2024 has been another strong year for our local market in Residential real estate, in spite of soaring interest rates and mixed news on the national front. As with all statistics, it’s important to not jump to conclusions on what the first data point might lead you to believe. In our case, whereas our listings were up 20% from what was on the market a year ago, there were 111 sales countywide in November, which was an increase of 60.9% from November of last year.
This surge in sales drove our supply relative to the rate of sales down by a full 20% from the prior November, with the Unsold Inventory Index (USI) staying under a 3-month supply for the second month in a row. This drop was made all the more pronounced by the fact that the supply had been floating at well above last year’s USI numbers for the entire Summer. And during this period the supply still remained under 3 months most of the year, keeping an upward pressure on prices, with the Median price for a home holding steady at $1,315,000 for November, which is up $35,000 from where it was a year ago.
The impact of this drop in the USI showed up in recent weeks at street level with a resurgence in multiple offers, and suddenly our playbooks are back out for how to best navigate in a competitive environment. For instance, after not encountering a “sliding bid” in years, I have recently encountered two offers with escalation clauses.
An escalation clause in the context given here is one which states that the party making the offer is willing to pay a fixed amount above the highest bona fide competing offer, sometimes up to a stated maximum above what they would ideally want to pay unless they have to, with a condition that a copy of the competing offer be provided for verification purposes. And while in principle this may sound like a relatively simple and effective tactic, it can lead to multiple dilemmas such as when one offer is all cash with minimal contingencies while another may have less desirable terms which prevent a simple apples-to-apples comparison.
To avoid such complications, some sellers and agents choose to counter back with a request for a simple highest and best price with the escalation clause removed. And in order to disable a competing offer from using an escalation clause against them, savvy buyer agents include a confidentiality clause in their offer, disallowing their price and terms to be disclosed to competing parties for any reason.
It’s in situations like these when our negotiating, diplomacy and ethical compasses are put to the ultimate test, often under pressure and with only short time frames to make decisions. This is where subtle differences in your approach can change the outcome of an opportunity that has often taken a great deal of time and effort to arrive at, and where you don’t want to ultimately regret your final chosen course of action.
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