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multiple offers

Not everything is getting multiple offers

October 2, 2019 By Ryan Lundquist 14 Comments

Everything is getting multiple offers, right? Many sellers feel that way, but it’s just not true. Today let’s dive deeply into what is actually happening with multiple offers. I’m excited about this and I hope you like it too.

Non-locals: If you’re not local, would understanding more about multiple offers help you? Could you ask your MLS about including a “multiple offers” field? This is how I’ve been able to extract data like this for my market.

FIVE THINGS ABOUT MULTIPLE OFFERS

1) A rhythm of multiple offers: There is a rhythm to seeing multiple offers in the Sacramento region. There are more multiple offers in the spring and less as summer and fall unfold. This isn’t a huge surprise, but it’s cool to see on paper. If you wanted to know, 42% of sales last month had more than one offer (which is what I mean by “multiple offers”).

2) The market isn’t always hot: It’s tempting to talk about real estate like it’s always “hot”, but it’s not. Every year the market heats up and cools as you can see in the images below. But on top of a normal seasonal up and down dynamic we’re seeing price growth slow too. In other words, prices just haven’t been rising as fast as they used to. When it comes to multiple offers, we’re seeing fewer these days compared to the past couple years. This is such a good point for sellers to understand. The market isn’t what it used to be. It’s still very competitive if you’re priced right, but it’s not like it was in the heyday of 2013.

3) Sellers, you might just get one offer: It’s easy to think everything is getting multiple offers, but it’s not true. When looking at thousands of current pendings, 59% of homes have only one offer while 20% have two offers. Thus 79% of properties in contract right now have two offers or fewer. My advice? Price realistically for today and you might get a couple offers. But you might only get one. Oh, and if you overprice you likely won’t get any offers at all.

4) It’s more aggressive at lower prices: This won’t come as a shock, but we’re seeing more multiple offers at lower price points. Here’s a look at multiple offers among current pendings as well as recent sales. Keep in mind there aren’t many sales and pendings above $700,000, so I wouldn’t put too much weight on these categories showing a higher percentage.

5) Many layers to the onion: Looking at multiple offers is just one way to see what the market is doing. The truth is there are many layers of the onion when it comes to real estate data, which is why I advise looking to many different metrics to understand the market. In other words, it’s not just about multiple offers to me (but this is cool to see).

QUESTIONS:

How did I get this data? A few years ago our MLS started including fields for “multiple offers” and “number of offers”. I’ve been watching these metrics and reporting on them for the past year or so, but today I’ve taken it to the next level. 

Is this data reliable? I’ve had a few people question whether this data is reliable. Of course data is only good as the input by real estate agents and hopefully the truth is being told. Do some people fudge the numbers? Probably. But keep in mind we’re looking at thousands of sales and pendings, so a few outliers won’t sway the trend. Moreover, the bulk of pendings actually show just one offer, which helps support the notion of agent honesty. 

I hope this was interesting or helpful.

RECESSION PRESENTATION: I keep getting asked about home prices and a looming recession, so I put together a quick presentation to download.

BEER & HOUSING CONVERSATION: Do you want to hang out at Yolo Brewing? On Saturday October 5th from 2-5pm I’m co-hosting a get-together. Hope to see you there. Details here.

Questions: What stands out to you most about the images above? What are you seeing with multiple offers these days? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

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Filed Under: Market Trends Tagged With: Appraisal, appraisals, Appraiser, cooling housing market, current market, Home Appraiser, Market Trends, multiple offers, pendings, sacramento housing market, Sacramento Real Estate, softening market, stats

Multiple offers & paying above the appraised value

April 4, 2018 By Ryan Lundquist 33 Comments

It’s getting a little crazy out there. Let’s talk about multiple offers and buyers paying above the appraised value. I want to give some perspective from the lens of an appraiser, and I’d love to hear your take. Any thoughts?

MULTIPLE OFFERS: The other day I heard about a property that had 20 offers and the contract price ended up being 16% above the list price. What the? Clearly the market was willing to pay more than the list price, so maybe the property was priced too low. Yet if the seller accepted the very highest offer, are there really comps and data to support a value that high? That’s always the question. Here are some things to keep in mind.

1) Magic: Appraisers aren’t magicians. They have to support the value they say exists. Sometimes appraisers are told, “There were 20 offers above list price,” and maybe that says something about value, but appraisers still have to use actual comps and adjustments in a report instead of the number of offers.

There are multiple offers above list price.
Are there multiple comps above list price?

2) Getting stuck on the list price: It’s important for appraisers to be cautious not to give too much weight to the list price because sometimes it really doesn’t reflect value at all. It might seem like a red flag for a property to be in contract 16% above the list price, but what if the property was priced 16% too low? Moreover, if the sales and pendings all support a value 16% higher, then it’s a no-brainer to see the appraisal come in at that level. But if nothing is anywhere close to the contract price, then maybe the property got bid up too high.

3) One Buyer vs everyone: There might be one buyer willing to pay more than anyone for whatever reason, but market value is about what the market will pay. If a bank is going to lend on a property, it’s a good bet to lend on market value rather than one individual buyer’s perception of value. 

4) Offering high: Let’s remember some buyers make offers based on the amount they are qualified to borrow rather than looking at the comps. This reminds us sometimes high offers don’t always mean value is there. 

5) Offers as data for appraisers: The number of offers can be helpful for appraisers. If we know there were 20 offers above list price and it looks like value is going to come in lower, then the number of offers can at least prod appraisers to dig deeper to understand value. In other words, if 20 buyers are willing to pay more, but I’m coming in lower, I better be ready to explain why. Appraisers can also use the number of offers as supplementary data. So an appraiser might write in a report, “I gave Comps 1-2 the most weight because they were most similar, and 10 of the 20 offers were at contract price or above, which also helps support the opinion of value.”

PAYING ABOVE THE APPRAISED VALUE: I’m hearing more from agents about contracts where the buyer says, “We’ll pay $10,000 above the appraised value.” This tends to happen in a market with low inventory and when buyers feel desperate about getting an offer accepted. Anyway, when I read a buyer is willing to pay above the appraised value, my gut reaction is to think the buyer probably believes the contract price is too high. Can you relate? Yet I’m paid to be objective, so I cannot let what a buyer wrote in a contract influence my conclusion of value. Besides, to be fair, contract verbiage like this might be about a buyer trying to get an offer accepted rather than what a buyer believes about value. Ultimately it’s crucial to remember support for value is found in the market with comps and data rather than what a buyer writes in a contract (this is why I recommend agents to communicate well with appraisers).

Radio Interview: By the way, I had a 35-minute conversation last week on a financial radio show. If you need some background noise, check it out here.

I hope that was interesting or helpful.

Questions: Anything else to add to the conversation? Did I miss something? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: appaised value lower than contract price, bidding wars, data for appraiers, definition of market value, hitting the number, information to share with appraisers, Market Value, multiple offers, sacamento home appraisers

When the market feels aggressive…

April 26, 2017 By Ryan Lundquist 10 Comments

The market feels aggressive out there. I don’t know about you, but I’m having so many conversations about rising prices at the lower end, a shortage of inventory, and even low appraisals. So I wanted to share some of the talking points floating around out there and give some commentary too. Here’s a list of things coming up in discussion lately (it’s longer on purpose). Anything to add?

sacramento appraisal blog - housing market

One buyer vs market value: Value is what a buyer is willing to pay. I hear that statement quite a bit, but what one buyer is willing to pay could represent an individual’s value rather than market value – which is what appraisers are gauging.

Front-loaded market: Most of the value increases are usually found in the beginning of the year. Thus if values went up 5% last year, that means we probably saw about a 1% increase per month during the first two quarters of the year. But if the bottom of the market increased by say 12%, then we saw a 2% monthly increase. Of course some months might see greater appreciation rates than others.

sacramento appraisal blog

The need to respect pendings: Sales tell us about where the market used to be when they got into contract 60-90 days ago, but pendings tell us about the temperature of the current market. This is why we have to respect pendings. For instance, during a recent appraisal of a fairly original home in South Sacramento I saw some properties close around $230,000 less than six months ago, and now similar ones are getting offers galore at $245,000+. The tricky part is I don’t know the exact price and terms of a pending unless I call the agent (and he/she tells me). 

One sale or pending doesn’t make the market: Let’s remember value in a market is not based on one high sale. In today’s market if a buyer paid $25,000 above appraised value, for instance, an appraiser has to consider if that property at $25,000 above everything really represents the market or just one buyer willing to pay more. This is a reminder that appraisers and agents have to “appraise the comps” so to speak. We can’t just blindly accept the final sales price of a comp without understanding the back story of why it closed that high. The same holds true with pendings as we can’t base an entire valuation on one “lone ranger” that is higher than anything else.

South Sacramento

Upward adjustments by appraisers: Value adjustments can be given by appraisers to account for an increasing market. These adjustments can be figured out with graphs, analyzing sales and pendings, talking to real estate agents, etc… This is what I did with the South Sacramento property above as my comps were 2-6 months old, but the market was 4-6% higher easily because the pendings were all trending higher. The truth is if I didn’t give upward adjustments my value would have reflected the past instead of today’s market. Some appraisers might not give a specific upward adjustment, and I won’t split hairs over that so long as an increase in value is accounted for somehow in the appraisal.  

Appraisers aren’t hired to “hit the number”: A lender hires an appraiser to assess whether a loan should be made or not. Thus if a buyer offers an unrealistic price, the buyer might be willing to pay that amount, but if the house cannot sell for that price to the rest of the market, it doesn’t make sense for the lender to make the loan at that level. In this regard it’s reasonable to see appraisals come in lower than some of the high offers we’re seeing.

Multiple offers don’t always mean aggressive increases: Just because there are many offers doesn’t mean values are increasing rapidly. In some price ranges we are seeing clear increases in value and other prices ranges feel a bit flat. Realistically though there are likely to be multiple offers in about every price range (more at the lower end). This is a good reminder that at times there is a difference between how the market feels and what it is doing (actual data).

what-market-value-looks-like-sacramento-appraisal-blog-530

Different trends different neighborhoods: It’s easy to project what is happening in one neighborhood onto another or use one sweeping cliché to describe all locations and price ranges, but we have to look at actual numbers in each neighborhood to understand what the market is doing there.

Informed buyers: Having low inventory is creating some aggressive offers out there, and while buyers are willing to overpay to a certain extent for the right property, they won’t literally pay any price just because “nothing is on the market.”

Not easy to interpret: If we’re honest it’s not always easy to interpret what the market is doing – especially when things seem crazy with multiple offers and bidding wars. This is a good reminder to be humble because the market isn’t always wrapped up in a neat little perfectly decipherable package. There are things we can expect of course and seasons of the year, but the market is still distinct and sometimes even surprising. Let’s be real about that.

A perfect season for communication: This is a perfect market to foster excellent communication between real estate agents and appraisers. Agents, sticks to the facts and tell the story of the marketing of the property when talking to appraisers. Feel free to use my Appraiser Info Sheet (local agents, I love when you use this). In any price range where values are changing quickly, insight from agents can really help appraisers. On that note, Appraisers, glean insight from agents by finding time to make phone calls and asking the right questions about comps and the subject.

Reconsideration of value: I did a presentation recently on tips when asking an appraiser to reconsider the value. If anyone wants a copy of it, just send me an email (lundquistcompany @ gmail  dot com). You can also read this post.

Hindsight makes everyone sound smart: When in the thick of a “hot” market it’s not always clear what the exact trend is, but after a few months when more stats are published everyone and their Mom sounds like a real estate expert. #truth

Questions: Anything else to add? What else are you seeing out there in the market right now? I’d love to hear your take.

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Filed Under: Market Trends, Resources Tagged With: appraisals, appraisers, dynamics in real estate, house valuation, increasing market, Low Appraisals, low inventory, multiple offers, pendings vs sales, Sacramento Appraisal Blog, sacramento housing market, Sacramento real estate trends, values going up

Should you get an appraisal when paying all cash?

March 21, 2012 By Ryan Lundquist Leave a Comment

stack of cashAfter completing two appraisals in the past 10 days for buyers for all cash transactions, I wanted to throw down some thought about getting an appraisal when paying all cash in the Sacramento area. I think there is a time to do that and also a time to not do an appraisal. This isn’t legal advice, but here is my opinion:

Get an Appraisal during a Cash Purchase:

  1. If you feel like you’re overpaying (or your client is overpaying).
  2. If you think an appraisal can be used as a bargaining chip to lower the price.
  3. If the seller will not budge on the price and says, “show me an appraisal”. I’ve seen investors and owner-occupant buyers lower their purchase price by providing a credible appraisal to the seller. I had an investor client this year able to lower the price on two fire-burned houses by getting an appraisal.
  4. If your funding source wants to see something in writing.
  5. If you plan to rehab the house through NSP or another program, get an appraisal since it’s probably required already (I just finished an NSP appraisal yesterday).
  6. If you are an out-of-town buyer, make sure you’re not overpaying. Investors from the Bay Area and out-of-state do tend to overpay because they are less familiar with the market. Moreover, when investors are coming from areas with higher values, lower prices can seem incredibly attractive, which only breeds an environment for overpaying. But even the two appraisals I did recently with all cash local buyers were overpaying (see last paragraph).

Don’t Get an Appraisal during a Cash Purchase:

  1. If it’s painfully obvious you’re price is fair (just be sure).
  2. If you specialize in the neighborhood and know prices and values like the back of your hand, why bother?
  3. If the price is just a bit high, but it’ll kill the deal if you walk, it still might be worth it to go through with the purchase so long as the investment pencils out. That’s a very subjective point of course and everyone must ask how much they are willing to overpay for something.

Multiple Offers and Overpaying: I have noticed buyers tending to make offers higher than the sales price right now to get into contract. Since there has been a much lower inventory in the Sacramento area it seems like listings are hoarded by potential buyers. A byproduct of fewer listings has been buyers offering more than the contract price to beat out their competition and get into contract. All things considered, if paying cash, there is a risk of overpaying in a climate like this. I would simply say to be cautious and consider getting an appraisal if you think the number isn’t quite feeling right. The two houses I appraised recently in situations like this were in contract 10-15K too high.

Have you ever had an appraisal during an all cash situation? Why? Why not? What points or tips would you add to the lists above?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

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Filed Under: Appraisal Stuff, Resources Tagged With: appraiser in Sacramento, decisions when investing in real estate, hire appraiser during cash purchase, Home Appraiser, Investment properties in Sacramento, lower inventory, multiple offers, overpaying, paying all cahs for Sacramento property, should you get an appraisal when paying all cash

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