Bidding war! How to navigate a low-inventory market like a pro
In the last several months, Greater Richmond’s real estate market has seen upticks in the number of listings that receive multiple offers and close over the asking price.
At Small & Associates Real Estate, for example, I’ve seen multiple offers on 46 percent of my transactions this year, up from 32 percent in 2017. And 60 percent of my listings have sold over asking this year, up from 38 percent in 2017.
Those are significant upticks.
So why are we seeing these increases? It comes down to two words: low inventory.
Right now, for example, there are no mid-priced listings in the Museum District. And if you look for houses that are listed for more than $500,000 in the Fan District, you’ll find just five.
We’ve seen low inventory drive up prices in the last two or three years, of course, especially in the Museum District and the West End. But these days, I’m seeing it in other neighborhoods, too. Citywide, we have almost no inventory.
For sellers, that’s great news.
I can put a client’s house on the market on Thursday, have an open house on Saturday and announce we won’t consider offers until Monday. And we’ll get 10 offers on Monday.
Of course, I did a lot of work well in advance to get the house ready – I’ve advised my client about what to renovate or modernize on the house, I’ve overseen the work, and I’ve gotten it photographed for marketing materials afterwards.
But planning those final days leading up to the open house and the bidding process is crucial. It’s a simple strategy, but it works because it takes advantage of the low-inventory market by channeling potential buyers’ interests into a narrow time frame. And they show up on Monday with strong offers.
Bottom line: It boosts my client’s chances of seeing multiple offers and a winning bid that’s substantially over the asking price.
Here’s a recent example. I represented a client whose house was worth $350,000. But I gave him a plan to update and renovate the house so that it met buyers’ expectations, and we got multiple offers and ended up getting $510,000 for the property.
When I represent the seller, that’s my job. I look at the property and see what I can do to maximize the sale. And in a low-inventory market like this one, clients who follow my marketing protocol can see significant gains.
For buyers facing low inventory, it’s a different story. Offering a low price with a lot of demands might not work. And trying to remove emotion from your decision might not be beneficial, either. People should be happy in their houses, and a part of my job representing buyers is to help them find a house that is truly a good fit for them.
So in this market, buyers need an agent who can explain all their options. Can they make an all-cash offer? Are they comfortable buying a house without inspections? Can they make an offer without demanding a close date? An all-cash, no-inspection, no-close date offer is the best offer a buyer can make, but they each impact the seller’s likelihood of accepting an offer. And the buyer’s agent needs to explain the pros and cons of each of them.
Perhaps most importantly, a good agent will ask his client, “How much do you want that house?” And he’ll help to prepare an offer that’s strong, and likely to win.
Here’s an example of what I mean. Recently, I represented a buyer who was interested in a house that needed work but was in a great location. It was definitely underpriced at $440,000. So we looked at it at an open-house event, and I explained to my client why it was worth bidding above the asking price. It was on a block where all the other houses were worth more than $1 million, and once the house we were looking at was renovated, it would be worth $1.2 million. After I finished, my client said, “What do I have to do to get it?” I guided him through the bidding process, and we closed for $665,000. I feel strongly the value is there, and the buyer does, too.
The bottom line: Buying in a low-inventory market can be frustrating, but with the right agent, you can navigate through the process and find your dream house.
