HOUSTON – (Michelle Leigh Smith for Realty News Report) – Homebuyers, feeling the pressure of a tight market, are increasingly paying more than the asking price to secure homes.
During the four-week period ending March 21, Redfin reported that a record 39 percent of homes listed on MLS sold for more than their list price.
How common is that in the Houston market?
“Five of my last six have gone under contract for over list price,” says Amanda Anhorn of Greenwood King Properties. “When we price appropriately, enough buyers see the listing to create a multiple-offer situation that often pushes the final sale above list. This occurred in both February and March. I have new listings coming to market every week for the next two months. With inventory remaining this low, I expect this trend to continue.”
Some buyers are sweetening their bids with personal letters to sellers explaining why they should be chosen, and others offer financial incentives.
“Yes, we are seeing buyers pay above and beyond asking price,” says Bobby Bryant, CEO and co-founder of Doss, a real estate brokerage and technology firm with offices in Houston and Austin. “We’ve even seen someone offer almost $100,000 over asking and offer to pay off the seller’s Mercedes if they accept. It’s a great time to sell real estate, everywhere. Buyers are paying anywhere from $5,000 to over $50,000 above asking price in competitive, desirable neighborhoods. Sending a letter to sellers has been common, but it’s become more prominent recently.”
Cheri Fama, sales manager and broker associate at Compass, attributes sales above list price to Houston’s very low inventory.
The Houston Association of Realtors reported a record-low 1.6-month supply of homes for sale in February, down from 3.3 months a year earlier.
Fama serves on both the MLS and Management Central Committees for HAR. “Agents have had to prepare for multiple offers where every term matters. Sellers rely heavily on experienced agents to guide them through these situations. People aren’t afraid to go over list price—one office reported eight or nine offers on a single house. Only one buyer wins, and we’re seeing back-up contracts from buyers who missed out initially. Buyers sometimes make multiple over-asking offers, and in tight markets we’ve seen offers to buy out a buyer who’s already under contract—although buyers rarely accept. It’s definitely a sellers’ market.”
Is there an end in sight?
“With the pace of sales right now, there’s no end in sight,” Fama says.
“Buyers are bidding over the asking price to remain competitive, from a few thousand dollars to $15,000 or more,” says Jean Shabot, broker associate with The Shabot Team, Berkshire Hathaway HomeServices. “Houses are selling within days, and selling agents are often handling three to four strong offers in the $300k–$400k range from buyers with healthy down payments.”
The market has favored sellers for some time. A balanced market typically reflects about a six-month supply of homes for sale.
“Time on market averaged 3.3 months a year ago,” Shabot notes. “Today inventory sits at a 1.6-month supply. Inventory continues to shrink while buyer demand grows.”
Lisa Barnes of Coldwell Banker recalls a similar period of intense competition. “From 2012 to 2015, we saw multiple offers when the market gained many jobs; 2015 was the last big year for that surge. Since the pandemic, it’s returned. People were confined at home for almost a year and are now resuming more activity while interest rates remain relatively low. Buyers who postponed earlier are moving forward, some even breaking leases to buy while rates are favorable. Virtual touring kept the market active during the pandemic, and now the demand is translating into multiple-offer situations. Listing agents are in a strong position; buyers can be outbid repeatedly.”
Home Sells for $100,000 Over Asking Price
Barnes relates, “A friend listed a home for $790,000 and received an offer almost $100,000 over asking in the Clear Lake area.” She also notes buyers’ willingness to move to suburban and exurban locations. “I recently sold homes in Smithville and at Lake Livingston. Buyers no longer feel compelled to live inside the Loop.”
With low inventory and high demand, Houston home prices are rising rapidly.
In February, Houston’s single-family median price climbed 12.6 percent to a record-high $275,900, up from $245,000 in February 2020.
Paying Over Asking Price
“Multiple offers are common across price ranges, from the $400ks to the millions,” says Sotheby’s Realtor Terry Cominsky, who has sold homes in Meyerland, Bellaire and West University Place for more than 30 years. “Whether we’re presenting or writing offers, the process takes more time. We often prepare several offers for a client to increase the chance of success. I listed a few properties in February when the market was slower, and now they’re drawing multiple offers.”
Not every area shows the same intensity. “I don’t see that level in Bellaire,” says Realtor Mike Livingston of Keller Williams. “Often homes sell at asking or maybe a couple thousand over.”
“I haven’t had anything sell for over list price, but I’ve negotiated purchases below list for clients—saving one buyer $300,000 and another $200,000,” says Neal Hamil of Sotheby’s. “Houston prices are rising and homes don’t stay on the market long.”
“Prices are rising but not by huge percentages,” Hamil adds. “Homes are selling faster now. More buyers are active than a year ago, driven by newcomers to Houston, pandemic-related lifestyle changes, and concern that interest rates may rise.”
“The last time I saw this was around 2014,” says Frank Ferrara, senior loan officer with Republic State Mortgage Company. “Back then there were many cash offers and oil prices exceeded $100 per barrel.”
Escrow officer Annie Ortiz with Capital Title reports, “My closed sale amounts are higher now and many agents tell me they’re seeing bids above listing price.”
In Texas, there’s a cultural willingness to go above and beyond for what buyers want, and that tendency is clearly visible in today’s real estate market.
March 31, 2021 Realty News Report Copyright 2021
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. Neal Hamil. Coldwell Banker