Bidding wars: How to winReal Estate Thursday, July 23rd, 2015
In the very hottest real estate markets, and we have a few here in California, the balance of supply and demand is tilting very much to the demand side. What that means is that there isn’t a lot of inventory for buyers to choose from and when something grand does come on the market, the hungry hoards are ready to, well … pounce. And that means that sellers are in the driver’s seat and bids often come in over the asking price.
If you’re a seller in this scenario, even though you might be tempted, it’s not wise to overprice your house. Let your realtor guide you to a price that encourages people to bid, perhaps over the asking, and bid fast. Smart realtors with a well-priced desirable property will often set a date for bids. This encourages brokers to bring in their possibles, and act decisively. For the seller, this practically guarantees a good and quick sale.
But what is the best strategy for the bidding buyer? To start with, do your homework. Know what the comparable properties on the block and in the neighborhood have actually been selling for; your broker can give you a list of recently closed sales. This will also give you an idea of what the property in question will appraise for. If it is bid up in a steep competitive war, it still might not appraise at the closing price. That means that if that buyer is you, you’ll probably have to come up with some additional cash. Keep this in mind when you go out shopping.
Next, get all your paperwork in order and be the best looking buyer you can be. That certainly will include a pre-approval letter from a lender, and a statement with verification of your down payment and closing costs. Buyers wishing to distinguish themselves have been known to add personal letters to their bids, outlining what might make them exceptional to the seller. Personality and sincerity do count, and often tip the scales when bids are close. References might help as well, especially in multiple unit buildings like cooperatives and condominiums where Building Boards may appreciate those credentials.
It’s wise to figure out your ceiling. What’s the limit of your budget? What are you willing to pay extra for? What is the potential appreciation? Will you miss that extra $30,000?
Though price is the ultimate factor in seller choice, it’s not the only one sellers take into account. You can pretty much assume that the fewer contingencies that accompany your offer, the more favorably it will be viewed. All cash is compelling, and will always beat an offer conditional on financing. Higher down payments, though not as strong as all cash, are also favored. Offers contingent on inspections, giving purchasers the right to back out if an issue surfaces, may have less appeal than as-is offers, especially on older properties. Fast closings and/or move-ins accommodating seller needs also play a part in bringing bids to the top of the pile.
Having a good persuasive broker is also a boon. The more informed, knowledgeable, experienced and clever your broker is in arguing your case, the better chance you have. It’s all a game, yes, but like any game, there are rules, strategies and advantages. May the most savvy buyer win.
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