The Multiple Offer Melee
Santa Cruz County has arguably become the hottest real estate market in the State. As of the end of September, the Unsold Inventory Index reached a historically low 1.6 month supply, putting increased upward pressure on housing prices, with the County Median of $1,062,500 setting an all-time high for the third month in a row since crossing the $1 Million dollar mark for the first time this Summer.
In a year which has seen COVID, Rioting and Forest fires, it’s like another pandemic has broken out, this one hitting our housing market, and not surprisingly in desperate times Buyers and their agents have started to deploy increasingly desperate tactics. In order to eliminate as many variables as possible for the Sellers, we are seeing increasingly shorter escrow periods often with free rentback periods for the Sellers and all-cash offers are quickly becoming the norm.
In order to compete, many conventional Buyers are being pressured to waive their loan and appraisal contingencies, relying instead on being able to show that they can bring the additional cash needed to close and committing to bring those funds to escrow in the event that the property doesn’t appraise at the sale price, which is quite often hundreds of thousands of dollars higher than the list price.
The majority of listing agents set a date specific for offers to be reviewed, providing a full packet of disclosures and inspections up-front for the Buyers to sign off on before submitting their offers. But increasing numbers of these are being pre-empted by aggressive buyers threatening to walk away if their bid isn’t accepted prior to the posted bid date, which has necessitated increased diligence and communication with listing agents to make sure the original timeline hasn’t been circumvented.
And the trend has gone away from giving all serious offers a chance to compete by responding with a multiple counter-offer form. Now, more often than not, the seller and their agent are likely to just pick a winner out of the pack and run with them.
A contributing factor to this trend is the increasingly ridiculous numbers of competing offers, such as in the case of a recent underpriced listing in the Yacht Harbor neighborhood which received a total of 43 offers. It was hardly a surprise when multiple offers broke out a few weeks later on another listing by the same agent while it was still in the local MLS’s agent-only “Coming Soon” section and that home went into escrow before it ever hit the public MLS.
We have also seen a corresponding rise in the number of non-conditioned offers where the Buyer waives their inspection contingencies and agrees to buy the house “as disclosed” with no disapproval rights, barring some undisclosed material fact coming to light during the course of the escrow, and that is a topic which likely merits an entire discussion on its own.
Bottom line, it’s turned ultra-competitive out there, so you need to be prepared to stretch the limits of what you are willing to do in order to prevail. And now more than ever it is a good idea to get the guidance of an experienced and skilled agent to maximize your chances of success, while stopping short of sacrificing all your principles.