Is a New Real Estate Buying Frenzy Creating a Seller’s Market?
The Fed just released a report indicating the real estate market is experiencing widespread improvement. For those who are actively buying properties right now, this should come as no surprise. With numerous investors and funds actively pursuing real estate investments, it’s not uncommon to see properties going into multiple offer situations – many times resulting in properties selling over list price.
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While this feeding frenzy of buyers can be frustrating to compete with, it does create an interesting dynamic on the sales side. In places like Atlanta where the demand for property is very high and the inventory is shrinking every month, it’s becoming more and more of a seller’s market (at least in certain price points).
Case in point: We had a property on the market last week that went under contract to a retail buyer almost immediately. This was a modest rehab that had been priced towards the top of the neighborhood. Within only a few days of being listed, we received an offer well above our asking price. Having priced the property fairly high, the over-asking-price offer came as a complete surprise. Interestingly, the agent explained to us that the buyer had been outbid on 3 previous offers and was ready to get something under contract.
It seems as though the competitive climate that has been building in the residential market is having quite an impact on retail buyers as well, not just investors. As such, many agents are setting an expectation to their buyers that offers need to be strong in order to have a chance of getting accepted. And with investors bidding properties above list in many cases, this is becoming more of a reality for buyers.
The bottom line is that for those investors that are able to obtain desirable properties at a good price, the potential for flipping is getting better and better. Just last month I bid on a property and was beat out by another investor who paid $10,000 over list price. Not a week later the exact same property was back on the market for $10,000 higher than what he paid! Talk about taking advantage of a hot buying market!
Every week I talk with other investors discouraged by the lack of inventory and increasing competition. Yes, it does make it harder to acquire inventory. However, for those investors that are spending the time and energy to find and contract on the good deals, it does make the opportunity for a quick sale (and profit) that much easier.