The competition between buyers for homes is on the rise, with half the properties for sale in some of the main cities ending in a multi-offer situation.
Many first-home buyers have been forced to put their best offer forward in the last month knowing that other buyers are also tabling offers at the same time, creating a multi-offer situation.
Tommy’s salesperson Jason Lange said the number of multi-offers was up 15% in May this year compared to the same time last year, with between 60% and 65% of Tommy’s listings receiving multiple offers.
Lange said first-home buyers in Wellington have been in multi-offer situations for about four to six weeks now because they think the market is in recovery and that prices will not get any cheaper.
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He recently sold an apartment on Feltex Lane, in Te Aro, which received four offers within eight days, and another apartment in Soho Apartments on Taranaki Street, also in Te Aro, which drew five offers within 12 days on the market. The sales prices cannot be disclosed until settlement.
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In the last few weeks, Lange has also noticed more multi-offers creeping in for family homes priced between $1m and $1.5m.
He said it seemed to be getting easier to borrow money again and last week’s announcement that it might be the last Official Cash Rate rise has given people some certainty around interest rates.
In a multi-offer, the highest unconditional offer is usually the most favourable to sellers, Lange said, so buyers needed to try and get all their conditions met before making their only offer.
“It’s sort of flipping back now where you have to get yourself into an unconditional position or a cash position. So that means undertaking your due diligence prior to the deadline or the tender closing, getting your financing or your pre-approval sorted, working through your builder’s report, reviewing your LIM report, getting your lawyer to check out the title so that you are in a strong position when it comes to the offers stage or the deadline stage so that your offer looks as attractive as possible to the vendor,” Lange said.
Lodge Real Estate managing director Jeremy O’Rourke said the number of multi-offers in Hamilton was increasing, while the number of properties for sale in the city was dropping. There are about 800 properties on the market down from about 950 a few months ago.
“We are just seeing more and more multiple offers on properties and basically more offers being made on properties. There’s been a definite lift in the number of offers we’ve seen coming through.
An apartment on Feltex Lane, Te Aro, received four offers in eight days. Photo / Supplied
A near-new three-bedroom, two-bathroom home on Voight Avenue in Chartwell went into a multi-offer situation after passing in at auction. Photo / Supplied
“All of a sudden there seems to be a whole lot more confidence among buyers and properties have been just snapped up.”
O’Rourke said buyers often made the mistake of thinking a multi-offer situation was a negotiation.
“You are unlikely to get another shot.”
His advice to buyers is to do their homework on the market, get as many conditions met as possible before making the offer, and to put their best offer forward.
Harcourts Hamilton's Campbell Scott said even if a property didn’t sell at auction, it was becoming common for it to receive multiple offers a few days later.
A three-bedroom, two-bathroom home on Voight Avenue in Chartwell passed in at a Harcourts auction, but is now under offer after three buyers went into a multi-offer situation. A four-bedroom, two-bathroom home on Saxbys Road in Glenview also received four offers after seven days on the market.
“We are probably doing eight to 10 multi-offers a week at the moment ... a month or two ago it probably would have been an exception to see one whereas now it’s much more common.”
Scott said buyers have more certainty around what is happening in the market in terms of interest rate rises and house price reductions.
“They know the landscape a bit better now whereas it was all over the show a little while ago. So, they’re more comfortable participating now that the dust has settled a bit.”
Bayleys Wellington regional general manager Grant Henderson said there has been a definite increase in the number of offers being made on properties, but some of them were lowball ones.
An apartment in Soho Apartments on Taranaki Street in Te Aro, Wellington, drew five offers within 12 days on the market. Photo / Supplied
His agency recently received four offers for a property, which at the peak of the market would have been worth $1.5m. The property sold for $1.2m, but the lowest offer tabled was a “cheeky” $900,000.
A property on Arcus Road in Te Horo, Kapiti Coast, received a whopping nine offers at deadline and sold last week for $1.7m, OneRoof records show.
Henderson said people think the market had “bottomed out”.
“Those that are in the market looking to buy today, that don’t have to sell, that have cash – the opportunity is today. I think all the signals are quite clear – we are going to see interest rates come off in the next 18 months, we are going to see prices start to rise once it happens, we’ve got positive immigration, and you can’t build the houses for what we are selling them for so it all spells time to be buying now.”
But the increase in multi-offers could also be due agents moving away from auctions because they tended to exclude first-home buyers, Loan Market Tauranga mortgage adviser Dave Williams said.
“And they are their bread and butter at the moment – first-home buyers. So, there’s a lot of price by negotiation, there’s a lot priced.”
While Williams agreed it was a good idea to put your best foot forward when going up against other offers, he added, it is also important to leave a little bit of “wriggle room”.
In his experience, even if the offer is accepted, the vendor might come back with a higher price and he suggests holding back even $5000 to negotiate with.
“They come back and say, 'hey you are in the driver’s seat, we are going to negotiate with you', but you just need to sweeten the deal a little bit, and they can really only do that with one of the offers.”
However, meeting the conditions before making an offer can be both a timely and expensive task and with costly registered valuations required for buyers with lower deposits, it is something a lot of first-home buyers cannot afford to do.
“If you’ve got a 20% deposit and you are a first-home buyer, I would suggest get all your conditions met and go in there cash unconditional as much as you can. But if you are subject to a registered valuation it’s a big dice to roll and sometimes it pays off and sometimes it doesn’t. With my clients it hasn’t paid off so I’m not quite sure where that leaves them.”
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