Sellers, getting twenty offers is the dream, right? That way you can be choosy about accepting the buyer with the strongest terms and probably a higher price too. But do you really need that many? In other words, can you get the same price with just a few offers? Let’s kick around this idea today.
THE SHORT VERSION:
1) No surprise. Getting more offers tends to lead to a higher sales price.
2) Sometimes just one offer can go way above the list price.
3) Homes with one offer also more regularly close way below the list price.
4) You don’t need 20 offers (but it sure does help).
THE LONGER VERSION:
Let’s look at some visuals and then consider some takeaways.
County Visuals: First off, I’m concerned these visuals are going to be confusing, so sorry if you’re thinking, “Dude, I only see dots and I have no idea what’s going on.” The goal is to show how much higher the sales price is compared to the original list price while considering the number of offers. Basically, when a dot is at 100%, it means a home sold at exactly the original list price. Or if a dot is at 110%, it sold 10% above the list price. Or 95% means it sold 5% lower than the original list price.
Question: What happens to prices when there are more offers?
The big plain truth: The truth is properties with more offers tend to close higher above the original list price than properties with fewer offers. Duh, I know we could have said that without the research, but it’s good to see what stats actually show rather than going with what we feel might be true. With that said, sometimes a home with just one offer can actually close at the same high percentage above the list price as a home with ten offers. So technically you don’t need ten to twenty offers to command a huge price (but it sure does help).
Neighborhood Visuals: Let’s check out some neighborhoods too instead of just the county. What do you see?
Conclusion: There are fewer data points to consider in the neighborhood visuals, but the takeaway is the same as the county (see above).
QUICK THOUGHTS:
1) 20 offers: If you’re getting 20 offers, it’s probably because you’re priced too low unless that’s what every listing is getting.
2) Aim for a few: Price it reasonably and you’re more likely to command a few solid offers and statistically be in the zone to compete above the list price. The reality is you don’t need 20 offers to get a huge price (but it helps).
3) Hang in there buyers: It’s not easy out there right now, but it’s worth noting not every sale is getting ten offers. It may feel true, but the stats don’t show it is.
4) Not everything is getting bid up: While many properties go 10% to 15% above the original list price, many homes sell below the list price. The narrative is Bay Area buyers are swooping in, paying cash, and everything is getting bid up, but that’s not true when looking at how many homes recently sold below the original list price (basically any dots below the 100% line).
5) Clear advantage: Having lots of offers gives sellers a huge advantage to be selective and accept contracts with the best terms (and probably higher prices).
6) Layers of the market: Not every price range is experiencing the same dynamic when it comes to multiple offers and getting bid up. This is why it’s so dangerous to take an experience with just one property and call it a trend for the market. Maybe. Maybe not.
I hope that was helpful. Thanks for being here.
Questions: How many offers do you think is ideal for a seller to get? Why are some listings able to command a huge price even though they only get one or two offers? What is it about those ones? Any other insight? I’d love to hear your take.
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I may be crazy, but I would tell them to wait six months till it cools a bit and typically higher inventory….
Thanks Mark. That’s always the hope to wait and have a better opportunity later. I think many are trying to seize low mortgage rates. There is a real fear of missing out.
Glad to see you back in the saddle. I am retiring next week. Happy Trails.
Congratulations!!! I’m so excited for you. Blessings to you in this new chapter.
Good to see you posting again and hope that is a sign you are OK.
From what I have seen, generally, the price of houses has gone up about 200% since 2012. Historically, going back to 1900, houses have appreciated about 1% per year after inflation. So it would appear that the market today is historically volatile. While far from certain, it seems the possibility of a downward correction is very possible.
On the other hand, interest rates are low, and if a person is relatively young and can afford the down payment, a loss of 20% or more could be overcome in the long run. If you are older, the market seems a little risky right now.
But all this is minor when reflecting that having adequate money for a roof over one’s head and food for your family is a blessing.
Again, glad you are better, ricardo
Thanks Ricardo. Good to hear from you.
Prices have increased dramatically. In fact, in Sacramento County we’ve seen a 165% increase in the median price since 2012. I ran some stats about six months ago and in many areas prices were easily up $200K+ during this time period. Frankly the type of growth we’ve seen lately is not sustainable. In the region the median price is up 9% from last year at the same time. If anything price momentum was beginning to slow these past couple of years until we saw rates get below 3%. Having such low rates has been like a steroid to speed up the market.
I share your concern about having funds for a roof and such, particularly for buyers who are putting very little money down. I saw a post recently where someone got into a house for less than $500. That’s great for the buyer. I just hope the buyer has some funds because unexpected issues arise. Even in my own home we had a disaster under the crawl space last month that ended up costing over $2,400. Yeah, that was fun to have happen while getting home from the hospital (no, I didn’t do the work).
Interesting data Ryan. Does your MLS provide the number of offers? To do this kind of analysis in our area, I would need to call agents and manually tabulate the data.
Thankfully our MLS since late 2016 provides both the number of offers and another field that simply says “multiple offers.” I don’t know that this field was meant to be exported, but I’ve been milking it for data for a number of years. I think it’s a really interesting backdoor way of looking at the market.
For any onlookers, here is an image I posted last week to show the seasonal trend of multiple offers. Each year there is an up and down rhythm to the number of multiple offers, so it’s one way we can see the market heating up and then cooling. As I said in my post last week, this year has been different as the market started to cool during the beginning of the pandemic before heating up again (not characteristic once we start to see a cooling). Sometimes people question the validity of this field and I understand the critiques. I’m just saying no matter what we are seeing a consistent seasonal trend here, which tells me data entry from agents is working. And agent friends, please be as accurate as possible with your information. Thank you. https://i0.wp.com/sacramentoappraisalblog.com/wp-content/uploads/2020/09/Multiple-Offers-August.jpg?w=539
Hey Ryan,
Welcome back. Love these visualizations. Would be interesting to know which multiple offer sales were intentional vs. accidental/lack of information.
Gary-our MLS has tracked number of offers for several years at our request. We’re fortunate in Sacramento to have a great partner in Metrolist.
Thanks Joe. I think it’s absolutely fascinating to see the market like this. It’s amazing to see the same basic shape too throughout the graphs. I’m sure there are some errors here. There is no such thing as a perfect dataset. But I will say we see a consistent trend with the numbers, so that leads me to believe the stats are solid enough.
Is there data that informs where the Bay Area folks are buying? Folsom? EDH? The Grid?
Hi Mark. I have not personally seen any solid data to show specific migration. Frankly some of the only data we hear about these days happens to be search queries. So we will hear stories that say, “X Company shows search queries from San Francisco are up when it comes to eyeing Sacramento.” That’s neat and all, but it seems like I hear this story repackaged every single year, so part of me wonders if queries are always high in this regard. Here is a tool that shows county to county migration, but the only downfall is data only goes through 2018. Of course it also only shows county-wide migration instead of getting more specific. https://flowsmapper.geo.census.gov/map.html
We have some macro data here and there and some of it seems a little spotty, but in the meantime while waiting for better micro data I think we have to rely on anecdotal evidence. What are we hearing from the trenches of real estate transactions? Frankly Bay Area migration is pretty vast from my point of view. Not everyone is a loaded tech worker. Some people come and simply rent. Lots of folks want Midtown because of the urban feel. But then you have many people who buy in EDH and Folsom for sure because they can afford it. I have basically heard Bay Area buyers buying at just about every price range. Some are also trying to buy rentals. I’ve also seen some people get exhausted because it’s not easy for them either to get into contract.
I thought some of the charts for more expensive neighborhoods was interesting. It told me there are some over ambitious sellers out there.
Thanks Paula. It would be wise for sellers to realize we are still in a price sensitive market. Buyers won’t pay any price and not everything gets 40 offers. Price it right. That’s the name of the game.
Hi Ryan,
Another great post! I find that 4-6 offers yields the best prices for sellers. When it gets above that, often the prices and terms are the same. Seller’s don’t want to consider more than that because they keep seeing basically the same offer.
I love the commentary Sheryl. Thank you sincerely. That’s the story of what some of the visuals tell too. The percentage above list price for 10-15 offers really isn’t much different than say 4 offers in some cases. This is good for sellers to consider for the marketing plan. Maybe aim for a few offers rather than expecting 20 and thinking something is wrong if you only get a few.
Hi Ryan, I am with Gary, (that will probably make him nervous) as we have to manually find this data. Heck I have been preaching to agents about putting in the information on Solar Panels and still very little if anyone does it. Then when I teach a class they ask me “so how much do you give to solar”. I ask them how much did you give it. And if you really want me to answer that question how about filling out the MLS field. Usually I hear crickets. But I digress. This over asking price has what little hair on top of my head running for the sidelines. Hard to value and hard to explain. Prior to my placing work on hold for my medical stuff and one client that insists on interior walk thru, it was nuts. Had to work thru a property valuation that had 72 showings and 32 offers. Funny as it took the listing agent 3 days to get the seller off the highest offer, because (and rightfully so) wouldn’t appraise. This is 2005 and 2006 all over again with the craziness. I still do recall that what goes up must come down. Will see. Ryan sure glad you are feeling better. You take good care of yourself and all my best to your Bride and the kids. Bet they are glad you are home, well unless you ask them to do something and interrupt their game. Take good care my friend. \
Thanks Brad. I always appreciate your comments because there are stories packed into them. It’s insanity to hear of properties getting over 30 offers. I’m glad the seller backed off the highest offer too.
On a different but related note I just had someone ask me if two model match pendings in contract at higher levels would make a difference for an appraisal. That could be the case of course as we see the market in what is currently getting into contract. Yet these two pendings both are in contract higher and they BOTH have appraisal waivers per the agent. Where is value? That’s not always an easy question…
Sure glad to have you back at it Ryan, sharing your real estate insights!
I like the simplicity of this analysis, and at the risk of complicating things, wonder what the dot plots would look like when adjusted for property value ranges?
Glad to have you back again Ryan, and please no repeat performance!
Thank you Jeff. I’m definitely not aiming for a repeat. 🙂
I’ve considered that also regarding price. That’s a big layer we could explore. There are a few neighborhoods listed that give a quick window into different price points maybe, but it would be interesting to do something exhaustive. I would suspect lower prices would show more properties getting bid up.
Great post, Ryan. It ties in well with what I wrote about this week, escalation clauses. It seems agents are using these more often in the current low inventory environment. I like your new graph format to visualize the relationship between number of offers and prices over original list price.
Thanks Tom. I appreciate it.
As far as “Clauses” go, I guess sellers could insert anything : My daughter has her house for sale, but she says she will only entertain cash offers because that’s how the other houses in the neighborhood sold or are listed – but if someone meets her price and she turns the deal down because it’s 80% financed, does that mean she needs to pay a commission ????? Her “realater”, as she calls her didn’t say anything about that , but she (agent) may be a recent arrival and can’t advise expertly (???)
Thanks Truett. I’m assuming the cash buyer has representation by an agent though, so a commission is still due, no?
Limit offers to “cash only” and you, well, um, it follows that you limit the number of offers, and more importantly the price point of those offers, you might receive. To designate an entire neighborhood as cash only makes sense only if that neighborhood has been redlined by lenders. I recall this has happened to some condominium projects that were in construction defect litigation. Is this the reason your daughter prefers cash only?
We’ve had fewer cash deals too. Only 9.2% of all sales in the region last quarter were cash transactions.