Chicago North Side Bidding Wars Push Prices Up

Bidding wars for scarce inventory are reaching a fever pitch in Chicago’s most in-demand neighborhoods, sometimes pushing sales up six figures over asking prices.

The market in competitive North Side neighborhoods like Lincoln Park, Lakeview, Wicker Park and Bucktown has become uncoupled from normal pricing strategies, agents said, with value determined by the depth of buyers’ pockets and how badly they want the property.

“The bidding wars are absolutely insane,” said Danielle Dowell, leader of the DoWell Group at Berkshire Hathaway HomeServices Chicago.

“It’s the best seller’s market that I’ve seen since I’ve been in real estate, especially for those neighborhoods,” she added.

In many cases, brokers said comparing similar properties for pricing is almost unnecessary.

“Comps are just, in some areas right now, within reason, irrelevant,” Dowell said. “We’re using them, but we’re pushing over comps because of what we’re seeing in the marketplace.”

Sales over the asking price have become the default in Lincoln Park and the nearby neighborhoods. According to Redfin sales data pulled from a region that includes Lincoln Park, Lakeview, Wicker Park and Bucktown, about 70 percent of homes that were listed this year and sold in the last month sold over their asking price. The data includes only homes that sold for more than $500,000 and were publicly listed before selling, with sale dates ranging from March 9 to April 6.

For those listed this year that sold over the asking price, the premium was just over $60,000 on average, or 7.8 percent. Including homes that sold at or below the asking price, the overall average was just under $25,000 over the asking price, or 4.6 percent, Redfin’s data shows.

Lincoln Park and the surrounding neighborhoods have been hot for years now, after the pandemic pushed buyers further away from downtown into neighborhoods like Lincoln Park and the suburbs. But multiple real estate agents who work in the area said this spring has been the busiest market of their careers.

The area still has a severe lack of inventory, agents said, as owners are sitting on mortgage rates below 3 percent and people who would normally upsize to a single-family home in the suburbs are staying put because the inventory there is similarly slim.

At the same time, buyers who left Chicago for other states during the pandemic are starting to return. Add in pent-up demand from buyers who couldn’t land a home in the last few years, and you have a crop of desperate buyers fighting for limited listings.

Demand is extending beyond the traditionally hot neighborhoods to areas like Logan Square and Avondale, which didn’t undergo the same price jumps as Lincoln Park in years past.

Kimber Galvin, an agent with KD Homes at BHHS Chicago, recently represented the seller on a 4,600-square-foot, five-bedroom home in Logan Square. It sold for nearly $1.5 million — about $135,000 above its listing price. The house at 2537 North Bernard Street last sold in 2006 for $820,000, according to property records.

“A few years ago, where a single-family home in Lincoln Park would be $1.5 [million] or $1.6 million, that buyer is priced out now and willing to look in neighborhoods where they probably wouldn’t have considered a few years ago,” Galvin said.

Winning bidding wars

In order to win bidding wars, agents and their buyers are getting creative. Agents said their buyers are more often waiving contingencies and inspections, accepting appraisal gaps and paying cash to beat the competition.

Galvin said she advises clients to throw in extra financial commitments when it makes sense to sweeten deals for sellers. Though it’s different for each property, she said that sometimes includes adding non-refundable earnest money, dropping contingencies and paying in cash when possible.

“We’re definitely pulling new tricks out of our hats that we haven’t had to in the past, to secure homes,” Galvin said. “Buyers do have to be flexible. They have to understand, for homes that are priced competitively and marketed correctly, they’re most likely going to be in a multiple offer situation.”

Because the market is so tight, agents said they’re also seeing sellers more often ask for rent-back agreements, which allow the sellers to cash out of the home while paying the buyer rent to stay there while searching for a home themselves.

Brokers are baking the premium pricing into buyers’ expectations, they said. Dowell said she will sometimes lower her clients’ search parameters to ensure they retain the flexibility to bid 8 percent to 10 percent above the list price.

Other agents use the hectic demand to engineer bidding wars. Matt Laricy, a top Chicago agent who leads the Laricy Team at Americorp, champions an “ask less to get more” strategy. He said he advises sellers to intentionally underprice a home to bring dozens of emotional buyers through the door, letting the frenzy push the final closing price well above a traditional pricing strategy.

“This is when the ‘comps don’t matter’ approach happens,” Laricy said. “People get kind of caught up in it, they get emotionally attached to a property, and they make a decision that’s maybe not as logical as they should.”

That emotional response is part of what’s fueling the huge price jumps for some properties, agents said. Buyers who have failed to close on a property in the last few cycles are more aggressive and willing to pay huge premiums to avoid looking for another year.

For buyers who are apprehensive about overpaying, some agents said they warn their clients it may not be the right time for them to buy.

“If you’re not willing to overpay for it, you’re just not going to buy,” Laricy said. “Everybody’s overpaying. And if you’re not willing to do it, then just don’t buy.”