Outsmarting other bidders in hot markets
Realty Q&A is a weekly column in which Lew Sichelman, a nationally syndicated columnist who has been covering the housing market for more than 40 years, responds to readers' questions on real estate.
WASHINGTON (MarketWatch)--Question: I have made several offers on houses but have been beat out each time by someone else who offers more than I can afford. I simply can't go any higher; my pocketbook won't take it, and I don't want to get in over my head like others have done and lived to regret it. So I was wondering if you had any ideas on how to outsmart other bidders without losing my shirt? --B.S., Spokane, Wash.
Answer: In many parts of the country, in most price ranges, the best properties are suddenly piling up offers from multiple bidders who know a good thing when they see one. Sometimes, though, the highest offer isn't the one that's accepted.
Here, courtesy of dozens of real-estate professionals throughout the country, is a cornucopia of creative tactics that could help you win the day when you can't go any higher on price:
No strings attached
Make your offer as clean as possible by removing every possible contingency you can live without. Have your financing lined up in advance so the sale won't be dependent on securing a mortgage. Conditioning the deal on the sale of your current house is the kiss of death.
If you feel confident enough, you can even waive the appraisal contingency. But realize that without that protection, if the valuation comes in low, you'll have to make up the difference between the agreed upon selling price and the appraised value.
Agents have differing opinions on waiving the inspection clause. Some think its OK, but others say it is too dangerous.
If you want an inspection, line up your inspector in advance and offer to get it done fast; say in five days instead of the usual 10. That way, if there is a problem that kills your deal, it will be discovered soon enough that the seller can accept another offer before your competition has moved on to something else, said Jonathan Osman of Keller Williams Realty in Charlotte, N.C.
Also be sure all the required documents are submitted with your initial offer. "No mistakes or weird language," advised Steve Crossland of Crossland Real Estate in Austin, Texas. "Make your offer acceptable and ready to sign."
You'll take it
Offer to take the place as is. You can still have the place inspected and cancel the deal if the exam uncovers something you find unacceptable. But once the inspection period expires, with an as-is clause, the place is yours.
Speed is of the essence
Some sellers want out as soon as humanly possible, so offer to close quickly. One winning deal offered to settle within 24 hours. Of course, that wasn't possible; it takes several days to prepare the closing papers. But the offer to settle the next day told the seller the buyer was ready to go.
A quick close "is worth money and peace of mind" to many sellers, said Linda Walters of Sage Realty in Wayne, Pa. "Lengthy contract periods tend to make sellers nervous, since their period of risk is longer," said Ed Corbett of Keller Williams Realty in Atlanta.
Other sellers might have a much longer time horizon. So instead of a quick deal, offer to hold off the closing for 90 days instead of the usual 30 or 45.
"If you can afford to be flexible on closing dates, that can be a great asset," said Debbie Battista of Domus Realtors in North Haven, Conn.
Add a personal touch
Write a heartfelt letter telling the seller who you are, why you love the property and how you will cherish it as your own. Write it by hand, and include a photo of your family.
Corny? You bet, but it works. "Sellers want to know that the buyers will love the home as much as they have, and their efforts to maintain it are appreciated," said Susan Neal of Century 21 Noel David Realty in Fair Oaks, Calif. "I've seen sellers turn down a higher offer to leave their homes in good hands."
Face to face
Some agents want the buyer and seller to meet, to get to know each other. But at the very least, your agent should present your offer to the seller directly rather than just handing it over to the seller's agent.
"It's my job to make the seller fall in love with my buyer," said Diane Hughes of the Higgins Real Estate Group in Bedford, Mass.
"It's a people business," agrees Dorene Slavitz of the Real Estate Group in Culver City, Calif. "If the owner likes your client, that can have a positive effect upon their view of your offer."
Timing is everything
Sometimes the earliest offer wins the day, especially with anxious sellers who want out quickly with no muss, no fuss.
Kevin Kieffer, a Keller Williams agent in Danville, Calif., likes to put in his offers midweek to beat the competition that shows up on the weekend. Barry and Serene Sulpar of Shorewood Realtors in Manhattan Beach, Calif., work the realty grapevine, and when they hear of a place that might be coming on the market, they quickly contact the listing agent, have their client preview the place and, if they like it, enter a bid.
A typical earnest money deposit is 1% of the purchase price, so offer more. This gets the seller's attention, tells him you have the financial wherewithal to follow through and shows him your serious.
If you really, really want the place, Mark Ruff, a Keller Williams agent in Studio City, Calif., suggested offering to make your deposit nonrefundable--but applicable to the purchase price--after the physical inspection period expires.
Ducks in a row
It should go without saying that you should be preapproved for financing. But many agents advise their clients to attach a copy of their approval letters to their offers. And some suggest including bank statements or other proof that you have the funds you'll need to close.
Teresa Parker of Coldwell Banker Bain in Spanaway, Wash., said you should pick a lender with a reputation for delivering, and Debra Kroon of Yosemite West Real Estate in Oakhurst, Calif., agreed.
"A pre-approval letter from a lender which the listing agent can vouch for as being reliable will have more impact than one from an unreliable lender or a lender unknown to the listing agent," Kroon says.
Greg Kilroy of Keller Williams Paradise Valley in Scottsdale, Ariz., asks the buyer's lender to call the listing agent "to give him a warm feeling" about his client's ability to obtain funding.
Back at ya
To make their move less stressful, offer to allow the sellers to stay on after the close for whatever extra amount of time they'll need. You can charge them rent, based perhaps on a percentage of your house payment. If you are really feeling magnanimous, let them stay free to clean up loose ends for, what, 30 days?
If the seller has a pet that he can't take with him--an aging dog, for example, or if the seller is moving into a place that does not allow animals--offer to take the pet as well as the house.
Ann Wilkins of East Bay Sotheby's International Realty in Oakland, Calif., said that one of her clients once agreed to adopt chickens as part of the deal. Kim Mulligan of Cooper Jacobs Real Estate in Seattle took on a middle-aged cat as part of her own purchase.
Similarly, Ralph Gorgolione of California Real Estate in Los Angeles suggests taking over or buying personal property such as a piano that would be too difficult or costly for the seller to move. And Kathryn Copeland of Coldwell Banker Residential in Winter Park, Fla., suggested that offering to keep on gardeners or longtime housekeepers who might otherwise be displaced might tip the scales in your favor.
Pay to play
Jim Mellen of Re/Max Peninsula in Williamsburg, Va., had a client offer to pay some of the seller's moving expenses. A client of Alex Cortez, at Island Sotheby's International in Maui, offered to allow the seller to come back and use his former vacation property at predetermined times every year.
If your contract isn't accepted, ask to remain as a backup in case the other deal falls through, says Christy Walker of Re/Max Signature in Phoenix, who notes that for one reason or another, more than one on every four contracts fail to close in her market.
Seventeen times last year, Charlotte agent Osman sold one of his listings two or more times, typically to the backup buyer. "You never know," he said. "The buyer could walk, get divorced mid-contract, lose his job, misstate his assets or income, or lose interest."
Nationally syndicated columnist Lew Sichelman has been covering the housing market for more than 40 years. MarketWatch readers are encouraged to send their real estate questions to him at firstname.lastname@example.org. Answers will be presented in this column every Friday. However, because of the volume of email he receives, he cannot answer every reader's query.