Listings Selling For More Than Asking Price? Bidding Wars Are the Norm in Most Markets

[Corey Dutton]

The National Association of Realtors has just reported that the housing inventory in the U.S. has dropped to $2.5 MM units in April, the lowest number since 2006. Here’s the most common scenario that realtors in Salt Lake City, Utah are seeing:

1. Seller lists property at what seems like a fair price
2. Within 24-48 hours the seller’s agent gets 3-5 offers.
3. The seller picks the best offers.
4. The property is under contract for usually MORE than the asking price.

But wait. Then the buyer’s lender sends out an appraiser who comes back and says, “I can’t find 3-5 other sales to put in the appraisal to support the higher price.”

What happens when there are no higher comparable sales to support a sales price in a contract? The appraiser will ask for everyone to review the sales data and see if he/she’s missed anything. If the appraiser can’t be convinced of higher prices, the buyer and seller will have to renegotiate the deal downward, or the buyer can leave the transaction and the backup offer can come in. They may have the same problem, unless the backup offer is not contingent on an appraisal or loan.

That is the biggest problem in the Utah real estate market: Low inventory, multiple offers, and appraisers who can’t find higher values.

What is happening in your market and how does it compare with what is happening in Utah?