Bidding wars greatly influenced home prices last year. They typically happen when there’s a lack of inventory because multiple buyers want the same property, so they compete against each other by making more attractive bids, which drives up home prices. Bidding wars have continued throughout the pandemic and are predicted to continue in a post-pandemic market in 2022. Home prices are slowly coming down, and inventory is slowly increasing, which is excellent news. But it means the market is still competitive.
When you’re caught in a bidding war, remember to be logical and not emotional. Sometimes, buyers will emotionally bid over the asking price because they’re afraid of losing out on their dream home. To avoid this, buyers should access resources for data on median values and annual appreciation, and expertise (like us!) to help make an informed decision on how to create a winning offer or bid. Sellers look at more than just the money being offered, so the buyer must factor in contingencies, timing, possession, etc.
Some Questions to Ask Yourself Before Making a Bid or Participating in a Bidding War:
1. What is the top value per square foot in the neighborhood?
As a homebuyer, you have to make sure you’re not overpaying, in general, but especially if you’re in a bidding war. This data can help you understand the pricing of the homes in the area and what the listing price should be in a reasonable market. As your REALTOR®, Sage Wilson Property Group can create a Comparative Market Analysis of the houses in the area to find what they have sold for to compare it to the current listing price.
2. How many years are you going to stay in that home?
If you plan on staying in the home for ten years or more, take the annual appreciation and multiply by anywhere from 3 to 5 years. This way, if you overpaid initially, eventually, the market will catch up to you.
If you’re thinking of selling, then understanding how strong the market is is a necessity.
3. Is it a seller’s market?
It’s a seller’s market if there is less than six months of inventory in your price point and neighborhood. In this situation, the seller does not need to negotiate much due to the market strength and the number of buyers. We’re in a seller’s market currently.
It’s a robust seller’s market if inventory is less than two months. In this scenario, a buyer will most likely need to bid above the asking price to get the neighborhood and timeline they want.
If you’re ready to buy or sell in this market, contact us! Whether selling or buying, Sage Wilson Property Group can help you navigate bidding wars. Check out our free report to learn about “How to Win in Multiple Offer Situations Without Paying the Highest Price.”