HowStuffWorks.com | By: Carrie Whitney, Ph.D. | May 28, 2021
Bidding War. A home is listed for sale in Palm Beach, Florida, where single-family houses priced at $10 million or more surged 306 percent in March 2021, from just a year earlier.
If the real estate market can be counted on for anything, it’s fluctuation. There are times when buyers have their pick of homes, and sellers must settle for sales prices that are less than what they’d hoped for.
Then there are those times when it’s a seller’s market, and it’s the buyers who have to pay top dollar — or even over asking price — to get into houses. In a really hot seller’s market, buyers can end up in a bidding war — essentially a homebuying competition where the highest offer wins.
Why Does a Bidding War Happen?
That’s exactly where the U.S. housing market is currently. Inventory is low; demand from buyers is high; and sales prices continue to surge. In fact, the National Association of Realtors’ (NAR) latest monthly sales report released May 21, 2021, says existing-home sales were down 2.7 percent in April — the third straight month of decline. But January to April sales are still up 20 percent, and median existing-home sales prices rose 19.1 percent year-over-year. Those are both record highs.
Total housing inventory (the number of houses for sale) in the U.S. at the end of April was up 10.5 percent from March, but still down 20.5 percent from just a year ago. These are near-record lows since the NAR began tracking the home supply in 1982.
Michael Schiff, a buyer’s specialist with Schiff Real Estate Team, with Ansley Real Estate in Atlanta, knows all too well these numbers. During a balanced market there should be about six months of inventory on the housing market. But Michael says in Atlanta, however, there is about a one-month supply.
These are the numbers that lead to bidding wars — a listing that receives multiple offers, and one where the listing agent puts a deadline on receiving the highest and best offers. But how do you win one? “There is strategy behind every single detail,” says listing specialist Leigh Schiff. She and Michael are the husband and wife team at Schiff Real Estate Team, with Ansley Real Estate.
Money Talks in a Bidding War
Just as not all listings are the same, not all bidding wars are the same either. Sometimes it might just be a threat of another offer. But other times a listing might get three, five or even 20 offers, Leigh says. Lower price point listings tend to have more offers, but she recently sold home at $1.3 million that had seven offers and went 10 percent over asking price.
Before you make an offer, or even start house hunting, get your money together. Prequalifying for a mortgage is not enough, especially in a seller’s market. Prequalification simply means that you have spoken to a lender and provided information about your income.
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