Buyers Should Think of Current Real Estate Market as an Auction
Buyers who head into the housing market believing they should get a home for less than the listing price may be very disappointed. Instead, they may want to think of an asking price more like the opening bid at an auction.
Every listing in today’s market receives an average of 5.1 offers, according to the National Association of Realtors® (NAR). And half of homes sell above list price.
“Due to the low supply of houses for sale, many homes are now being offered in an auction-like atmosphere in which the highest bidder wins the home,” according to an article at Keeping Current Matters.
In actual auctions, sellers often set a reserve price, which is the minimum amount a seller will accept. In today’s market frenzy, a home’s listing price may be more like that reserve price – the starting point of a negotiation, knowing the seller will consider anything above that amount.
About 40% of potential buyers who searched for a home this spring said they haven’t bought yet because they keep getting outbid, according to a survey from the National Association of Home Builders.
Knowing they have the upper hand, sellers have come to expect a bidding war for their home. A recent realtor.com survey found that 24% of homeowners expect to get more than their asking price, and 29% plan to set a list price that’s more than what they think their home is worth.
As a result, some buyers go to extremes to win a home they want. Real estate pros report that individual listings have received as many as 20 offers – one even got 97 bids – as the home buying frenzy continues.
To win a bidding war, buyers may be willing to waive contingencies and stretch their budgets to the absolute max. There are cases where buyers have offered more than $100,000 above asking price to be sure they secure the property.
Source: “In Today’s Market, Listing Prices are Like an Auction’s Reserve Price,” Keeping Current Matters (2021)
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