Real estate bidding wars are back in parts of D.C. area
By Sandra Fleishman,
With all the bad news about the national housing market, it may come as a shock to eager Washington area home shoppers when they run into a bidding war. But that has been happening routinely in some popular neighborhoods, say real estate agents, especially when properties are priced slightly under the market and are in good condition or show strong promise for renovation.
Today’s bidding competitions aren’t the same as the slugfests of the boom days, 2004 to 2006, when just about every property was fought over because of investor speculation and soaring appreciation, and when escalation clauses — committing buyers to automatically increase how much they would bid — went sky high.
“We’re not seeing crazy-high bids,” said Fred Kendrick, an agent with TTR Sotheby’s International Realty in Georgetown. “It’s difficult for people to go much over the asking price because of the lack of financing. . . . In the old market, everything appraised” because the next sales went so fast and drove the appraisals higher. “Today, the question is: How much over the price can you go before you run into problems with the lender?”
During the boom, “escalation clauses were all over the place,” said Bonnie Roberts-Burke, an agent with Evers & Co. near Dupont Circle. “It was a moving target, and appraisers knew it was a moving target. But appraisers were not having problems [with lenders] then because they knew the value would be going higher. Now buyers are much more cautious with escalation clauses.”
More skirmish than war
There usually are fewer bidders now compared with the boom times, agents say. “Most of my scenarios involve perhaps two to four bidders and anywhere from $5,000 to $20,000 extra, depending on the price range of the property, although one seller got more than $70,000 more with only three buyers in competition,” said Valerie Blake, associate broker with Prudential Carruthers Realtors in Upper Northwest.
Blake finds most multiple offers occurring at the first-time buyer level — up to $400,000 — and in the move-up price range up to $725,000. But others say they’re seeing competition in all categories, including the million-plus bracket.
About 10 percent of Trudy Severa’s contracts get multiple bids these days, but with only three or four bidders, said the Reston-based Long & Foster agent. They’re most likely, she said, in pockets of Reston — which, like Bethesda, attracts buyers because of proximity to shopping, restaurants and Metro — and in Falls Church.
Some agents say multiple offers were more frequent in the early spring, when buyers were bubbling over with pent-up demand from the inventory-deprived winter. But, even in the recent 90-degree days when “it’s difficult to slog through this heat to look” at properties, “we are still seeing [multiple bids] whenever a property is well-priced,” Roberts-Burke said.
And the mega-war still pops up with some frequency. Agents say they’ve seen situations in which real estate offices have stopped taking offers or showing houses because interest was too high to keep up with.
In April, Roberts-Burke drew 11 offers for a listing in Georgetown. And, according to District property records, the two-story brick rowhouse sold May 31 for $1.64 million, which was $440,000 more than the listing price. It was a cash sale.
The estate sale drew attention because the 110-year-old property was unusually wide for Georgetown, with lots of windows and a gorgeous garden. According to the Web site Trulia, the asking price for the three-bedroom, three-bath home was about $150,000 below the average list price for similar houses in the area.
The philosophy in keeping the listing price down, Roberts-Burke said, was that “instead of people walking in and saying: ‘Nothing has been done to this house since 1965. Nothing has been done to this kitchen. . . . Nothing has been done to the garage.’ . . . people would walk in and say: ‘Wow, look how wide this place is. Look how great the garden is.’ ”
“The houses that get multiple offers,” she said, “are the ones where the sellers err on the side of modesty instead of overreaching.
The likelihood of multiple offers, she said, depends on how few houses are available in a given neighborhood as well as on the comparative prices. A property on Garfield Street NW this spring had 13 offers, but “it didn’t go that much over the listing price,” she said.
Also in April, 26 bidders piled up over a Cape Cod listed for $579,000 in the Ashburton neighborhood of Bethesda, said Alana Lasover, branch vice president at Coldwell Banker’s downtown Bethesda office. The house eventually sold in the $600,000s, which was good “but not like it would have done in the heyday,” Lasover said.
Craig and Dara Friedson won a big bidding war in February — beating 11 other offers on another aggressively priced Ashburton house, thanks to Craig’s mother, Leslie Friedson, an agent with Long & Foster Potomac/Cabin John. Leslie represented her son and daughter-in-law in the transaction, guiding them in structuring a contract meant to win the four-bedroom, 31 / 2-bath Cape Cod.
The couple saw the house on a Wednesday, heard there were about seven offers expected and wrote the contract that Sunday, with Friedson presenting it in person on Monday night.
“I told them [her son and daughter-in-law] that ‘you have a choice,’ ” Leslie recalled. “ ‘I can protect you and be a wonderful agent, writing an offer with contingencies for the typical things, or not.’ . . . I asked them: ‘How badly do you want the house?’ ” When they said they loved the house more than anything they’d seen in a year, she said she “wrote an offer that I thought couldn’t be beat.”
Their purchase offer left out the home-inspection contingency. (Leslie Friedson had already gone through the 45-year-old house with an inspector.) It also left out the financing contingency, since the couple had good jobs, savings and credit scores. They also waived the appraisal contingency, based on research that Leslie and her son had done on similar properties nearby.
Although Craig Friedson said the offer’s terms made him “very nervous” since there was no backing out, he said he trusted his mother and the research on comparable properties.
Leslie Friedson notes that you never know what’s going to happen when there are multiple offers. The seller “can play one bidder against the other,” she says.
The couple’s bid escalated to $631,500. The house had been listed at $600,000.
Listing agent Theresa Helfman Taylor,of Coldwell Banker’s downtown Bethesda office, said the house was purposely “action-priced” to move quickly. “It’s better to get it off the market quickly than have it just sit there.”
Taylor, who started in real estate just as the boom ended, added: “I just couldn’t keep up. It was like something out of a movie.” She tracked the offers on a computer spreadsheet, and the sellers went with the highest and least-complicated bid.
Although underpricing is generating multiple bids, agents warn that sellers need to be careful where they start because that could also be where they finish.
“I personally would be reluctant to underprice because you just don’t know in this market” Kendrick said. Buyers today are conservative and looking for deals, he said. “The worst thing that can happen is to get a full price offer and to have the seller say no because they want more money.”
“I always tell people never to put it on the market at a price less than you’d be happy with,” Roberts-Burke said.
Agents for some time have been fighting the perception that there are bargainprices to be had everywhere, they say. Unlike other parts of the country where foreclosures were widespread, the Washington area isn’t chockablock with bank-owned properties.
“There has been a misconception for a long time that there were tons of foreclosures available in D.C.,” Blake said in an e-mail. But, as of early this month, she said, there were only 93 homes listed as foreclosures out of an inventory of 2,477 homes for sale in the local multiple listings service, the Metropolitan Regional Information Systems.
“I have had a hard time convincing out-of-state buyers who want to purchase foreclosures that there are only so many to choose from,” Blake said. “They want to find the ones in Georgetown — of which there are none, of course.”
Jennifer Knoll, an agent with Long & Foster in Chevy Chase, predicts multiples “will slow down in the summer as so many people are out of town.” But she said the trend will continue for well-priced properties in excellent condition, in highly desirable locations along the Red Line. “There are still many buyers who haven’t found what they are looking for,” she said.
Sandra Fleishman is a freelance writer.