrive.
With all of that, as inventory is likely to increase further, the buyer with more than one property option is indeed sitting in the cat bird seat…unless of course the sellers or the agents of all of those options have their heads buried in the sand.