First-Time Homebuyers: Avoid a Bidding War

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First time home buyers need to be wary of stepping into a possible bidding war.The housing outlook for 2011 remains murky for countless first-time homebuyers looking to make their move, but there are signs of a recovery amid the doom and gloom. Ever thought you'd hear the words "bidding war" in a housing context again? According to AnnaMaria Andriotis at SmartMoney, sellers in some major markets are once again gaining traction, and it's not just on the high end of the real estate spectrum.

Rather than risk losing the Capitol Hill two-bedroom, first-time homebuyer Wade Kirshy made a generous offer, $7,000 above the asking price. But less than 24 hours later, the 28-year-old Washington, D.C., attorney received surprising news: His offer was only one of 11 - and the sellers chose another bid.

In another sign of a housing market recovery, bidding wars are back. Not everywhere, but in some upper-middle class suburbs around San Francisco and New York, and other areas where prices have hit bottom, first-time buyers eager to take advantage of relatively low prices and low mortgage rates are actually driving up prices, says Tara-Nicholle Nelson, an analyst at Trulia.com. Buyers are competing at the low end of the market, too, for homes under $200,000 and foreclosures, as buyers with smaller budgets take a stab at ownership. And for sellers, that might mean their long-awaited day has finally come.
In fact, in many areas, homes are selling at pre-crash prices. During the bust, in Chicago's Loop and Berkeley, Calif., houses were selling for as little as 4% below the asking price - now they're back to 5% above, according to ZipRealty. Similarly, in distressed cities like North Las Vegas, Fort Lauderdale, Oakland, Calif., and Chicago's Greater Grand Crossing, homes are selling at up to 9% above their asking price, as buyers clamor over foreclosures and short sales, says a ZipRealty spokesman. Of course, even after a bidding war, many of these houses are still bargains - 9% over an asking price that's 50% off its peak value is still a deal.

Read the full story at SmartMoney.

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