HOW TO WIN A BIDDING WAR!
Written by Barbara Pronin
Long Beach, California spouses Aaron Albanetti and Stephanie Morgan had been renting for years when they came upon a favorable trifecta: they were ready to buy, interest rates were low, and they had enough money saved for a down payment.
“We started looking at houses last spring,” Albanetti said. “We probably looked at close to 50. But every time we found a house we wanted, we’d put in a bid and lose out. We made nine offers on nine different houses and lost out to competitors every time.”
In one instance, on a home with some 25 offers, they bid $30,000 over the list price. It was only enough to get them into the second round of bidding.
“We then offered $75,000 over the list price,” he said, “and we still lost out to a higher bidder.”
At that point, said Albanetti, they knew they needed to change their strategy. “We decided we needed to focus our energies on homes that were a little less in demand.”
They would not compromise on school district, he said, because they have a young child - and they wanted to stay within a certain geographical area. But, they thought, they might be willing to compromise on amenities.
Their tenth try at ownership was a charm.
“We found a one-bath home in the area we liked that was listed for $675,000,” he said. “We felt that having only one bathroom was something we could live with.”
Even on this less-sought after home, there were multiple offers, he said. But they managed to close the window with a winning bid of $60,000 over the list price.
It’s a common scenario playing out across the nation.
“Every buyer has a different journey and different thresholds to cross,” said career agent Jane McAuley, Coldwell Banker Residential Brokers in Atlanta. “I had buyers recently who believed they found the perfect home for them - a unique property with a lovely pool and a yard that backed up to a horse ranch. It was listed for $1.25, which seemed a bit overpriced. We made an offer of $1.075, but with four offers over $1.24 on the table, and my buyers desperate to own the property, they not only upped their bid to $1.255, but they also agreed to no warranty, no appraisal contingency. They pulled back their ask for pool equipment and furniture that had been in the initial offer.”
They won the bid.
McAuley noted that having contingencies of any kind will typically get you nowhere in today's multiple-offer environment.
“I had clients who were a little timid about buying a home before their present home was sold,” she said. “They had a cute little bungalow with a nice pool in a good part of town. It was at least 60 years old and had never had any upgrades. We listed it for $575,000 and had seven offers almost immediately. The house sold for $60,000 over the asking price - good news for both the buyer and the seller.”
As an agent, it's important to do your due diligence, McCauley said.
“In another instance, I had a first-time buyer who had only five percent for a down payment,” she said. “They made three offers that were rejected. But we found a seller who’d seen a couple of sales fall through for various reasons. She was ready to accept my buyer’s bid and their low deposit because they were in every other way well qualified.”
In Kansas City, where inventory sits at 1.2 months - a fraction of the six months typical of a balanced market - most homes in the starter range are selling within the first two or three days for at least two to eight percent over the asking price, said Mina Steen, a multi-million- dollar producer with Better Homes and Gardens Real Estate.
“First time buyers who have not built up assets are at a disadvantage in this market because sellers feel more secure when they see a larger down payment,” Steen said. “The larger down payment also improves the likelihood of final loan approval and appraisal.”
Because updated properties are in demand, she noted, anything that has been newly redone and is priced right is selling at a premium.
“But even the remodel, or teardown properties are going quickly if they have ‘good bones’ and are in a desirable location,” Steen said.
Buyers who can afford to do so use escalation clauses and often request inspection but waive the right to ask for repairs, Steen said.
“Also,” she added, “in addition to putting down more earnest money to offer the seller more security, “a serious buyer may agree to bring the shortfall in cash to closing in the event the property does not appraise.”
In a seller’s market, it’s clear there are many strategies for clearing the homeownership path.