There is a certain amount of anxiety homeowners typically experience once they find and bid on a property they like. Some need to sit on their fingers to avoid texting their realtor for updates. Others spend hours crunching the numbers in case the seller counters or they are outbid.
This year on the North Fork that’s more the norm than the exception.
Sheri Winter Parker, licensed associate real estate broker, The Corcoran Group, said a bid her clients put on a two-bedroom, two-bathroom cottage in Cutchogue this month was one of nine made on the property that had one day of showings and had been on the market for less than a week. It was accepted — and just over 25 percent of the listing price.
Back in the spring, the North Fork real estate took a big hit as the area shut down to fight the COVID-19 pandemic, according to a Q2 market report from Douglas Elliman. Second-quarter sales were the lowest in 8 years and inventory plummeted as would-be sellers held off or de-listed properties. But real estate agents say demand has come roaring back, setting off bidding wars.
“It’s a rapidly increasing market,” said Jerry Cibulski, licensed associate broker, Century 21 Albertson Realty. People are no longer tied to their New York City offices, he said, and as a result are looking to live here full time and purchase a home on the North Fork.
The result? “We are getting more competitive offers,” Cibulski said. “With the extra demand and lower supply, sellers have increased their price.”
Scan the listings in Greenport and you’ll find a 2 bedroom, 1 bath home built in 1955 for $500,000. A 4 bedroom, 3 bath house in South Jamesport, listed in April for $1.05 million, was re-listed in August for $1.2 million—a 14 percent bump. Overall, Zillow’s Home Value Index predicts prices in Greenport, Southold and Jamesport will rise roughly 4 to 5 percent in the next year.
This means that some prospective buyers are being outbid. Part of the reason is that many sales comps, which buyers and their realtors use to gauge a home’s worth, are based in some cases on pre-COVID sales data, which aren’t aligned with current price points, said Cibulski.
“My first-time homebuyers are anxious,” he said, “because as soon as they see a property they are interested in there is activity. If they need to think about it for a day, it’s gone.” Cibulski said he is seeing this most in the $500,000-$750,000 range. Parker says it’s also happening in the $1-$2 million range.
North Fork renters may also be anxious. They’d be forgiven for wondering if they will end up casualties of a piping-hot real estate market in which the homeowners from whom they are renting are incentivized to sell to take advantage of over-ask bids. That remains to be seen, said Ed Reale, brokerage manager, Sotheby’s International Realty.
“Obviously rentals are hard to come by to begin with,” he said. “There is a lot of competition for them in the first place. We don’t know if this is just an aberration or if it is going to continue.”
Meanwhile, if you are thinking of either buying or selling a North Fork home, there are strategies you can use to navigate the current market.
If You’re a Buyer, Consider Removing Your Mortgage Contingency
Going up against a cash buyer can feel like a Sisyphean task. One way to be more competitive is to opt out of a mortgage contingency, so the seller is less concerned about accepting a bid that may fall through. By removing the mortgage contingency, you are removing the opportunity to back out of the purchase agreement without giving up your deposit should you be unable to obtain financing.
“Homebuyers that choose to do this will want to work with their mortgage representative to get them through the underwriting process so the only step left is the bank appraisal,” said Cibulski. “Everything else has been completed.”
For sellers who are looking to move into a new home but need to sell their existing one first, a buyer’s mortgage contingency means they may be starting from zero should financing fall through. By taking the mortgage contingency off the table, you are reassuring the seller that they won’t be left completely out of pocket if the contract is voided.
“Sellers are finding with these multiple offers that there are more assurances that the transactions are going to get to the closing table,” said Cibulski. “When there is no mortgage contingency, there are no unknown answers to come out that threaten the transaction they need to happen in order to complete the one on the home they are purchasing.”
Offer To Speed Up the Process
One way to do this is to have an inspector ready immediately and to offer to do the inspection right away. This is valuable to the seller because the property goes off the market while an inspection is scheduled. Having an inspection done ASAP means the deal can close more quickly, giving the seller peace of mind that they might not have lost out on a better bid.
You may also consider putting more money down if you can. You’ll require less financing from your bank, which will please the seller, and if the home ends up being appraised for more than the purchase price, you’ve got automatic equity in the home.
Know Who You Are Bidding Against
Reale of Sotheby’s International Realty said it’s important to go into a bidding war knowing the other parties involved.
“If I am a buyer, I would ask who else I’m bidding against,” he said. “If you are not dealing directly with the listing broker, you’ll want to know if the listing broker has a customer or a bidder in the process. This can be somewhat of a disadvantage and you need to know that.”
If it turns out that the listing broker has a bidder, they should have someone else run the bidding contest to avoid a conflict of interest. “Having their manager or someone else step in and run the bid for them means they are not aware of what the bids are,” Reale said.
Before You List, Take Care of Outstanding Obligations
The last thing you want when you reach a deal with a potential buyer is to discover you need the required sign-offs right before you are planning to close. This includes everything from permits for a pool or an extension to a property lein.
“If there is anything related to the property that needs to be addressed,” said Christopher R. Nuzzi, Senior Vice President, Regional Director, Advantage Title, “I would work early with your local land use professional, attorney or expediter to try to get those things in order before it goes into contract or before it gets listed.”
If You’re A Seller, Consider a Sealed Bid
Ask any seller if they’d like their listing to result in a bidding war, and many would say yes. “From the seller’s standpoint it sounds great,” said Reale. “People are competing to pay more for your house.”
But that could backfire if the process stretches on too long.
“If a bidding war goes on too long people either lose interest or feel they are being manipulated, or they go too far and don’t follow through on signing the contract,” said Reale. “So there is a real risk in running a bidding war if you are a seller.”
A better option may be taking sealed bids and choosing the best from that group.
“If there are multiple bids that are close, the best bet is to have a sealed bid where you declare a time and place and ask for best and highest offer and everyone submits once,” Reale said. “Then they don’t feel they are being played. That’s to me much more fair and transparent in that everyone gets their bid and the same opportunity without being manipulated too much.”