Recently we have been reading a lot of material in the news media about the rise of multiple offers, and particularly here inSilicon Valley.
The combination of very low interest rates, the dramatic rise of rental prices, instant Facebook Millionaires effect and a very limited inventory of houses has created this perfect storm. It is not uncommon to hear about a dozen offers being submitted on any given property.
New buyers who just entered the market are having difficulty absorbing this information because we are receiving conflicting information from the media. On the one hands, we are seeing articles about multiple offers and historic low interest rates; then a few hours later, we are reading about a wave of foreclosures coming and that the housing crisis may still take years more to correct. Which story do you believe? Depends on where you are looking.
My recommendation always is to ask your local Real Estate professional. The people who are out there daily dealing with people who want to buy and sell homes will have the true pulse of what is happening in your area; as opposed to reporters who are often times getting regional or citywide information to capture a wide audience. It is a micro vs. macro view of the real estate market; real estate market conditions sometimes differ from zip code to zip code and neighborhood to neighborhood. Get local information.
For most consumers - myself included - real life data make it easier to understand than some theoretical data. To give you an idea of what is truly happening in the Silicon Valley, here is an example of a bidding war in which my clients were recently involved.
Rose Garden Home (the photos displayed are incorrect)
This is a nice practically move in condition home in the outer edge of the Rose Garden neighborhood in San Jose. This is an REO property, which means the bank took it over after a foreclosure action.
It is an incredible value priced at $300,000. There is no other property in the area at or near this condition for this price range. Everyone knew this was under-priced to get activity, but given the shortage of supplies, many buyers - including mine – were interested in competing for it. (I won’t get into a debate as to the rationality of pricing it so low as to attract these numbers of offers here).
As of the writing of this post, they have received 60 offers. Yes, 60 offers to purchase, which they are submitting to the lender from which it will choose the winning bid. Is this an extreme case: absolutely. Are we seeing multiple offers in a majority of new listings: definitely.
The point of writing this post, however, is to demonstrate that it is common practice at this point in the desirable areas of Silicon Valley to receive multiple offers on pretty much all new listings that are priced correctly, unless the property has some major defect or issues which makes it undesirable. Even homes on busy streets are receiving 8-9 offers. Just pick up the phone and ask any local Realtor.
So new buyers, be ready to face the current reality of the market place. Until we get a correct balance where inventory has returned to normal levels, this type of bidding will be here, at least in the near future. Good luck and may the Force be with you.
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