National media is once again beating the drum about tight housing inventories and bidding wars among home buyers. Columbus home buyers need to understand what drives bidding wars, and how to protect themselves when encountering one.
First, let’s look at what a bidding war is, and why they happen. A bidding war occurs when multiple buyers make an offer on the same house, and start to compete with one another by offering higher and higher prices to the home seller. The buyer who pays the most, gets their offer accepted, and “wins.” However, the home seller is the true winner!
Traditionally, bidding wars happen when there is a perception of insufficient home inventory on the market. An impression of scarcity motivates buyers to try and outbid each other. Bidding wars can happen in any market area, in any price range. Buyer competition can be fierce in highly-desirable locations.
What we are advising our Buyer-Clients is that there are “micro seller markets” that have their own dynamics. Meaning that in specific neighborhoods, in specific communities, in specific price ranges – there are a number of buyers who are looking to make a purchase. When a home first enters one of these micro seller markets, there is an immediate “rush to view” the very first day (or two) and IF it shows well and is priced well (remember – compared to the other “available inventory”) it will get an offer, and sometimes more than one!
We are seeing two extremes in these micro seller markets. We see homes that go under contract immediately. Or, when the homes don’t show well, and/or are over-priced, they sit and languish for weeks and months! You must know the difference, and that’s where we can be your best advisor.
Remember, the statistics you find about homes for sale are only counting homes available through the Multiple Listing Service, which are marketed by licensed real estate agents and brokers. This does not include homes that are for sale by owner, or new construction homes that are for sale by a builder. Therefore, you should treat “low inventory” headlines with some skepticism.
It is understandable that supply and demand can instigate a bidding war. However, there are bidding wars that are deliberately created when home sellers price their homes below fair market value. This too-good-to-be-true pricing creates a sense of urgency, and the resulting bidding wars push the final price well above fair market value.
Metro Columbus home buyers face many risks when getting involved in a bidding war. At the very least, you may overpay for the home. And if the final sales price exceeds fair market value, the bank appraisal isn’t likely to agree with it, which could spoil your financing. You might over-stretch your budget even if the mortgage goes through.
There are also emotional hazards, such as the stress of a bidding war’s fast-paced auction mentality, and the buyer’s regret you may feel once you look at the deal objectively.
Having exclusive buyer’s representation can protect you from the pitfalls of a bidding war. And because we can show you any home on the market, your home choices won’t be limited to the MLS!
As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.
Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!
Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!
Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax
