Real Estate Bidding Wars Part I

“The best time to buy real estate was 5 years ago.”

Ray Brown

Real estate is a hot market for sellers, but buyers have to be crazy to get themselves into this war. I have to admit I am part of that group of crazies!  I got remarried almost 3 years ago and at the time, I convinced my husband to move into my condo.  After I got divorced, I bought my condo and over the years I have done many upgrades.  It is hard for me to let go, but I finally made the decision that we need more space. We started our journey in April and let me tell you it has been a roller coaster of emotions, surprises, and learning. I am not an expert in real estate, but this is definitely a bubble, the million-dollar question is when is it going to burst and what is going to happen when it does? Nobody knows. Differently from what happened between 2008 and 2013, this time lenders are being really careful approving loans and people are getting scrutinized. Buyers are putting down at least 20% to 25% or more of the price of the house, if not just paying cash altogether.

Back in 2011, I was working for a law firm that did foreclosure defense, foreclosure mediation, and bankruptcies.  It was a constant adrenaline rush, every day we got a client with a notice of sale for the next day, meaning we had to act fast filling all the pleadings with the court to stop the sale that usually was set to happen on the courthouse steps early the next morning.   People were desperate, many had to do short sales or cash for keys while others were not that fortunate and were foreclosed on or had to file for bankruptcy. I think what is happening now is different.  To start, a high percentage of buyers are paying cash and the buyers that are financing, are paying very low interest rates.  However, at some point, the market will fluctuate again.  

Let’s say there is a house priced at $700,000 and in order to get it, you have to offer at least $780,000. Yes, you read that right, if you are not involved in the real estate market right now it is true, if you want a house, get ready to reach deep into your pockets! Then, say you invest another $50,000 in repairs and now you are at $830,000. Later on, market goes down, the house is valued at $680,000 bidding wars are over, what do you do if you need to sell? Loose $150,000? My advice, if you want to buy a house now, make sure you want to live there for a while.

I live in Reno, Nevada and the inventory of houses is very low at this time. Cash offers are very popular. California buyers are dramatically affecting our marketplace as they are selling their places for a ton of money and come to Reno to buy a much bigger home for way less. The market was pretty crazy a couple of months ago, houses were selling the same day for at least 10% over asking price. I follow the market daily and have seen significant changes within the last couple weeks. Houses are taking a bit longer to sell and offers over the asking price are between 4% and 5%, if at all, some homes are even seeing price cuts.  I dedicate at least an hour a day to my real estate research.  I sit down with my husband, and we look at homes we like.  For me, it is important to see the price per square foot, taxes, Home Owners Association (HOA) fees if there is one, curb appeal, neighborhoods and most importantly the history of the property.  If it has sold 5 times in the last 6 years, then something could be amiss.  Also, as mentioned, many homes have HOA fees that could range from a few bucks up to $700 a month.  I pay $300 a month in HOA fees and while I am not a fan, I think HOA is important in order to have some protections.

So, what had happened to us in our journey? Well, so many wild things! Stay tuned for Part II and please share your experiences if you are sharing this crazy ride!