Nothing confirms the auction atmosphere facing today’s home buyers more than a series of emails I received this week. They were from an agent who priced his west San Jose listing in the mid-low 6s. However, even a year ago the home was worth almost $100k more than the list price, and regular readers will know that lots of water has passed under the Silicon Valley real estate bridge since then. So much, in fact, that Monday I told clients that the winning offer on the home would be $800k, and with no contingencies. Offers were due Wednesday by 2:00 PM.
Since I’d downloaded disclosures, the listing agent had my email address, and late Tuesday afternoon I got an email from his assistant informing me that “there has been quite a bit of activity on this property, currently we have received multiple offers, with the current highest offer above $700,000 with 20% down. If at this price point this property is still of interest to you, please don’t hesitate to submit an offer before our deadline of 2/20 at 2pm.” The “quite a bit of activity” didn’t surprise me. Homes priced 25 percent below their market value tend to attract lots of buyer interest. Unfortunately, much of that interest comes from buyers who think, at least initially, that the home will sell for list or, heck, even significantly above list. But after several phone calls from their agent along the lines of “I’ve been told seventy disclosures packages have been downloaded”, it quickly dawns on them that “significantly above list” significantly understates the likely outcome.
But I have to admit that the email had me worried. Here we were, less than a day before D-day and H-hour, and the best the seller had managed to extract from home buyers was an offer “over $700,000”? That was my estimate of the home’s value in February 2012, and my calendar confirmed that this was February 2013.
I fired off a reply asking how many offers they’d received, and whether they’d stick to the Wednesday 2:00 PM deadline. It never hurts to ask impertinent questions, even if your client isn’t interested in making an offer, because you learn stuff that way. It’s like asking for the recipe for Jack’s secret sauce and actually getting it. So who knew? Maybe they were in a mood to get everything off their chest. Turns out they weren’t, not yet anyway.
Wednesday at 9:55 AM they sent me another bulletin: “currently we have received multiple offers in the low to mid $700k range with over 30% down”. Things were looking better, at least for my reputation for omniscience.
Further bulletins came, fast and furious. At 10:35 AM I was alerted that “currently we have multiple offers, with the current highest offer above $750,000 with over 20% down”. At 12:38 PM, “currently we have multiple offers, with the current highest offers in the $750-$800k range with over 20% down”. At 1:45 PM, “currently we have multiple offers, with the current highest offers in the $750-$800k range, with zero contingencies and over 20% down”. And finally, at 3:07 PM a “Last Update” from the front lines: “Position over-run by buyers, will fight to the last escrow coordinator.” No, actually, something almost as inspirational: “It is likely that the Sellers will counter only the top 2-3 offers. This update will serve as your last notice to strengthen your offers before we review this evening. (Please note the request for a 30 day rent back which is a new request)”.
But that wasn’t the final, or even penultimate, word, because 2:05 PM Thursday I was notified that “there has been quite a bit of interest on this property and we received over 40 offers. The top Buyers have been contacted and we are finalizing counter offers at this moment. If you have not been contacted by phone, you should receive a formal ‘rejection of offer document’ shortly. To give your Buyer an idea of where we are ending up on this property, we are currently negotiating the final details and are expecting to end up very close to $800k or possibly over, with zero contingencies, a 30 day rent back, quick close of escrow and a substantial down payment.”
Of course, things had kind of been pointing in that direction, and it was no surprise to get this final(?) email yesterday at 3:15: the home was “now In Contract with a purchase price above $800,000”.
I’m not sure how I feel about all this bulletin-ing and throwing in additional requests/demands at the last minute just because you can. Yes, I’ve heard this is a seller’s market. But any agent taking a listing in a neighborhood should know market value for that neighborhood. Sure, sometimes a sudden market upturn or downturn can embarrass you, either with a listing that doesn’t sell or with a listing that’s too popular. Both have happened to me, the latter in late 2003 when the market, which had just been bumping along (if that) because of endless talk about invading Iraq, and then the invasion itself, suddenly decided that Iraq was old news and got back to the business at hand, which was bidding up prices of houses. I’d listed the home at the bumping-along price, not the mission-accomplished price, so I ended up with twenty-seven offers, and insisted on hearing all of them because that’s the kind of guy I am. So these things happen.
But on yet the other hand, I was once one of sixty-seven offers on a fixer in Cupertino that in a normal market would have been lucky to get one, this outpouring of interest due mainly to a listing agent apparently into games: he wouldn’t tell me and, presumably, any other agent, how many disclosure packages he had out. So I figured interest was minimal, and my clients wrote a nice safe offer at list. Needless to say, a nice safe offer at list did not carry the day against sixty-six other offers. In fact, I think we can all agree that it was a criminal waste of time for at least half the buyers and agents involved. That was many years ago, and I still remember the name of that agent, and if I can ever return the favor…
I don’t know why this west San Jose house was priced so low, and why I was treated to this blow-by-blow account of a humble rancher getting its fifteen minutes. A cynic might say that the home was deliberately under-priced, and that the emails were designed to fan buyer interest to even more overheated levels.
But here’s the agent’s explanation: “I thank you all for your interest and hope that these communications have been helpful for you and your clients. I understand this is a challenging market for Buyers and hope that this transparency in communication has shed light on the market conditions your Buyers are currently facing so they can better prepare for their next offer. We need more houses for all of you! I wish you and your Buyers the best in their home search and please feel free to contact me if you have any questions.”
At the very least, it’s an interesting way to deal with too much interest, and perhaps the easiest and fairest way. And in the process, it showed us how rapidly momentum builds in this market.
copyright © John Fyten 2013