Reader Question: I am going to list my home. I am hoping to start a home bidding war to maximize the number of offers I receive. I want my broker to stipulate that we will start accepting bids five days after the house goes on the market, in order to get multiple bids on my home. My broker says they cannot do this, as MLS no longer allows it. Does this make sense to you? Have you heard about this change in the rules? Thank you. Jerry and Ann C.
Monty’s Answer: There are over seven hundred MLS systems operating in the US, and they are each independent and each with their set of rules. Call the MLS directly or ask your agent for documentation that a seller cannot delay entertaining proposals for five days. Here are some thoughts for you to consider before taking action.
It is very common for home sellers to envision when their home hits the market; buyers will be knocking people over to buy it. Some sellers can be optimistic because they have actual market statistics that suggest there will be multiple bidders on a home.
In employing tactics that are likely to produce results, ask your agent to gather more information about the market in which your home competes. Most MLS’s divide into physical territories with boundaries and each area has a name or a number. You are interested only in your sub-market and your price range.
Listings and sales in sub-markets is an example of history repeating itself in real estate. When thinking of the coming 180 days your home may be on the market, look back to last year’s activity for an indicator of what may happen this year.
Do your research
Your goal is to project the “sales rate” of homes similar to yours in the coming months. The more sales and listing data the more dependable the calculation. Remember to search only your price range and sub-market. Here are the questions to ask your agent, the answers to which can be found in the MLS.
How many homes are currently for sale? How many homes were for sale last year at this point? From this point forward last year, how many new listings came up the next six months? By assuming this year will be similar, we can expect “X” number of new listings in the next six months. Adding the current inventory to the predicted new listings, one can predict the total competing inventory.
Applying this same logic to sold and closed numbers, we can also predict the number of sold and closed homes in the coming six months.
For example, assume 80 similar homes on or coming onto the market, and 20 homes sold last year in the coming six months. This information suggests that 20 homes will sell this year in the coming six months. With 80 homes for sale and 20 projected to sell, the projected sales rate will be four sales per month, a twenty-five percent sales rate. Remember that markets are cyclical, and there is no guarantee history will repeat itself, but this is better than a “gut feeling.”
Delaying entertaining of offers may not work with a twenty-five percent sales rate. There are simply too many homes from which to choose. So, how could we attract more buyers? The way some lenders do it today after the foreclosure glut between 2008 and 2012 is to reduce the price of the home to attract attention. The idea is to be the first house to sell or create a bidding war. This strategy will work in hot markets because listing inventory is low. The chances of it working in a market with a twenty-five percent sales rate are small because as the price rises during competition, competing homes begin to look more attractive.
Consider taking the extra time to understand the marketplace. Agents talking with other agents may hear the market is going crazy, but different agents will say the market is relatively normal. The actual numbers are the only evidence that is concrete. All else is anecdotal. If you are in a “hot market” (seventy percent plus sales rate), you will not have to try to control what happens, the market will do it for you. If you are not in a ‘hot market” you will not be able to influence the market except with low price.