Two perfect storms in the California real estate market have collided – low inventory and high demand – creating an environment where six in 10 home sales received multiple offers in 2012, according to the California Association of Realtors’ (C.A.R.) “2012 Annual Housing Market Survey.” Fueling the storm – historically low interest rates! And here locally, a sizeable buyer pool with the ability to pay all cash.
This is the highest report of home sales receiving multiple offers in 12 years; each home received an average of 4.2 offers in 2012, up from 3.5 offers in 2011. The trend was especially prominent in lower-priced homes, typically foreclosures or short sales. This competitive environment led to more properties being sold at or above the list price, with 41 percent of homes selling without a markdown from the asking price, the highest since 2005 and up from a long-run average of 32 percent.
Buyers that were able to bring all-cash offers had a distinct advantage in the bidding wars; notably, the number of buyers paying all cash was at 35 percent for the Monterey Peninsula in August, nearly triple what it was in 2001. In addition, investors are actively jumping into the bidding wars, taking advantage of the still-competitive housing prices.
Here locally, inventory is tight and when aggressively priced homes in prime locations hit the market, you can expect multiple offers. Commonly the bidding wars we see are over distressed properties. Examples of multiple offer scenarios last quarter include:
- A property in the Miramonte Neighborhood of Carmel Valley – long regarded as one of the most desirable Valley neighborhoods. This was a short sale priced at just under $1M. After receiving a half dozen all cash offers, the property ended up closing at almost 25% over asking. And it needed about $225K of work to make it livable!
- A home built in 2008 with stunning ocean views, once offered a few years ago at almost $4M, closed as a foreclosure for $1.5M. I actually represented the buyer when this was a short sale a few years ago. We were in escrow above its recent sales price. The bank didn’t approve the sale and countered asking for more money – when my buyers rightfully walked away!
- A foreclosure in the Carmel Woods neighborhood – asking price $649K. Buyers were caught up in the bidding frenzy and in my opinion overpaid for this two bedroom home with an awkward floor plan, closing in late October for $800K.
- A short sale in the beautiful Sleepy Hollow community is currently pending – over 3,000sf on 8 acres. The asking price is $1.1M and it is set to close in December.
Contemplating entering a bidding war? Nothing ventured – nothing gained! It doesn’t hurt to try and it helps to be as prepared as possible. First of all, be ready to act. If you are getting a loan, come with your pre-approval letter in hand and for all cash buyers, provide fund verification with the offer. Don’t get caught up in the excitement of a bidding war. Set your ceiling – and stick to it. And of course, contact me to receive new listings the day they hit the market – or better yet – before they hit the market.