Not long ago, even the most desirable home might linger unsold for months in the metro Chicago real estate market. However, that is no longer true in many parts of the Chicago area. A substantial percentage of homes listed for sale today are attracting offers from more than one would-be buyer within just a few days of being listed for sale, according to Re/Max.
No one source tracks multiple offers, but one likely indicator is the number of homes selling at or above list price. During June, for example, 22 of 83 detached sales in northwest suburban Arlington Heights, 9 of 29 in Chicago’s North Center community and 10 of 39 in south suburban Frankfort were sold at or above their list price. As for attached homes, 37 of 65 June sales in Chicago’s Near South Side area were at list price or above.
“The market has changed so much over the last six months, and multiple offers have become commonplace,” said Adam Stary of Re/Max Professionals Select in Naperville. “Especially if a home is aggressively priced and in good condition, multiple offers are the norm.”
José Campoverde of Re/Max Signature in Chicago, said that recently it hasn’t been unusual for a listing of his that is well priced, nicely maintained and in a desirable location to attract 10 or more offers, and one of his colleagues reported getting 40 offers on a single property.
“The inventory of homes for sale in some areas is extremely limited right now, which only increases the likelihood of multiple offers,” Campoverde noted.
Re/Max agents report that some newly listed homes are being priced slightly below market value to promote multiple offers and generate what Alice Scifo of Re/Max Advisors Realty in Lake Villa, called a “feeding frenzy.”
Listing the property below market value gets buyers’ attention, and the end result is that these properties often sell for thousands of dollars more than their list price, Scifo reported.
How should buyers approach the market in this environment? Re/Max brokers offer the following suggestions:
• Be financially prepared: Buyers should have their financing ready. If relying on a mortgage, buyers should have a current letter from their lender saying they are approved for a loan at least as large as needed to close the sale.
Whether making a small down payment, paying all cash or something in between, buyers should be prepared to demonstrate to the seller that those funds are on hand.
“Proof of funds is vital,” noted Scifo.
• Move quickly: If a property looks likely to attract multiple offers, buyers should realize that their first showing is likely to be the only one they get. In such circumstances, buyers should take their time, giving the home a careful inspection so they fully appreciate its strengths and weaknesses.
It’s also vital that buyers see the home as quickly as possible because in this market, the early bird definitely gets the worm, according to Stary.
“I want my clients to be the first ones in to see a new listing,” he explained. “If we can get into the home within a couple of hours, and it is something they really like, I want our offer submitted within 30 minutes. Then I will continue to follow up as quickly as possible. My objective is to get the seller negotiating and get the contract wrapped up before other offers come in.”
• Determine the market value: Buyers must understand the value of the property based on the sale of comparable homes in the same area and then see if the asking price makes sense.
Before showing clients a home, Campoverde reviews recent sales of similar properties within a mile radius to see if the home is priced below, at or above its market value. That gives his clients a starting point from which to decide how much they’d feel comfortable spending on the property. It might be less than asking price, but Campoverde said if a home is priced on the low end of the spectrum, he wants his clients to realize that offering more that list right away can be a good move.
• Make the strongest possible offer: Offers involve more than just price. Such factors as a sizable down payment, the ability to close the sale in 30 or 45 days and a contract that contains a minimum of contingencies all make an offer more appealing to most sellers.
“The less complicated the offer, the better chance the buyer has of getting the property,” counseled Stary.
• Have a strategy: Buyers should always start with a strategy based on a solid analysis of the market value of the home, particularly if multiple offers are likely, advised Scifo.
When list price is well below the apparent value, an initial offer above list price may be the right move. Conversely, if the list price exceeds apparent market value, a more conservative approach may be wiser.
Ultimately, in a multi-offer situation, the seller’s agent is likely to ask all buyers for their highest and best offer. Buyers then must make a final determination of how much the home is worth to them.
It’s at that point a broker may tell clients to offer more than the list price if this is truly the property they want. Some will stick with their initial offer. Others will add just $500 or $1,000, and some may increase their offer by a much larger amount.
“It is in situations like these when it is vital that a broker understands the clients’ needs, desires and urgency,” said Scifo. “If a house ranks at the top of their list, it isn’t necessarily a mistake for them to pay a little more than might be fully justified by an appraisal.”
Getting clients to grasp that logic is why Campoverde stresses the importance of explaining the distinct character of the current market to them.
“Even then, some don’t believe you. Some think the market is the way it was two years ago, but it’s very different today,” he emphasized. “It can take losing one or two homes to understand and be prepared for the fact that you may have to offer more than list to get the home you want when multiple offers are on the table. I don’t want my clients to overpay for a property, and offering more than list doesn’t mean that they will.”