Published by Jim Droz
Signs point to the housing market heating up enough this summer where buyers might get caught in a bidding war on a house they’re looking at. Yes, the phrase “seller’s market” is creeping back into the real estate vocabulary so if you haven’t dealt with multiple offers for a while it’s a good idea to dust off your skills again.
The National Association of Realtors lists Seattle, Phoenix, Washington, D.C., and Southern California’s Orange County as places where tight housing inventories are leading to “multiple biddings and escalating price conditions.” A survey of HouseHunt agents echoes that and also includes cities in Northern California, Colorado, Illinois, Indiana and Florida where multiple offers are becoming more commonplace.
One of the methods McCamey uses for listings likely to get multiple offers is an escalation clause in the purchase contract that allows for incremental increases in the offer price based on competing offers.
“If we put an offer on a home that’s $250,000 and below, I pretty much give my clients a heads-up that it’s more than likely going to go to a multiple-offer situation and that we’ll more than likely have to use an escalation clause to even have a chance to be competitive,” McCamey said. “That usually will help us win more often than not.”
It’s important that you and your client don’t adopt a win-at-all-costs mentality. If you or they bring up waiving contingencies, for example, make sure they know that skipping things such as an inspection could cost them down the line if expensive repairs pop up. It’s easy to get caught up in the competitive nature of the business when the market is going good, so be sure you’re working in tandem with your client’s financial realities and desires. Assure them that you’re up to date on market trends and know the proper starting point for an offer and when one is simply too high for a certain property.
Other things you can inform them about and discuss with them include:
Make sure their financing is in order
- and documents are ready before you start making offers because sellers will want loan pre-approval verification.
If your clients love the house, tell them that you’ll only make an offer they’re comfortable with and not one they feel pressured into making.
Stress the importance of a legitimate deposit. A few thousand dollars won’t cut it, so if they can put up the full 3 percent, have them do it because it shows the seller they’re serious about getting the house.
Give the seller a quick closing date or offer to close on their preferred date.
If possible, don’t put conditions on the offer because it will be more appealing to the seller.
Come up with a cut-off price together before offers start getting made. Winning a bidding war is great but not if your client pays above market value to do so.
Tell your client to offer reassurances to the homeowner that they’ll maintain the garden or keep the gazebo, for example. Even though they’re selling, some homeowners are still emotionally attached to the property and might appreciate the fact that your clients are willing to maintain – and not renovate – the property.
Lead with your best offer, but be patient and understanding because the seller might be going through a tough emotional time because of the need to sell due to unforeseen circumstances. If you don’t get the house, learn from the experience and move on.