Paying Over Asking Price

HOUSTON – (Michelle Leigh Smith for Realty News Report) – Homebuyers, feeling the pressure of a tight market, are frequently buying homes for more than the asking price,

In the last four-week period ending March 21, a national report by the Redfin realty company, says a record high 39 percent of homes listed sold for more than the list price on MLS.

How often does that happen in the Houston market?

“Five of my last six have gone under contract for over list price,” says Amanda Anhorn with Greenwood King Properties. We are finding if we price appropriately, there are enough buyers for them to see a multiple offer situation and ultimately sell for above list price. This has happened in both February and March. I have new listings hitting the market each week for the next two months. With the inventory staying this low, I expect this to continue.”

Some buyers are sweetening their offers with letters outlining why they should be selected for the sale, and one buyer offered a further incentive.”

“Yes, we are seeing buyers pay above and beyond asking price,” says Bobby Bryant, CEO and Co-Founder of Doss, a real estate broker and technology firm with offices in Houston and Austin. “We’ve even seen someone offer almost $100k over asking price and to pay off the seller’s Mercedes if they accept their offer. It’s a great time to sell real estate, everywhere! We are seeing buyers pay anywhere from $5K to over $50K above asking price. It’s that competitive now, especially in desirable areas. As far as sending a letter to sellers, that’s been a thing. However, it’s become more prominent now.”

Cheri Fama, sales manager and Broker Associate at Compass attributes the above listing price sales to Houston’s low inventory of homes.

The Houston Association of Realtors reported inventory of home for sale registered a record low 1.6-months’ supply in February, compared to 3.3 months a year earlier.

Fama serves on both the MLS and the Management Central Committees for HAR. “Agents have had to gear up due to multiple offers where every term was important. This would be extremely difficult on the sellers without a very good professional guiding them. We did find that people were not afraid to go above list price. The most I’ve heard in this office is eight or nine offers on one house. Unfortunately, only one person will win. We’re seeing agents come and do back-up contracts with someone who didn’t get a house on the first round. We’ve seen people go over the asking price multiple times. Another thing we’ve seen is people taking a buyer who is in a contractual spot and offering to buy them out of the contract. Does the buyer really want to give it up? Not usually. I’ve seen that happen in tight markets before. It’s definitely a sellers’ market.”

Is there an end in sight?

“With the rapid sales that are going on, there is not an end in sight,” says Fama.

“Buyers are bidding over the asking price to be competitive in their offers from a few $1,000 dollars to $15,000 or more,” says Jean Shabot, Broker Associate with The Shabot Team, Berkshire Hathaway Home Services. “Houses are on the market for days and the selling agents are competing with possibly 3-4 offers in the $300-$400K price range. And they are strong buyers with healthy down payments.”

The realty market has favored sellers for quite some time. A balanced market is when there is a 6-month supply of homes for sale.

“Time on market to sell a home averaged 3.3 months a year ago,” says Shabot. “Today the inventory is a 1.6-month supply of homes on the market. The inventory continues to shrink, while the buyers flood the market.”

Lisa Barnes with Coldwell Banker recalls that this isn’t the first go-round with the rush of offers at higher prices beyond the ask. “From 2012 to 2015, we had multiple offers, when we added as much as 100,000 new jobs, 2015 was our last year of seeing a tremendous number of multiple offers. Since the pandemic, we’re seeing it again. People have been sitting on top of each other for almost a year – they couldn’t really have a social life. Now, two things are happening. Our lives are kind of going back to normal and interest rates are going up. People who might have been putting it off before are moving forward now. With virtual touring, we kept showing property and it was something people felt like they could do without danger. People are breaking leases in order to buy at a good interest rate. Someone said you know this is the time to be a listing agent, not a buyer’s agent because you can work and work and get in line with multiple offers and lose out, some people are on their sixth home because they’ve been out bid.”

Home Sells for $100,000 Over Asking Price

Barnes said, “A friend listed for $790,000 had an offer of almost $100,000 above asking price on a home in the Clear Lake area.” And she said people are open to moving to suburban or exurban locales. “I just sold a home in Smithville and one at Lake Livingston. People no longer feel they have to live inside the loop.”

With low inventory and high demand, Houston’s home prices are going through the roof.

In February, Houston’s single-family median price climbed 12.6 percent to $275,900 – a record high and well above the February 2020 median of $245,000.

“It’s pretty common now, having multiple offers, in all price ranges, from the 400s to the millions,” says Sotheby’s Realtor Terry Cominsky, who has been selling homes in Meyerland, Bellaire and West University Place for more than 30 years. “Whether we’re presenting them or whether we are writing them, it does take more time. We can write several offers for one person and hope that we hit the right one, with the right contingencies. I have a couple of things I listed in February when it was slower and now those are seeing multiple offers.

Not all agents are witnessing the surge. “I don’t see it in Bellaire,” says Realtor Mike Livingston, with Keller Williams. “Only at asking or maybe one or two thousand over.”

“I haven’t had anything sell for over list price but I’ve negotiated the purchase for under list price; saving one buyer $300,000 and another $200,000,” says Neal Hamil, with Sotheby’s. “Houston home prices are going up for sure. They don’t stay on the market long.

“Yes, prices are rising but not by a huge percentage,” notes Hamil. “Yes, it’s true homes are selling faster now. There are more active buyers now than a year ago which has to do with people moving to Houston, the changes in lifestyle as a result of Covid and interest rates remaining low (and the concern they will continue to inch back up).”

“2014 was the last time I saw this,’ says Frank Ferrara, a senior loan officer with Republic State Mortgage Company. “There were many cash offers. Oil surpassed $100 a barrel.”

Escrow office Annie Ortiz with Capital Title says, “My closing sales amounts are higher at this time and many of my agents are saying the same about bids that are higher than list price.”

In the Lone Star State, people are quick to say: “Don’t Mess with Texas.”

While Texans are known for paying above and beyond asking price when it comes to something they want (think the Hunt brothers or J.R. Ewing – would they let an opposing bidder block their path?). This particularly flamboyant trait is showing up in the real estate market in a very big way.

File: Paying Over Asking Price – 39 Percent of Homebuyers Paying More Than Listing Price

File: Why Homebuyers are paying over asking price. 3-31-21. Annie Ortiz. Cheri Fama. Neil Hamil. Coldwell Banker