Google “bidding war” and you’ll find over half the search results reference residential real estate. It conjures up images of an intense, competitive back-and-forth with escalating prices each party is willing to make to win the house at any cost. I understand a buyer’s reluctance to enter into a bidding war.
I don’t use the term “bidding war” because it’s a grossly simplified caricature of the actual complexity of an offer. It barely describes the situations that buyers and sellers are facing.
Buying in Boston
With so many aiming to buy—and often needing to land a home before their lease ends, a baby is born and/or a new job starts—competition for what’s available is fierce. Given that buyers can afford a high amount (relative to what they’re putting down), even if it costs them more per month than they’d be paying in rent, they’re willing to buy security: no rent increases (but very likely home value increases) for a home they actually want.
But they have to put a lot on the line. Just offering an attractive price doesn’t mean much. In the most sought-after communities, a buyer ought to expect to pay at least 10% and as much as 25% above the listing price for a home—by virtue of sheer number of buyers and limited homes for sale.
A sale price has little to do with what a seller wants to get for it, and all to do with what a buyer is willing and able to pay for it at a given time. The buyer’s demand (need) is what determines the price, and the stakes are high given the cost of housing as a renter. Over time (over three straight years as of this writing), this demand has not let up.
Distinguishing your offer from the rest
Buyers have had to put more on the table to distinguish themselves from their competitors. That as meant offering the seller everything you can think of and are able to, such as
- no discussion over inspection issues (or no inspection at all)
- no discussion over financing or appraisal issues (or no financing contingency at all)
- allowing the seller to remain in the property after closing at little or no charge so the seller might have a smoother transition as they figure out their next move
What happens in submitting an offer isn’t just willy-nilly or emotional. It has to do with value and risk, supply and demand. The offers I craft on behalf of buyers take all of this into account and are thoughtful and strategic.