Multiple offers? On Santa Cruz Real Estate? In today’s beleaguered market? Moooo…!
It happens. It happens a lot more often than you’d think. I guess a lot of people think it doesn’t happen very often, what with the fact that we’re in a terrible housing crisis and property values are falling down all around us, kind of like federal tax dollars raining down in Alaska.
Here’s the thing, though. It’s not really that slack of a market. There is a fundamental demand for Santa Cruz Real Estate. Look, we’re living in paradise. There isn’t that much housing stock available. We are located adjacent to a growing area of fabulous wealth – the Silicon Valley – that is a huge bulwark of the economy not only in California, not only in the United States, but basically the whole friggin’ world.
But yes, there is a housing crisis. It’s real. There’s a lot of pain to go around. And there’s also a lot of opportunity. There’s still a lot of money left chasing around real estate. Most houses on the market – and I mean like 85% of them – are over-priced and will not sell at the prices they are asking.
Some houses, on the other hand, are under-priced. They are under-priced because the owners are serious about selling them. And when I say under-priced, I mean, they are under-priced in today’s market. Tomorrow, I can’t say, but there are some houses which represent a clear value in today’s market. Houses that are, truly, a bargain.
Let’s say you see a house for sale. Wow, that’s cheap! you are saying. Next question: what’s wrong with it? If the answer turns out to be “nothing, really” or “nothing much” – the next question you need to ask is, “How many offers are in on it?”
Zoinks! Egads, do I mean to say that a house might have multiple offers on it? Indubitably, my dear Watson. There’s a demand here. There’s money here. If a house is offered that presents a clear value – a bargain – in this market, it will attract offers, and more than one.
If you are interested in putting in an offer on a house, and you find that the seller of that house has attracted several offers in a short number of days, what should your offer strategy be? Should you:
- a) put in a below-asking-price offer
- b) offer full price
- c) offer over asking price
I’ll give you a minute to think about that.
Time’s up, pencils down! There answer is clearly not A. If a house has received multiple offers in a very short period of time, the market has spoken: at the asking price, the home is offering a good value. It is likely under-market price. So why waste time with a less-than-full price offer?
To those of you who think making a low-ball offer (choice A) is appropriate in this situation, I say, you need to have your head examined. Or at least, you need to re-think your offer using a little logic. The fact that a home has garnered multiple offers in a short period of time is a strong – very strong – indication that the asking price is already low, and will almost surely sell for at least asking price. You’re not going to get the house for your low-ball price, so why bother trying? It’s virtually guaranteed you will lose out on the house.
As for Choice B – make a full price-offer: a better choice than Option A, however if you really want the house, you should probably go with Choice C.
Choice C is definitely the way to go when making an offer on a house that has received multiple offers in a short period of time. The reason for this is that, if there are more than, say, 3-4 offers on the property, it is likely that it will go for over asking price. It may be that the seller will just choose the highest offer they receive. Or, they may choose to only counter the highest couple-few offers. Either way, making an offer of over-asking-price is going to get you a much better shot at the property.
I know, I know – you’re asking, geez, might I end up paying too much for a property by offering more than asking price? Sure, there’s always that risk. One thing you can do to mitigate that risk is ask your Realtor to provide a Comprehensive Market Analysis (or CMA – also called a Comparative Market Analysis) of the property before you write up your offer. Then you’ll have a good idea of what the home’s value really is – and don’t pay more for it than it’s worth.
Ideally, even though you’re paying more than asking price, you’re still getting the home you want at a below-market price. It happens all the time. Although the price you pay will not end up being the super-fab bargain it appeared it would be at first, it’s probably still a pretty good deal.
One more bit of advice – don’t freak out in a multiple-offer situation. You would be surprised how many people who submit offers choose Choice A, under-asking-price. These people are not really in the running. Many people choose B, and make only full-price offers; this is enough to be in the game, but usually not enough to be seriously competitive.
If a house has 5-6 offers on it, only 2-3 of these will be seriously competitive, so if you’re in a situation where there are many offers, relax. Get your Realtor to do a bit of work, go over the comps with him or her, and put together a winning offer that gets you the house you want at a good price.