Some areas right now are experiencing bidding wars on some properties. When inventory is low and demand exceed available inventory – it creates multiple offers. We haven’t seen this since 2008 – but they are back.
How do you get the house you want while not getting caught up in the bidding war and paying too much? I have seen this happen numerous times in my career, it is a sign of an improving market.
Negotiation is one of my favorite things. There are so many ways to get to a win/win it can be a lot of fun to figure out how to achieve it for my clients.
Here are my best tips for navigating these waters:
For the seller:
- Strategize with your agent to find the “sweet spot” in pricing. Overly zealous pricing will result in disappointment, frustration and many times netting a lower amount than you could have.
- Up front set a deadline for offers. If there aren’t any at the end of the deadline, then you know you missed the mark. The deadline comments can also be deleted post deadline – so no harm no foul.
- Analyze the choices to determine the most likely “best fit” that will actually close – not necessarily the highest price.
- Flex a little. Don’t get hung up on a non-issue and make it an issue.
For the Buyer:
- Know where you’re shopping. The surest way to lose the war is to not know if you’re in one.
- Get your ducks in a row. You need a good agent, a good lender, to have made loan application already so you know where you stand with ratios, rates, and credit…and have a good idea of what you want in your purchase. You may not get the first home you think you want, but if you have a clear idea of your purchasing power and what is most important to you in the home you want, you will be ready for the hunt.
- Be observant – how many cards are in the home? Is there an open house? Check traffic at the open…if there’s a pile of cards with just a few days on market – you know it’s a hot property. If the open house has a steady stream of lookers…again hot property.
- Have your agent find out the answer to the following questions:
Is there a deadline to submit offers?
Is there a specific format the seller wants to see?
Are there any specific factors important to this seller? Do they want a quick closing or a delayed one? Is there something specific they are hoping for other than price? Do they know where they are going yet? Will they have a short term rent back need? How long have they been in the home? (This last question may aid when it comes to negotiating on an emotional level)
- Make sure your offer is clean and concise and packaged well. Straightforward, not missing anything – complete, with proof of funds or pre-approval. Make it easy to accept without requiring a lot of changes or requests for information or explanation. Tighten your time frames. For example: Inspection condition with a 5 day deadline instead of 10 days. Tighten everything as much as possible. You can ask for an extension on an item if needed later but keeping things tight lets the seller know you mean business and you aren’t wasting their time and dragging things out.
- If possible, pay cash. If cash is not an option, then make your earnest money a serious amount. Make your offer stand out with a good strong number. A bidding war is not the time to low-ball. Also consider ending your number with a 1 or 6 at the end of it. Don’t ask me why – but they tend to get noticed more. Decide your strategy – are you going to put your best offer forward or hold back a little in case they ask for highest and best? Are you going to include an escalation clause stating you will pay “x” amount over their highest offer not to exceed “x”? Negotiation is a well-orchestrated dance…each with it’s own tempo.
- You or your agent should craft a “love letter” to the seller. This letter should thank them for the opportunity to place an offer on their home and state what you love about it. The letter should have a brief over-view of who you are…what you do for a living, etc. Then it should have a statement about how you envision your future in the property. For example: “We hope you choose our offer – we would love to raise our kids here.” This humanizes you. Real estate is more than numbers – it’s about people. When you are able to pull people out of the numbers for a moment and remind them real people are involved, it can often work in your favor.
- Do NOT waive your right to an inspection. In an effort to be competitive some people try to have no contingencies of any kind. While keeping them to a minimum is recommended, please don’t waive your right to an inspection. Don’t try to use it as a tool to renegotiate though – not unless you find some serious issue you didn’t know about before. The inspection is for your knowledge – it’s to tell you if there are any serious issues you should know about and what items may be in need of repair or maintenance in the short term. Its purpose is to make sure you know what you are buying and you feel comfortable with it. No home is perfect. An inspector can even find small issues in new construction. It’s not a weapon to beat the seller down with.
- Be available for your agent during the negotiation process. Don’t head out for an extending vacation the moment after writing your offer. Often you agent will need to interact with you during the course of the negotiation dance and if you’ve gone missing – you might lose the chance to respond. Be prepared to make decisions quickly and respond quickly. It can make the difference. Be willing to flex. You never know what little thing is going to come up as a key thing – for example: toward the end of the negotiation the seller has one more item they want to talk about…the rose bush Nana gave them 4 years ago – all of a sudden they want to take it with them…if that’s okay, you’ve got a deal! Don’t get stuck on a small non-issue. You can buy another one. Flex and be happy.
- Know your limit. As emotional a thing as buying a home is…it’s a very personal thing – where you lay your head at night…eat, sleep, laugh, love, plan your days ahead, etc.….try to take a step back. Know what is the most you are comfortable with and willing to pay, and do not exceed it. Getting swept up in paying too much because you really, really, really want the house is not a good idea. The house needs to appraise. You don’t want to be upside down. Your agent should be concerned with your long-term good and want you to have the house you want at a fair market price. Keep a clear head. Don’t be upset if you lose and be prepared to walk away.
- Don’t give up. It may take a few tries to get a good house at a fair price.
Lastly – try to relax. We accomplish more when we relax a little and try to enjoy the process of getting your next home. I have guided many clients through this kind of challenge. If you want a highly competent partner on your side, give me a call – I’d love to help you!