Home buyers naturally want to get the best deal possible on their purchase. But in this market they have to balance that instinct against their desire to win one of the relatively few available properties.
Buyers have to BUY the home they want.
Sellers are not going to give them the home. And a bidder thinking that they’d be okay taking the home – but only at their price – is unlikely to get anything good under contract. The competitiveness of the current market means that if a buyer wants to successfully bid on a home then they needs to be willing to buy it. They have to put in a strong enough bid that the seller will pick their offer over the (inevitable) other interest. It sometimes takes losing a few homes for a buyer to be willing to actually buy a place. This is not a natural mindset for buyers, and works against their desire to minimize their purchase price. But that is the market right now.
Over the summer I worked with buyers who understood the sort of property they wanted was in high demand, and they understood what it would take to win a home. There was one we looked at that had an asking price of $450k even though the market was red hot and the home had recently sold for $470k. It was a nice house, in a good location, with a lovely yard. We knew that in order to be competitive we would need to bid over the asking, and likely over the prior sold price. But after visiting on consecutive days we determined that we weren’t comfortable with the value proposition. Yes, they could have bid well over asking to try to buy it, but it wasn’t worth that much to them. The asking was at the top of the comps, and they knew they would have to go higher. They decided not to bid, and it turned out someone else really, really, really wanted the place – the final price was over $500k.
The point is that if a buyer wants a home, then they are going to make a very strong bid in order to get it.
Part of my job, as your buyer’s agent, is to help you evaluate the home quickly. We want to understand its positives and negatives, and also want to have a sense of how much it is really worth in the current market environment. There is never an exact number, but if we can find a value range then you can use that range to decide what to bid.
For some homes you might want to bid at the lower end of the range; they would work for you but they are not The One. You might want to bid at the upper end of the range for others; you hope to get it but are okay if you don’t. And if there is a home that truly speaks to you, and that you don’t want to miss, then you might want to bid above the range. Sometimes that is what it takes to win a very attractive property.
Every situation is different, but bidding wars are common right now. So for buyers it is important to have the right mindset and good advice.