Real Estate Transactions: A Game of Poker in a Market of Multiple Offers and High Prices

You might not have realized this but a Real Estate Transaction starts out like a poker game.  These days, where multiple offers are the norm, and it is not unusual to see properties going way over the asking price, you have to be able to play your best hand.  Seeing houses selling for 10, 20, or even 30% above the asking price is not an unusual thing at all.  This is particularly true in what we affectionately refer to as 716 land.  We had a meeting with several loan officers this morning in our offices.  We like to keep fully abreast and informed on what is happening in the financial world so we can advise our clients accordingly. One agent very casually mentioned they sold a house yesterday that was on the market at $275,000.00 and it went $75,000.00 over the asking price.  Upon hearing this, not one agent flinched, and I am sure they all just thought to themselves, “well, it’s (still) business as usual.”

But let’s get back to the poker analogy.  When there are multiple offers, much like in a poker game, you will not get to see the other player’s hands until it’s “put up or shut up time.” In poker, you are sitting at the table and you’ll see what the losing hands are. You will see what the winning hand is too. Here is where the game is a little different.  When offers are presented to the seller and or the sellers agent, you as the buyer will only know the number of players (offers) that were actually presented. If you do not have the winning offer, the principal or their agent will simply say thank you (and you are done.)  They will not speak to you or your agent about any of the other offers. They will not tell you what was accepted. either, and generally you will only learn what the magic number was when the property closes. On occasion, your curiosity may get partially satisfied. and you will be told, “they went with a higher price and/or better terms.”  They may also tell you, “they took a cash offer over yours.”  But that’s about all you are going to get out of them. Some buyers get very bent out of shape when they try to inquire. They might even vehemently declare, “Well that stinks.” Yeah, it does.  You need to get over that and chalk it up to one of the harsher realities of Real Estate.

So, as long as we are talking about cash offers, generally speaking, cash wins out over most offers. Pretty much the only thing that seems to beat cash is “higher cash.” This is understandable because there is no financing contingency for the seller to be concerned about, and this makes for a cleaner transaction all around.  The reason I mention this is to address the elephant in the room when it comes to offers on Real Estate these days. Our banker friends told us that CASH transactions makeup 41% of all of the sales right now.  So loan officers are competing against all of the other loan officers, and the potential of their market consists of only 59% of the total. That’s pretty tough for them. But if you are a consumer, try to compete with a buyer who has cash. It is almost like they are holding 5 aces in their hand.  So if you are looking to purchase in 2023, and you are looking to finance your purchase, you should expect that you might not get the first, or the second, or even the third house you try to buy.  Hang in there with your agent. Don’t get discouraged.  If you are thinking of waiting a year, good luck with that.  I don’t know anyone who is either in the business or a civilian, who is predicting prices to come down together with interest rates.  It will cost you more next year. I will take that bet.  So especially for now, understand how the market is and talk to your agent about using the best strategies you can so you can have a winning hand.