Much like high schoolers who apply to several colleges in case their dream school plans don’t work out, and like prospective employees who send résumés to every applicable company that’s hiring, homebuyers are keeping all options open when looking for a house in a competitive environment. And that’s likely compounding the problem.
In June, the residential real estate company Redfin surveyed 785 of its agents across 38 states and Washington, D.C. Fifty-one percent responded that multiple offers were the greatest challenge buyers faced in Q2. The rate was up from 40 percent in the first quarter of this year and 29 percent in Q4 of last year.
Because finding a home is so tough, buyers are making offers on more than one house to increase their chances of acceptance. If they’re approved on multiple homes, they renege on the option they prefer the least.
This strategy sets up two kinds of obstacles. One, sellers are wasting time dealing with prospective buyers who may not be serious about a sale, and two, legitimately interested buyers are getting pushed away. Redfin agents said that homeowners should avoid bidding on multiple homes, pointing out that the urge to place multiple bids is often an emotional response resulting from missing out on another house.
“I recommend that clients in this situation take a step back and consider what’s most important to them in their next home and how far they’re willing to go to get it,” Boston-based Redfin real estate agent James Gulden said on the company’s blog. “That way, they can be in the right mindset to make an offer they feel good about on a home they truly love when it hits the market.”
When viewing a house, multi-bidders are using the inspection for leverage. Among the survey’s findings as to why contracts fell through, 39 percent of respondents attributed the failure to negative or surprising inspection results.
“It’s not necessarily true that the inspection reveals major issues or that the buyers just got cold feet,” San Diego-based Redfin agent Jeremy Paul said in the company’s blog. “It’s more that the buyers who are making multiple offers at prices they may not be able to afford just to get an offer accepted often use the inspection as a chance to negotiate significant credits in order to reduce costs. When the seller won’t budge, the buyers move on.”
In the previous two quarters, low inventory was cited as the greatest challenge facing buyers, according to Redfin