This was an actual question posed to me by a local real estate broker this morning. Since I've heard it a lot lately, I thought I'd go ahead and address it quickly for everyone. Here's the deal in a nutshell...Actually, the way I see the current situation can be broken down into a couple of simple reasons: 1. For the better part of the last few years, banks simply were not letting the REOs hit the streets in the same quantities that they had been. Thus, the old "supply and demand factor" has come into play over the last several months. Investors have seen the inventories shrink a bit and fearing being left out in the cold, without the portfolios they had hoped for, they are scrambling to scoop them up. I might add that many of them are actually OVERPAYING for properties and are doing more harm than good with their feverish rush to hit their "buy" numbers. Now, you may find that a strange sentiment for a large REO broker to express, however, I actually AM thinking about the well-being of my clients (REO sellers and banks). How? Well, I am seeing so many of these "would be investors" scoop up homes at falsely inflated prices, caused by "bidding wars", then rehabbing them and trying to "flip" them. Consequently, these guys are often getting in way over their proverbial heads and then my clients (the banks who sold AND in some cases then financed the homes to the new buyers) are having to re-foreclose on the properties, take on additional foreclosure costs and ultimately take severe hits to their bottom lines. Reason #2 for all the multiple offers: Perception: That's right. Good old public perception of what the economy is doing and how things generally "feel" out there. Happens every year. Sun comes out, leaves turn green, air smells fresh and BAM we are in the midst of a buying frenzy. Gotta love it as an REO broker here. I'm in the midst of a personal best April in history and I can GUARANTEE you that if it were rainy and dreary, I would not be smiling form ear to ear as I am right now. 🙂 Just one of those factors that has ZERO relevance to smart or not so smart buying decisions. Nevertheless, it does influence people.
What people really need to understand about real estate is that there isn't necessarily any rhyme or reason as to the way the market behaves-especially these days. There are so many different factors that influence swings one way or another and it's so easy to get caught up in them. My advice to REO buyers is to always keep your peripheral vision wide. Look around you, beside you, in front of you and behind you. Take a good hard gander at EXACTLY what's happening in your area. Are homes selling? Are the prices lower today than the last 90 days? Have the prices risen? Do the local businesses have lines outside of them or are they eerily quiet like an old ghost town saloon with a row of empty bar stools? In other words, don't pay attention to hype, media and especially politics. Just focus a wide vision on your narrow market. Pay attention to the factors that matter and make an informed decision on any purchase. Each deal stands alone, each town stands alone and each BUYER stands alone. If you can be disciplined, you can ALWAYS win in the real estate game.
So you see, the question; "What's the deal with all the multiple offers?" is really silly and irrelevant. The question ought to be; "Is it smart for ME to buy THIS property right now, based on the IMPORTANT and RELEVANT factors ". NEVER pay attention to "frenzies" that represent the habits of others who may not be so diligent in considering their moves. Walk tall and THINK for yourself.