This isn’t the typical post on this topic which tells you to make your best offer first, include proof of funds/financing with the offer, avoid contingencies, and have a flexible closing date. Below you will find a list of communities describing their recent history with above asking price sales as well as strategies to help you avoid situations where you may be in competition with other buyers.
Most people agree we are currently in a Seller’s market. Demand is high and in most areas inventory is low which has led to an increase in multiple offer situations (often referred to as bidding wars). I took a look at sales data in 13 cities and towns in the Greater Lowell area to find out where was a buyer’s best chance to avoid a bidding war. On average since 2014, 10% of the properties in these 13 cities/towns sold for full price while 25-30% sold above asking price. This means 60-65% of the single family sales in these communities sold below asking price. A further breakdown can be found below.
I must disclose this data was compiled using MLSPin (the local MLS system), but does not include Auction Sales, Short Sales, or REO Sales (homes sold post foreclosure). Auctions were not included as they often have a low starting bid price. Short Sales and REO sales, often referred to as distressed sales, were also excluded as these properties often use aggressive asking prices in order to obtain quick and/or multiple offers.
The above data represents Single Family Sales data as of 08/12/2016.
The top 4 include Carlisle, Tyngsboro, Lowell, and Methuen. In recent years within these four communities buyers have had a 70% or better chance to have a below asking price offer accepted. In 10 of the 13 communities, buyers have had a 60% or better chance at having a below asking price offer accepted. Wilmington comes in last, as less than 50% of the sales since 2014 had a sale price below the asking price. While bidding wars are fairly common, a majority of homes in the area do not sell above asking price. While it is possible to have an accepted offer below asking price, do not expect deep discounts from the asking price. A majority of the properties in these towns sold within 2-4% of the asking price.
While a majority of the sales in Carlisle were high price homes, I took a closer look at Carlisle sales under $600,000. While there have only been 37 sales under $600,000 in Carlisle since 2014, only 2 sold for full price (5.4%) while 4 sold above asking price (10.8%) for a total of 16.2% of sales selling at or above asking price.
Tips for Avoiding Bidding Wars.
“Finding opportunity is a matter of believing it’s there” – Barbara Corcoran
Buy off season. In general a majority of sales occur from late March through August. Buyer activity typically begins to slow in early September, and really falls off after the Thanksgiving holiday. While there may be fewer homes on the market at this time, you are less likely to be in competition for the property with another buyer during the late fall and winter seasons.
“You create your opportunities by asking for them” – Shakti Gawain
Consider off market homes. If there are only a few listings available in your desired market area, a savvy buyer’s agent will contact recently expired and cancelled listings to see if the owner is still interested in selling. Often a seller will take a home off the market during the holiday season with plans to re-list the property in the spring. If they are still willing to consider an offer from you before they place the home back on the market, you will not have any other buyers to compete with.
Similarly, if you have found a neighborhood or two where you would like to focus your search, try contacting owners of properties which have not recently been listed for sale. By utilizing this option you may find an owner who is getting ready to list their property and get first crack at it. When trying this strategy, I would avoid contacting owners who have just purchased the property within the last year or two as statistically they are less likely to be making a move soon.
“Sometimes we stare so long at a door that is closing that we see too late the one that is open” – Alexander Graham Bell
The Ugly Home. A third strategy is to consider the “ugly” homes that have been on the market for a while with no takers. Often homes in need of some updating and repair are overlooked by buyers due to the needed repairs. There are loan programs, such as the FHA 203k program, which allow buyers to add repair cost to the loan. Finding a home below your budget which is in need of repair and located in a neighborhood you like may be a good alternative for you. More information on 203k loans is available at: HUD 203K
Also check with your local bank or credit union as many of them may offer similar type loans under their Construction Loan Department.