Mark Herseth and Alison Runnoe didn’t feel much pressure to get a deal done when they started shopping for their first house more than a year ago. It’s a buyer’s market, after all, so the married couple took their time.
But when they finally made an offer on a bank-owned house in Minnetonka, they were surprised — and somewhat miffed — to discover that they had been outbid. In fact, eight other would-be buyers made offers on the house, which sold for $10,000 more than the asking price.
Most sellers are happy to get a single, viable offer in today’s market. But Realtors across the metro area say that some buyers are finding themselves confronted by something they hadn’t expected — multiple bidders.
“It’s not like they’re everywhere,” said Barb Jandric, sales manager for Edina Realty. “But this is seriously unusual.”
Herseth and Runnoe know all about it. After coming up short on the first home, they offered $20,000 less than the $179,000 asking price on a Golden Valley house. They finished second to an investor who plans to tear it down and subdivide the land.
“It seems like what we were looking for is exactly what [others] were looking for,” said Mark Herseth, a self-employed painter.
The couple tried again — this time making a bid slightly above the asking price of a $168,000 bank-owned house in Minnetonka. That was enough to close the deal. “The houses we found seemed like good values and that made them hot commodities,” Herseth said.
In the aftermath of the Great Recession, the housing sector continues to flounder in what has been, at best, a modest economic recovery. Since the home-buyers tax credit expired, U.S. home sales have lost momentum. In the metro area, sales were down almost 40 percent in November compared with the previous year, and sale prices have fallen. The National Association of Realtors said this week that 2010 is shaping up to be the worst year for home sales since 1997.
Despite the grim news, Realtors say some residential properties are drawing more bids, including many that have been listed for weeks, months, or, in some cases, have been pulled off the market.
Some speculate that the uptick in offers is a sign that the old rules of real estate — great location and great condition — have come back into play, sparking traditional home buyers and investors to take advantage of the downturn and snap up bargains. Others say the market has simply hit bottom.
Still, multiple offers seem highly improbable, given all the dour news. Max Mortellaro, for example, was so doubtful that his Minneapolis condo would sell when he listed in late fall that he asked his real estate agent to find a renter.
“My expectations were extremely low,” said Mortellaro, who had to sell because his company was moving him to Florida,
His agent, Michael Bartus of Remax Results, found a renter and agreed to list the Falls/Pinnacle condo for $174,900 and show it for just 60 days. After the 60-day showing period expired, two buyers stepped forward with offers. The condo sold for more than the asking price.
“People are waiting to make a move and are hesitant,” Bartus said. “But once they see it go away, they want what they can’t have.”
Such situations are particularly unusual in December, a time when buyers become particularly passive, Jandric said. But there are shifts in the market that may be prompting buyers to move faster. Mortgage rates are creeping up. Neglected bank-owned houses continue to clog the market, reducing options for buyers who can’t stomach a fixer-upper. And there’s a building tension among buyers who have been waiting to make a move or have lost a property they really wanted.
“Fear of loss is a very powerful motivator,” said Jandric.
A stronger market?
Could these sporadic bursts of competition be a harbinger of better times ahead? Jandric is cautiously optimistic. “Every little good hope story is a sign of that slow recovery that you don’t see because it’s so slow,” she said.
Indeed, at a time when nearly a third of the homes on the market are bank-owned listings, a housing recovery isn’t going to happen quickly. Economists expect the flow of foreclosures into the market to continue, in part because many homeowners are still contending with rising adjustable-rate mortgages that could push up their house payments.
Regardless, some traditional rules in real estate still apply, said Remax sales agent Luann Lind. Houses that are in great locations, perfect condition and priced right will always be popular. “The good ones priced right will get multiples.”
For buyers and sellers alike, knowing when a house is priced right isn’t easy. That’s particularly true in the Twin Cities, where sellers tend to price their houses high at first, then drop the price later. In fact, the Twin Cities consistently leads the nation when it comes to the frequency of price reductions, according to Trulia.com. Of all active listings, more than 40 percent have had at least one price reduction.