Bidding-War Strategies for Sellers
These are the best choices to help sellers achieve top dollar in a bidding war, and, at the same time, be fair to all parties:
NSDCC New Listings, Jan-Feb
Our local home prices are in record territory – won’t that draw out more home sellers? Greed is good!
But lo and behold, so far we’ve had fewer new listings!
NSDCC New Listings, Jan-Feb
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The median list price has gone up 37% since 2013, yet fewer people are listing their home for sale!
It’s enough to drive buyers crazy, especially when you see homes flying off the market that were listed at prices you thought were too optimistic.
Buyers – don’t panic, relief is on the way. Last year, we listed 516 houses for sale in March, so we should see a steady flow of new offerings this month.
If you are looking at homes under $1,500,000, expect competition. You might lose a few before you land one!
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Traffic Doesn’t Equal Offers
By now, the low-inventory/fast-market has trained the motivated buyers to be on red alert. If a new listing pops up that looks remotely interesting, those buyers know to get over there quick for a peek.
This presents a major problem for the sellers and listing agent.
Once the parade of lookers descends upon the new meat within hours, it is irresistible for the ego to go wild, and it causes sellers and listing agents to have visions of lottery-type money.
It is so much fun, they want it to last forever! They are so excited!
Savvy buyers know that if this is THE house, they need to make an offer promptly. It makes the equation quite simple – sellers will receive offers from the motivated buyers within the first 2-3 days. All you have to do is counter for every buyer’s highest-and-best offer, and by Day Four the buyer who will pay the most will emerge.
But what usually happens?
The overly optimistic buyer-agents get all giddy and tell the listing agent that they think they will be making an offer. But a funny thing happens to buyers once they roll down the street for a couple of blocks – all the reasons NOT to buy that house come up, and most buyers talk themselves right out of it. At least half of the people who threaten to make an offer never do.
What if you are a motivated buyer, and make a great offer in the first 1-2 days? It happens regularly that sellers and listing agents will pooh-pooh a great early offer, and hope that there are two in the bush.
What can buyers do? You only have one option, and that is to walk away if you don’t get a response by the time the offer expires. At least if you threaten to quit, it should hopefully get their full attention.
Sellers and listing agents think that lots of visitors = lots of offers. But most visitors don’t offer – they’re just visiting. In virtually every case, the no-offer rate is at least 90%, but sellers ignore that and are convinced there has to be two or more in the bush.
Here’s today’s example:
The seller paid in the low $700,000s in late-2012, and didn’t add anything but lipstick since. We initially offered $1,275,000 last week, and sure got the feeling that we were getting shopped around – the listing agent kept reminding me that there were other offers expected. So we put a deadline of 1:00pm today to accept our $1,300,000 counter-offer. Two hours after our deadline, the seller countered $1,339,000, which was just $6,000 under their first counter. They called it their final offer, and it wasn’t a multiple-counter, so no other offers were on the table.
The sellers paid low-$700,000s, and couldn’t live with $1,300,000 – they had to have an extra $39,000, or the deal was off.
My buyers stuck to their guns, and instead we were off to a new listing that was priced well under this one.
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Bidding-War Report
We received 16 written offers on the Bluff Ct. property – here are notes:
Five agents were from the LA/OC area. Because their MLS (CRMLS) covers most of the rest of Southern California, they were used to traveling to sell a house. San Diego home sellers want these LA/OC buyers to come here, because our prices look cheap to them.
The first three offers were all below list price. When it came time for the highest-and-best round, all three withdrew. I would have thought that the first offers submitted would be from the most motivated buyers?
The average down payment was 33%. There was one cash offer, and four that had less than a 20% down payment.
Five of the financed offers didn’t include a pre-qual letter.
Five buyers increased their offer during the highest-and-best round, by an average of $21,000.
List price was $749,000 – three H&B offers came in at $799,000 and higher.
My youtube video of the home’s defects is up to 335 views!
Buy/Sell Now or Later?
What now?
Summer is over, and the so-called spring selling season is six months away.
Is it worth waiting?
Sellers want to believe that springtime is when all the young families with 2.2 kids will be looking to pay retail-plus. But that belief ignores the trend – prices been fairly flat around higher-end areas. Look at the graph above. The only area that is a good bit higher today than in January is Rancho Santa Fe, which has been on a roller-coaster the last couple of years.
Predictions for next year? From Zillow:
Zillow was more pessimistic about 2016 too, so the +1.7% may end up being conservative. But prices are already setting all-time records, so it is hard to imagine another big pop next year.
We as an industry aren’t used to flat pricing – the drama of violent price swings is much more exciting! But flat pricing does make it easier, because it eliminates one of the major variables about moving.
If you are going to sell or buy at roughly the same price now or next spring, then which is better?
THE BEST TIME TO BUY OR SELL IS WHEN NOBODY ELSE IS!
If you are buying and come across the right home at the right price, you sure don’t want any competition to screw it up for you! There will be less competition during the next 4-5 months!
If you are selling in a flat market and have other active listings around you, what if one of them needs to sell worse than you do? They could undercut your spring-selling-season-2.2-kids-retail-plus program, and leave you hanging.
Remember our Glendale realtor with the line out front?
There weren’t any good comps nearby all year – a great time to sell when nobody else is! They ended up with 18 offers (6 were cash) and they had two cash buyers who wanted it so bad that they were willing to pay more than $100,000 over list price!
Thankfully there weren’t any good comps nearby to screw that up!
Another Disrupter
Doesn’t it seem like there’s a new real estate app that’s going to slay the real estate industry every week or two? Will they spend millions to advertise? They need to make it lucrative for listing agents to bring their listings.
Garrett Camp, Uber cofounder and CEO of Expa Studios, is today unveiling Expa’s latest project, Haus.
Haus is the studio’s first real estate play and focuses entirely on the buying and selling of residential property, digitizing and organizing offers from buyers so that all parties (the buyer, seller, and agents) have more transparency and immediacy through the negotiation process.
There are plenty of startups out there that concentrate on discovery of properties, Camp said. But the issue that hasn’t really been touched by technology is that of making and accepting official offers.
Haus digitizes that entire experience, letting sellers put their listing on the platform, where buyers and their agents can both post their offers, amend them, and see an anonymized version of other offers that have been made on the property.
As it stands now, real estate brokers are shuttling offers to sellers’ agents via fax, email, or simply in-person. On the other side, sellers’ agents are trying to properly compile multiple offers in spreadsheets, in an email, or with pen and paper.
This might seem simple — write down all the best offers and pick the highest number, right? But there are a number of factors within a single offer beyond the actual overall price, including the financial security of the buyer, extra terms of the deal, amount of cash up-front, and more.
The real estate industry isn’t necessarily known for its transparency. While sellers’ agents are required to show them every offer on the table, buyers have little access to the actual movement on a particular listing.
Haus aims to clear up that opacity by showing each offer, with its unique nuances, to both the seller and the other interested buyers.
But this type of transparency is not without its potential downsides.
When a seller receives a few good offers on a home, the sellers agent will ask for best and last offer by noon tomorrow, for example. If buyers were able to see the terms of all the other offers, as they would when using Haus, then this could drive the price of the home up as buyers enter into a bidding war. Not to mention, unethical sellers or agents could artificially inflate the price of a home through shill bidding, as an offer is not legally binding.
While Haus helps sellers measure the demand on their property, it might also drive away potential buyers who don’t want to get in a bidding war over an already-expensive purchase. Or, on the other side, this might short a seller who would have received a much higher best and final bid from a buyer, but saw that offer drop to barely beat the next-best offer.
“We think the openness will create a more efficient market and that the number of offers and price will ultimately be dependent on demand,” said Haus GM Sarah Ham. “Bidding wars are a common, almost accepted, part of the real estate process today. But with our approach, buyers know where they stand. Buyers will know what they need to offer to make their offer competitive, but they also won’t negotiate against themselves.”
There may also be some concern over this replacing agents entirely, though Camp sees this as a complement to what brokers offer their clients, offering efficiency in the part of the process (compiling offers) that can be slow and time-consuming. Plus, most folks still need a broker’s expertise when it comes to marketing the home, finding a home, understanding the true value of a property, and of course, drafting up the paperwork.
While there may be some question over the transparency angle, Haus certainly offers way more efficiency when it comes to compiling and presenting offers to the buyer. Camp likens it to the town car industry of the past, which (as you might already know) was blown up by Camp’s previous startup, a little company called Uber.
“Collecting offers and presenting them is a very manual process, the way that town car companies would pick up a phone, write the fare on the board, and send the next available driver to that location,” said Camp. “It just seems much more efficient for agents to use a platform to coordinate all of this information automatically.”
Haus isn’t currently charging anything, but eventually they’ll pull from the broker fee once the company understands how it can generate extra business for realtors by saving them time during the negotiation process.
You can check out Haus for yourself right here.
Bidding Wars 2016
Are there many sellers who will consciously “list it a little bit low”? The hottest bidding wars are over the well-located houses that have many current upgrades – even those listed for retail. P.S. This should be one of the last TV stories on bidding wars.
LARCHMONT, N.Y. (CBSNewYork) — It is getting tougher and tougher to find a home in the suburbs these days, with buyers going after all the same homes.
CBS2’s Lou Young had some tips Wednesday to proceed if you find yourself in a home buying bidding war.
Real estate agents said anyone shopping in the superheated New York suburban home market this season had best be prepared.
“Around here, you can get a listing on Friday, and by Sunday go to multiple bids,” said real estate agent Nancy Elsas.
Westchester County in particular is bidding war territory, with real estate agents setting the bait for multiple would-be buyers.
“I find that if you list it a little bit low, you’ll get multiple offers” and spark the war, said real estate agent David Turner.
One house in Bedford that Turner just sold went to sealed bids from three would-be buyers. Turner cautions people not to hold back when it gets to that point.
“I’ve had buyers call me after the conclusion of the bidding war and saying: ‘Can I go a little higher now? I’ve decided I really want it and I didn’t go high enough,’” Turner said. “Generally, there’s not that opportunity.”
Read full article here:
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The Red team reported that of the potential home buyers they surveyed, the biggest concern was competition from other buyers. There is an easy fix – work with a good agent who has experience with winning a bidding war.
Car Ramble
More talking while driving….safely:
Handling Multiple Offers
Our listing on Cherokee closed yesterday.
It was the 2,527sf three-story house that backed to the I-15 freeway – the one where we had 200+ people attend the open house.
The final tally at the Zillow page was 3,745 views, and 77 people had saved it as a favorite home, which are both extremely-high counts. (Josh was the seller)
Yesterday, we marveled at how the bidding war ended up. The listing had hit the MLS on a Saturday, we had the open house on Sunday, and by Monday we had six offers.
Because not every bidder knew there was competition, we gave everyone the chance to submit their highest and best offer by Tuesday at noon. I like to keep a tight timeline and promise buyers that we’ll select a winner promptly in order to retain as much urgency as possible.
The list price was $549,000.
At the end of the highest-and-best round, we had a $565,000 financed offer, a $570,000 cash offer, and a verbal $571,000 cash offer (the other three stuck with their $549,000 or $550,000 original offers).
The agent who wrote the $570,000 offer was 80 years old, and was using forms from five years ago. I actually had to hand-write his original offer for him, but thankfully he was able to scratch out a one-sentence H&B.
Because I had concerns whether he could make it to the finish line, I pressed the $571,000 agent to get his deal in writing. But he called back with bad news – his buyer, a savvy, multiple-property owner, decided it was too rich.
I called back the $570,000 agent, knowing that I’d be carrying his luggage for the next three weeks. But he had more bad news – he took his buyer’s family to the house, and they vetoed the sale.
With the other three bidders unwilling to budge, we signed the $565,000 financed offer…..before they changed their mind!
Most people would have been tempted to hold out. Yes, it would have been sexier to close escrow in 2-3 weeks with a cash buyer. But after 200+ open-house attendees and 50+ showings, are there two in the bush?
Though my phone hasn’t rang like this since back in the REO days, there was no disputing the facts – most people didn’t make any offer, and those that did weren’t in love enough to go crazy. It was a trend that was likely to continue.
In spite of casual observers telling me we were giving it away, or it was too cheap, the actual results were telling. The duty of the listing agent is to check the ego at the door, and focus on the facts.
We made the deal at $565,000, and it stuck.
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
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