RALEIGH – Some homebuyers in the Triangle are so eager to purchase new residences they’re writing offers to purchase property at more than $100,000 above the listing price, according to new data analyzed by WRAL TechWire.
Since January 1, there have been 125 closed residential real estate transactions across the area for the Triangle Multiple Listing Service (TMLS) where the final sales price was $100,000 or more above the original listed price.
That’s nearly 2% of recently closed transactions.
And transactions are coming at all price points:
- A listing priced at $1,945,000 sold for $3,795,000
- A home priced initially at $230,000 sold for $330,000
Housing demand is so high, in fact, that most homes sell at higher-than-listed prices.
Current market data
According to the TMLS data analyzed by WRAL TechWire, of the 6,374 total closed transactions between January 1, 2022, and March 8, 2022, 52.3% closed above the list price. Across the entire data set, the average difference between the sales price and the list price of the property at the time of contract was $10,767.
Overall, homes are selling for 102.7% of their list price.
“I’m getting people from urban areas who come in and are very savvy in all other aspects but believe they should be getting a bargain because it is Durham, North Carolina, or Raleigh, North Carolina, and not Washington, D.C., or Chicago,” said Teisha Wymore, a North Carolina licensed real estate agent and REALTOR® who works with the Adam Dickinson Realty Group at Nest Realty. “But that is just not the case in today’s market.”
A recent Redfin analysis of website traffic found that out-of-town buyers are often searching for homes in Raleigh and Durham that are higher priced than the homes searched by those who already live in the region, and tend to search areas within city limits more often.
A bidding war
The bidding war news comes as homes across the region may be becoming less affordable, and at a time when many are concerned about rising housing costs.
“The availability of decent housing that is affordable to households all along the income spectrum is essential to individual and regional well being,” John Quinterno, a professor at Duke University, told WRAL TechWire in an interview this week. That’s because, regardless of whether they rent or own, said Quinterno, most households find that their housing costs are their largest monthly expense.
“The greater the proportion of income they devote to housing, the less they have to spend on everything else,” said Quinterno. “When housing costs generally increase faster than income, households may find themselves squeezed and paying more for housing that has not increased in quality.”
And what happens when a real estate market is experiencing extremely low inventory of homes coming available on the open market while demand for housing is increasing?
Despite the possibility of rising mortgage interest rates, home prices continue to climb across the Triangle, and people are lined up to try to secure a contract in an increasingly competitive real estate market where investors are scooping up homes.
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What it takes
Some Triangle homebuyers are prepared to do whatever it takes to — finally — place a home under contract.
Even if that means waiving an inspection, signing an appraisal waiver asserting that they’ll make up any difference between the appraised value of the home and the contract price, or paying tens of thousands of dollars as the due diligence fee.
Sometimes, even that isn’t enough, and what it takes is making an offer well above the list price of the home or matching another one.
Among the data set analyzed by WRAL TechWire, the list price of the median home was $675,000. A 4 bedroom, 3.5 bath detached Cary residence, sold for $876,000, or $201,000 above the list price, a price premium of nearly 30%.
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A listing agent’s perspective
So, what’s happening in today’s market?
Felix Eleazer, a licensed real estate agent and REALTOR® with Home Coach Realty, recently represented seller clients for a property in South Durham’s 27713 zip code.
In working with the clients to establish a listing and pricing strategy, Eleazer noted many owners had taken great care of the home and were prepared to take the time and effort to position the property in the very best light ahead of listing it for sale.
For most residential property that will become a primary residence, real estate professionals prepare a comparative market analysis (CMA). Agents such as Eleazer are held to standards through their local and national REALTOR® association, as well as the legal standards set forth by the North Carolina General Statutes.
They settled on a list price of $515,000.
“I expressed to them that we would list the property at a price that is justifiable based on the laws of the North Carolina Real Estate Commission,” said Eleazer. “Based on the comparable properties, that more than well-supported the list price.”
That price was established based on a comparative market analysis Eleazer conducted and set forth a reasonable expectation for the property’s price when listed on the open market.
“But I told them that the market was going to dictate everything,” said Eleazer. “From a legal standpoint, we needed to make sure we were in the clear.”
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A buyer agent’s perspective
The day Eleazer’s listing came available on the market, he received multiple offers to contract and purchase. At least two were for more than $100,000 over the listed price of the property, Eleazer told WRAL TechWire.
One of those offers came through Wymore. Her client had previously been in a bidding war on another property, and had lost the deal, Wymore told WRAL TechWire.
“They had fatigue, it was very emotional, it was very difficult, and so they were willing and ready to do what it took to get their house, at that point,” said Wymore.
“I primarily am a buyer’s agent, so I work very hard knowing the market. Because it is moving so quickly, you really need to work with an agent who really knows the market, knows the neighborhoods, knows the streets and knows the homes.”
Wymore helped her client move quickly to make a compelling offer. She came to understand that her clients were again in a multiple offer scenario. “It really did take the relationship between myself and the listing agent, and our communication, in order to make it work,” said Wymore.
The winning contract? $625,00, or $110,000 above the listed price for the home.
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Not just about price
Winning a deal isn’t always about price, though, noted Eleazer. He described to WRAL TechWire a 2021 deal where he was representing the buyer, noting that the listing agent relayed to him that the sellers of the property had researched potential buyers on internet databases and social media sites.
Ultimately, they’d selected the offer he’d prepared for his clients. But it wasn’t just about the contract price.
The agent told Eleazer that the offer was close to the winning one, and, according to Eleazer, added that “there are other offers on the table, but if you’re willing to give us x,y,z, we’ll go with you.”
[Editor’s Note: Eleazer, as with any other licensed agent, is not legally allowed to disclose the specifics of this, or any other deal.]
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So, what does matter?
If not only the price, what other factors are there that a seller may consider?
“Due diligence is just as valuable as the contract price,” said Eleazer. “In this day and age, if someone is offering $5,000 due diligence and we’re at the same sales price, if someone else offers me $20,000, I know for a fact that I will get that check when we sign the contract.”
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Putting yourself in the seller’s shoes can help potential buyers better understand how to structure their offers, noted Wymore. “For a lot of people, even if they’ve bought a house before, they’re still asking questions about whether we’d need to put in a full-price offer,” she said.
Not only might a buyer need a full-priced offer, they may need to go over asking to win the deal. The analysis of TMLS data revealed that the transaction that involved Wymore and Eleazer was just one example among many in today’s real estate market where homes sold for sale prices that surpassed the list price of the property.
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And North Carolina is a “caveat emptor” state, meaning that buyers of real estate alone are responsible for checking and inspecting the quality and suitability of the property. So it’s critical that potential buyers understand how a North Carolina real estate transaction happens, noted Wymore, and that’s also why it’s so important to work with an agent who is representing you as the buyer.
“It’s unfathomable to not have an agent, or not have one who knows what they’re doing,” said Wymore. It’s an agent who can help buyers navigate the complexity of the transaction, the emotional ups and downs of competing in an ultra-competitive market, and when it might be a good time to lock in mortgage rates.
Eleazer told WRAL TechWire that not all buyers or sellers understand the steps of the transaction.
“We’re seeing that buyers are waiving inspections,” said Eleazer. “One of the most important things for buyers to understand is the appraisal gap,” he added, noting that some buyers are attaching an addendum to contracts that they understand that they will be responsible for making up any difference between the contract price and the appraised price of the property in cash at the closing table.
These are also factors that a seller might consider in selecting the offer, as a seller who has chosen to list property has an interest in the transaction occurring smoothly and as agreed to in the legal contract executed mutually by both parties.
Still, though, noted Eleazer, for buyers that want to compete, “due diligence is the wild card, the ace in the hole, that can seal the deal.”
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