Real estate is an exciting and interesting market, in part because of how hot and competitive it can get. When multiple buyers compete for a piece of Encinitas real estate for sale, a bidding war may ensue. A bidding war is a situation in which multiple competing buyers keep offering progressively higher prices for a home. Bidding wars can make a home sell far above its original list price and could easily price you out of the running. Here are some indications that a bidding war may be brewing.
A bidding war is often part of a pattern
Bidding wars are generally a sign of a particularly heated real estate market, in which properties are selling over their list price and not staying on the market for long. Perhaps once in a while, a bidding war for a particularly special piece of property could be a one-off event, but generally, a bidding war will happen in a competitive market.
According to a local market report for the San Diego-Carlsbad metropolitan area from 2013-2022, there has been a general upward trend in prices that accelerated after the beginning of 2020. A bidding war is more likely in a market with increasing home prices, especially if those increases are sharp. In an environment of rising prices and low inventory, a bidding war is more likely to ensue. If you look at factors such as the average amount of time that homes spend on the market or the median or average price growth over time, in addition to other real estate data, you will have insight into whether or not you are dealing with a time and place in which a bidding war is likely to develop. So, for instance, if you were looking at Carlsbad, Del Mar, or Encinitas real estate for sale in the early 2020s, you would want to be prepared for a potential bidding war.
Look for bidding wars in upscale and luxury properties
Bidding wars are generally more likely to occur in segments of the market where there is more capital, such as in luxury real estate. This is especially true in small, exclusive areas where there is a lot of capital chasing a little inventory. Because purchasers of luxury real estate have more money to spend than those who are buying on a budget, they have more leeway to simply bid higher on a home that they really like instead of just walking away. A young couple buying their first home on a tight budget would not have this option, and so bidding wars are less likely — although still possible — in starter properties.
Although there can be bidding wars in lower-end property, you are more likely to see a bidding war in a nice luxurious Cardiff beach house than in a fixer-upper. Given their proximity to the waterfront and location within a small but sought-after town that is packed with sunny beaches, luxury Cardiff beach houses are more likely than ordinary homes to be subject to bidding wars.
Look for offers and counteroffers
A bidding war is different from an ordinary instance of multiple offers made for the same home. It is not uncommon for a home to receive multiple offers. Other factors being equal, a seller will likely choose the highest offer. A bidding war ensues when competing offers continue to be placed as potential buyers are outbid.
When someone makes an offer on a home, that offer may come with a maximum bid and an escalator clause. The escalator clause allows for the bid to be raised up to the maximum as competing bids are made.
Notice when newly listed properties already have offers
It is normal for homes to spend a few weeks, if not a few months, on the market before selling. In a heated real estate market, however, a home may receive an offer as soon as it goes on the market. When the property you are looking at has one or more offers but is newly or recently listed, this is a good early indication of a bidding war.
Notice when offers on a home go above the asking price
Many homes sell for their asking price. Others sell slightly above, or even slightly below, the original list price. In a bidding war, however, all bets are off. Home prices may be bid well above asking prices, as buyers refuse to walk away and instead continue competing for the opportunity to purchase a property. When you see bids on a home start to go significantly above the asking price, this is a likely sign of a bidding war. The more offers you see on a property and the higher those offers go, the higher the chances that a bidding war is ensuing.
A realtor can help you to recognize a bidding war and act accordingly
You do not have to learn to recognize and navigate a bidding war all on your own. Experienced realtors are familiar with all kinds of different situations in the real estate market. A real estate agent can help you to recognize a bidding war and advise you on how to proceed. Perhaps you fall in love with a particular property, in which case you may be willing to wait out a bidding war. In other cases, it may be advantageous for you to walk away in favor of finding another property. A real estate agent can give you a realistic idea of the current market and help you to set goals. Ultimately, it is up to you whether you want to stay the course through a potential bidding war or move on, but a local realtor can give you the insight that you need to make the best decision possible.
Contact Lynda Wennerstrom for more market insights
When navigating a competitive real estate market, look for a local agent who has a thorough understanding of the area. Lynda Wennerstrom specializes in the Encinitas, Carlsbad, and Del Mar areas. She has access to luxurious Encinitas real estate for sale, including Cardiff beach houses and other high-end waterfront properties. Reach out to Lynda Wennerstrom and Associates when you are interested in checking out some of the beautiful upscale properties along the coast of San Diego County.
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