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Winning the Bidding War

by sfishome on February 3, 2005

You’ve made 10 offers and lost every one. You refuse to give up like so many others, but you refuse to pay too much too. So how do you get a home? Well, first off, if you want to buy a home without competing against other home buyers, move to Indiana. Don’t try to buy in San Francisco.

You think I’m wrong? Maybe a fixer-upper can be had for below market without competition? Think again, 20 other buyers think the same thing about the same property, and they end up driving the price up. How about that place that’s sat on the market for two months? Well, probably the Seller refuses to take anything under a certain amount, and that amount is $100,000 over what even the craziest buyers are willing to offer.

OK, maybe you believe me, but you still want a home. So how do you do it?

Here are a few strategies for the savvy Buyer:

1. Pre-emptive offers:

In hot Seller’s markets, nearly every home for sale has an “offer deadline”. This is designed to take full advantage of the competitive market and create an all out bidding war. Your strategy should be to get out there, and look at homes that you think you’ll like within the first day or two of them coming on the market. And you make an immediate offer ignoring the offer deadline. Some agents and sellers will refuse your offer (keep in mind only the Seller has the right to refuse an offer, whereas the agent is legally bound to present it unless the Seller has given him written permission not to present offers). Let’s say the agent does present it. How and when will a Seller accept a pre-emptive offer, and not wait another 10 days for the offer deadline and the bidding war they’re confident will produce multiple over-asking price offers? You guessed it, your offer must be over-asking. OH NO you say, why bid over-asking? Isn’t the point of a pre-emptive offer to save me money? Yes and No. You may save money because a bidding war may produce even higher bids, but if the Seller KNOWS he/she is going to get a higher bid, why on earth would they accept your pre-emptive offer. So your offer must be for about the amount the Seller wants or thinks they can get in a bidding war.

2. Building Trust with the Seller and Listing Agent:

Bad, but true story. You submit an offer at the deadline and you’re the highest of any offer by $10,000 and the Seller chooses to accept the offer just below yours. WHAT? But I was the highest offer! Well, if they don’t know you, and they don’t know your agent, and your offer is sloppy, and is full of contingencies, then you very well may get passed over without a second thought. How do you build trust? You visit every Open House they have and introduce yourself each time. Your agent does the same thing. You or your agent call frequently with intelligent questions continuing to show a sincere interest in being the winning bidder. Your offer is presented in person, it’s in a crisp, professional looking format, and includes the provisions the Listing Agent told you were most important to the Seller when you called him/her on one of your intelligent-question phone calls. They know you, they trust you, they know you are going to follow through and complete the purchase come hell or high water.

3. Making a Competitive Offer:

The Asking price is $599,000 or $699,000 or $799,000 or some other $x99 or $x95 or $x65 or whatever. FORGET about the asking price. In only rare instances is the Asking price what the Seller and Listing Agent want and expect – and that’s almost always in New Construction buildings. You must look at recent sales of similar homes and what they sold for to determine what a “reasonable buyer” will pay for the home you want. That price is your minimum bid, and if you really want the property, you MUST go slightly higher. And if you really, really, really want the property, you MUST go more than slightly higher. You really need a Buyer’s Agent to have luck buying something in San Francisco, and this in one of the areas where they earn their keep. A good CMA (comparative market analysis) is essential if you want to know what it will take to even have a chance at being the winning bidder, without going ridiculously over asking.

The above three are just the highlights. 3 ways to avoiding house hunting for months while you continue to throw away rent money and lose tax deductions. Not getting prefessional, competent, help from a top quality Buyer’s Aent will cost you time and money. And get this, Buyer’s Agents work for you for free. Drop me a line if you want to know more about Buyer Agent services, or more tips and strategies for getting your offers accepted.

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