26 Offers. First-Time Home Buyers Are Screwed.

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I admin it. I’m frustrated.

“Tell them to not even bother,” said the listing agent apologetically about my first-time home buyers. “There is simply no way they can compete.”

He and the Sellers figured the home was priced “about right.” And it was… the list price WAS right. The house won’t appraise for any more.¬†They certainly weren’t expecting 26 offers. Most were over asking. Most had removed their appraisal contingency. The best was an all-cash offer about 10% over the asking price.

I’m not going to give away the address out of privacy concerns for the Sellers and even the other bidders. But, there are only a handful of available homes that it could have been. icon wink 26 Offers. First Time Home Buyers Are Screwed.

My head is spinning. 26 offers on an underpriced house is still a lot, but at least it makes sense. 26 offers on a fairly-priced house is insanity.

Consider:

  • There are at least 26 serious buyers in the Pleasanton-Danville stretch up to $700,000, with just about nothing for sale. They’ll be competing on every decent listing.
  • If this home sells for the price I was told, that represents a full 10% over what it would appraise for.
  • And, probably a full 15-20% more than it would have sold for 3-6 months ago.
  • Meaning that lower-end homes in this area (maybe $500-750K) are appreciating at a 30% per year pace.
  • There were multiple all cash offers over asking price… how can a fha/va or even a 20%-down buyer compete without overbidding even more? Then covering the appraisal shortfall with cash. What if they don’t have $50,000 to spare?

The next steps for us will be to maybe lowball some higher-priced homes that have been sitting for a while. And I’m going to try and find sellers who cancelled their listings last year without selling. Maybe some of them would reconsider.

This is worse then 2004. The housing bubble is re-inflating quickly.

If you’ve been considering selling, call me today and let’s discuss how you can take advantage of all of this madness.

10 thoughts on “26 Offers. First-Time Home Buyers Are Screwed.

  1. Tom Stone

    Greg, Buyers of mine offered $10k over asking for a serious fixer with 3 acres in West Petaluma last month. It had issues, an illegal granny, a minor easement issue, and it had not been updated since 1975. It was priced about right, and I had some concerns about it appraising. There were 10 offers, 2 were all cash and $50k (10%) above asking. A bidding war ensued and the “Winner” paid $100k above asking for a fixer that needed $200k of work. My buyers have 20% down and the only chance they have is making an offer on something that’s been sitting. And Appraisals, bah. I looked at two appraisals of the same property today, both with the same effective date. One was 40% higher than the other ($1MM and $1.4MM) and I could sell that place for $1.5MM in two weeks. It’s the biz…

  2. madhaus

    In 2004 the problem was too much mortgage money going to buyers who probably shouldn’t have qualified to get it. The problem today is too much investment cash and too little inventory. The result is the same, though, when demand outstrips supply.

    The bubble’s been back in SF and Silicon Valley for a while. Danville/Pleasanton is getting the secondary spillover.

  3. Greg FieldingGreg Fielding Post author

    “The problem today is too much investment cash and too little inventory.”

    Too little inventory driven by government extend-and-pretend programs. If their goal was to reinflate the bubble they are doing a damn fine job.

  4. June Halperin

    It’s January. Why aren’t you advising your buyers to wait for spring when there is ALWAYS more inventory. Go visit houses on rainy weekends and during the Superbowl when others are hiding at home, or visiting Tahoe, and make offers on places other people are less interested in. Basic supply and demand. Or, RENT. I known, no commission. And the rental market offerrings aren’t great either.

  5. admin

    Because there isn’t ALWAYS more inventory. Last year, there was no spring increase in homes for sale. The number of available listings declined each month from January through December.

    Also, even when there is more inventory, there are also even more buyers to compete with.

    And, I’m with you… I’ve advised more people not to buy over the last 6 years. I’m a renter myself right now.

  6. Pingback: Another Wave of the Bubble Wand: A $6.5M Crapbox in Palo Alto [Burbed.com]

  7. Tom StoneTom Stone

    In western Sonoma County the price point is roughly $700K. Supply outstrips demand above $1MM and there are some very nice properties available at good prices.

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