Extreme Bidding Wars

Most buyers entering the Los Angeles real estate market understand that we are experiencing a seller’s market right now – there are significantly more qualified buyers out there than there are homes to buy, so prices are going up and bidding wars are commonplace. However, recently I have noticed a new phenomenon that even the savviest of buyers might not be prepared for: something I call the “extreme bidding war”.

Last month, I helped some buyers write an offer on a great listing in Montrose. When the house came on the market, my buyer sent me an email that said, “Whoa, this looks to good to be true!” Sadly, there was a reason for that – the listing agents were using a technique in which they severely underpriced the house in order to create a feeding frenzy of buyers. When my clients and I stopped by the open house, there was a line of cars waiting for available parking spots and there were hundreds of people going through the property. My buyers took this all in and when we submitted our offer, they listened to what I had to say and they offered over the asking price. However, we were not prepared for the reality that hit us when we got a counter back explaining there were 24 offers and that the sellers were not only asking for a price almost $100K over the asking price, but requiring that the buyers proceed with no loan or appraisal contingencies.

Last week, I had another foray into an “extreme bidding war”. A dirt-cheap fixer in Glendale came on the market Tuesday morning, and by noon they already had four offers. I took my clients to see it that afternoon, and anyone passing by would have assumed that there was an open house going on because there were so many people there to view it on it’s first day on the market. My clients wanted to make an offer, and so we made plans to meet Thursday to sign the paperwork. Thursday morning I called to check in with the listing agent, and she informed me that in two days, she had received 20 offers that ranged from the list price to $100K over asking. My clients were smart enough to realize that they couldn’t compete and they decided against writing an offer.

What does this mean for buyers trying to navigate an “extreme” market? First of all, listen to your agent. He or she will likely tell you if you are looking at something that is too good to be true. Extreme bidding war situations happen when a house is outrageously underpriced for the size or location. Experienced agents will be able to spot these listings and can warn you up front that you’ll need to be prepared to go way above the list price to be in contention.

These types of buying situations are not for the faint of heart – so if you aren’t ready for a fight, you might want to consider passing. However, keep in mind that in today’s market almost every decent listing has multiple offers, so it’s rare for you to be able to avoid bidding wars entirely. Just listen to your agent and let them guide you through the process and hopefully you’ll end up a winner!