What are the new rules for successful offers?
The old rules don’t work.
The new rules don’t work.
You can’t depend on the comparables. You can’t depend on some ratio of price to assessed value. (You never could.)
It used to be a good rule of thumb was to offer $3000 to $5000 over asking price for every offer. That was the rule that tended to work most of the time, at least since I have been a realtor. If you lost out, then you could sleep soundly knowing that the buyer that beat you paid too much.
I’ve done dozens and dozens of offers this year, more than any previous year. The vast majority unsuccessful. They are unsuccessful for many reasons.
#1 As the year began, we were still operating by last years rules. The market got nuttier as the year progressed. But full time real estate agents who were paying attention and dedicated clients quickly learned.
#2 Although agents like me are pretty far along the learning curve, many clients have to experience the agony of defeat and the frustration of losing out a few times before they catch us on the learning curve. I don’t think I have met a client this year that wouldn’t have done things differently if only they had of known. Hindsight is 20/20.
#3 There is a lot of desperation out there. When you’ve lost a few times, you don’t want to lose again. When you witness prices rising so fast, you don’t have the time (or money) to wait.
#4 Prices are rising faster than any of us have every experienced. About 10% year to date.
The new rules of real estate
So the old rule was to add say $5,000 per offer to the list price if you really wanted the house. Not a great rule, but it seemed to work. My modified rule was to do that and then add an additional $15,000. This is not very scientific, but it seemed to work some of the time.
Then up to 8% over the best comparable seemed to work.
One of my clients had things worked out to the value per square foot. That works great except when it doesn’t.
My new rule is to offer until it hurts. Take it today at tomorrow’s prices because tomorrow’s prices will be here before you know it. If you wait until next week, you’ll be paying next year’s prices.
I know this isn’t very encouraging.
On a personal note
Have you ever seen the movie Groundhog Day? In the movie, Bill Murray is forced to live the same day over and over again. I feel a lot like that.
It has been a tough year for home buyers and for buyer’s agents. In the past two weeks with two different clients, we were blown out of the water on offers again and again.
You sunk my battleship.
So much wasted effort.
Personally, I’m tired and frustrated and I’m thinking of taking the rest of the year off. I might as well. When a new listing comes up in Eastbridge or Beechwood, it is not often that I am feeling the thrill of victory but the agony of defeat.
Actually, I’m mostly feeling a lot like Bill Murray.
I thinking about taking off and backpacking around Southeast Asia again – Southern China this year.
I’d like to come back after groundhog day has come and gone.