Buyers fret at the thought – and many will say, “I’m not getting in a bidding war!”
Here are my thoughts on bidding wars:
1. It means you have found a decent property with a good price on it – which isn’t easy these days! You should at least find some comfort in your advanced hunting skills, and ability to identify a quality buy – congratulations!
2. It also means it will be likely that the other buyers and agents will panic, and half of them will hit the eject button – so hang in there, the competition is likely to eliminate themselves.
3. There are no rules or standard procedures, so get the listing agent to commit to a specific process – how will they handle multiple offers? Will they counter each one with a specific price, or will they ask each bidder to submit their highest-and-best offer?
On a hot, new listing, it is better for the seller to ask for highest-and-best offers – because you don’t know how high a buyer might bid. If faced with a H&B request, only submit the price you are comfortable with, and tighten up all the other terms so at least you have improved your chances the best you can – and hope for the best.
If they counter each bidder with a specific price, it is imperative that you ask the listing agent how they will pick a winner if everyone signs their counter. Typically the answer is a vague and lame, “well, we’ll just look at them all, and the seller will make a decision”, when really it gives the listing agent a chance to play God and select their favorite agent or some other slimy way of choosing.
They may have countered a specific, but different, price to each bidder, but that is rare – agents aren’t that smart. But if they say that they did, then you may want to consider offering more than the seller gave you, just in case.
If it is a tired, old listing, and/or you think the listing agent is bluffing and you don’t care enough about buying this one, then don’t respond. If there is any chance of coming back later, you don’t want to tip your hand, or sully your reputation now. I think it is rare that agents bluff, because they aren’t good at it, don’t have much experience at it, and they don’t want to blow a sale. If you are going to be suspicious, be wary of the top-notch agents, but they usually have their assistants doing all the work anyway so there’s less chance than you might think – plus typically they are in it to maximize their volume of sales, not toying around.
4. Discuss strategies ahead of time. You don’t want to be in the heat of battle and have to figure out how you are going to handle it on the run.
5. Read Paragraph 3K of the C.A.R. Residential Purchase Agreement.
6. Remember that you always have your contigency period to sort things out.
Whether you are selling or buying, you should ask questions of your agent about bidding wars, and how they handle them. They should have recent success stories and/or strategies available – because they will need them! My winning percentage is down a little due to other agent’s buyers willing to pay a lot more than they should – if you love the house, add a little extra mustard, just in case – but don’t overdo it.
There hasn’t been the widespread appreciation – yet – that normally signifies a “sellers market”.
But as we’ve been documenting here, multiple offers are being submitted on every reasonably-priced listing. In many cases, sellers – and their listing agents – aren’t happy enough just to get a good price, they want to put the squeeze on the winning buyer too.
It’s understandable for listing agents to use other contract terms to help improve the sellers’ deal, and weed out the less-committed buyers.
But when they act like a it’s free trip through the candy store, some buyers will reject the terms outright, and others may accept but be hesitant and/or bitter of the treatment, neither of which aren’t in the sellers’ best interest.
These additional terms include:
1. Bigger deposits.
2. Shorter or longer escrow periods.
3. Shorter contingency periods.
4. Exclude attached items that should be included (appliances, lighting, etc.).
5. Sellers’ free rent/no deposit after closing.
This last item should be very concerning to buyers. Your loan documents include a clause that has you agree to occupy the home within 30 days after closing. But even if the sellers agree to vacate a day or two after closing, that could always change, and you could be left with an eviction process.
What do you do if you are the buyer, and find yourself having to accept a delayed occupancy?
1. Sign a rental agreement with the sellers.
2. Ask where the sellers are moving. If it is a vague answer, you could end up with sellers/tenants who don’t want to move when scheduled, and in California that can be a nightmare.
3. Insist on a deposit. Many listing agents think this is absurd, because they are owners, not tenants. But that doesn’t mean things won’t get dinged up on the way out, or garbage left behind (which happens a lot).
4. Include a specific amount in the agreement for “holdover rent”. I usually calculate a daily rental rate based on the higher of the market rent or buyer PITI payment, and then double it. If the sellers stay past their agreed date to turn over occupancy, then they should pay extra for inconveniencing the buyers who’d have to change their move-in plans. Some rental agreements don’t include a clause for holdover rent – write them in.
5. Monitor their progress as escrow is proceeding, and prior to releasing all contingencies on Day 17, verify that they are moving as planned.
6. Do a walk-through a few days prior to close, and see if they are packing.
Sellers and listing agents who respect the buyers will have a better chance at getting top dollar, and having a smooth transition. If there was one piece of advice, it would be for sellers to give buyers immediate occupancy at closing – take advantage of their enthusiasm about moving into their new home!
Hat tip to T&W for sending this along, frommsn.com:
Just as temperatures are starting to rise, so are multiple offers on prime properties in some recovering markets. To stand out from the pack, an increasing number of buyers are taking the old-fashioned approach and penning a love letter to sellers telling them what they adore about the house and why they are the best suitor to end up with it.
In this digital age, there’s something nice about getting a personal letter written (or even typed out) on paper, even if it comes from someone you are doing business with. That’s why an increasing number of sellers are writing letters to owners when competition for properties gets stiff — especially given that bids considered too high often won’t meet lenders’ appraisal rules.
Anna and Buzz Hays recently wrote a letter to shore up their bid on a midcentury home in a coveted Glendale, Calif., neighborhood. “I thought about it and said, ‘I might not have all cash to pay for the house, but I do have writing ability and I can use that,'” says Anna Hays, a teen-fiction writer.
She described what she liked about the home, including how well-maintained it was, the beautiful rock waterfall by the pool, the friendly neighbors and the “nature and calm” in the wooded neighborhood that surrounded it. She also included a few lines highlighting her and her husband’s résumés and assured the couple selling their home of 15 years that they would take steps to make its pool safe for their school-age twins.
The strategy worked. Hays and her husband beat out the other three offers and recently closed on the property. “They called me when the bid was accepted and said it was because of the letter,” she says.
Is this tactic a good way to set your bid apart from the pack, or is it a waste of time? We asked agents what they thought about buyer letters and what they would include if they wrote one. Most said a sincere letter was worth a shot for a standard sale, not a bank-owned property.
“I have seen them work miracles with sellers, and I have seen sellers put them aside and move on with another offer,” says Ofe Polack, an agent with Coldwell Banker in Manchester, N.H. “Like everything else in life, it takes two to tango.”
However, agents caution that buyers should never go rogue and submit a letter without their agent’s knowledge. “Buyers are never to have direct communication with sellers,” says San Diego agent Kim Drusch of Century 21 Award. She says she often submits photos and background stories of the family she is working with, if she thinks the seller would be swayed by the information.
“A traditional seller typically is devoted to the home they raised their family in,” Drusch says. “They, of course, are vested in who takes over ‘their’ house from this point forward.”
Buyers should convey several things in a letter, including:
Specific features or things that they like about the house and the community. “I’ve … had sellers read letters and the compliments made them so happy that they’ve chosen lower offers because of the letter. But not much lower,” says Joseph Moore, an agent with Bridge Realty in Minneapolis.
How long they’ve been looking.
A little bit about themselves, including names and ages of any kids. “If the buyers knows that the seller raised a family in the house, I would appeal to those emotions,” Polack says.
Anything that speaks to their purchasing power or creditworthiness.
A commitment to the house and a willingness to do “whatever it takes” to land it.
Anything else buyer and seller have in common.
Keep it short and sweet and don’t give so many compliments that the sellers think they’ve underpriced the home, agents say. And don’t expect your prose to bridge a $30,000 gap between your offer and the next bidder’s.
“If you’re sincere,” Hays says. “I don’t see how you can go wrong,”
Hat tip to Auntie Agent for sending this along, from thelatimes.com:
The newest problem for the slowly improving housing market isn’t a shortage of serious buyers, it’s a shortage of good homes.
Would-be buyers are packing open houses and scrambling to make offers on properties before they are even listed. Bidding wars are erupting. And real estate agents are vying fiercely to represent the few sellers that do exist.
Housing inventory has sunk to levels not seen since the bubble years. The number of American homes with a “for sale” sign hit 2.5 million in April, the lowest number for an April since 2006, according to the National Assn. of Realtors.
David Dennick, who lives in Echo Park and works as a television editor, has been searching for a home with his wife, Denise, for about two months. The couple have already bid on three properties. They are hoping to find a home for less than $525,000, which is $25,000 more than they originally had hoped to spend.
“It is much more competitive than we thought,” said Dennick, standing in the entrance of an Eagle Rock open house on a recent Sunday. “It is just frustrating because we thought we would really be able to buy a house; we are a middle-class family.”
The sharp drop in inventory along with rock-bottom interest rates have helped stabilize even some of the hardest-hit markets, including the Southland, Las Vegas, Phoenix and Miami. Some real estate professionals are concerned that the lack of inventory might turn off potential buyers, stifling the recent recovery in home sales.
The much-predicted foreclosure wave that was expected to dump more homes onto the market has not materialized. Fewer borrowers are entering default, and banks are better managing the properties they do have on their books.
In addition, professional investors bankrolled by private equity firms and hedge funds are pouncing on bank-owned homes, often turning them into rentals.
A dearth of new construction also is constraining supply. In April — the most recent month for which figures are available — the number of completed new single-family homes available for sale stood at 46,000, the lowest level since the Census Bureau began keeping track in 1973. Some 70,000 were under construction, also near historic lows.
The inventory problem has been exacerbated by the plunge in home prices since the go-go years. Many people who bought at the top of the cycle are so deeply underwater, they can’t get the price they need to sell and are therefore not bothering to put their homes on the market.
“We know negative equity holds back home sales, but it also holds back the listing of sales,” said Sam Khater, an economist with CoreLogic, a company that tracks the mortgage market. “Today it is holding the market back.”
The lack of available homes is maddening for those consumers who thought 2012 would be the year to buy.
In Southern California, inventories have plunged over the last year. The number of homes listed for sale in April fell 35% in Los Angeles County and was down 42% in Orange, 39% in San Bernardino, 42% in Riverside, 53% in Ventura and 43% in San Diego counties, according to online brokerage Redfin.
The number of days a home sits on the market has also decreased, meaning properties are selling faster. For the entire six-county Southern California region, the median number of days a home sat on the market fell to 33 last April from 43 the same month a year earlier.
Eddie David and his wife, Tiana Rezac, have felt the unexpected shortage firsthand. The two were sure they would buy a house this year until they tripped into the perplexing new housing reality. After being outbid on three different properties in neighborhoods from the Westside to Atwater Village, they shelved the search.
“With the downturn, it seems like there are a lot of people who have been waiting in the wings to pounce, and because the rates are low, there is just a lot more competition,” David said. “There were multiple offers. We tried to get in on a couple other homes, and even though it had been just a week or two weeks, it was just too late.”
Alex Gruenberg and his wife, Kristina, both 27, lost out on a home that ended up going for $30,000 more than they offered. The recently married couple have new jobs in the area and are looking for a pedestrian-friendly neighborhood with decent dining options.
They are now trying to find homes before they are listed.
“We are really learning that there is sort of an inside element to that,” Gruenberg said. “Things are going in days.”
Thanks to booty juice for sending this in frombloomberg.com:
A week after Christine Lynch listed her house in the Brentwood neighborhood of Los Angeles for $3.625 million, she had seven offers. Within 10 days, a deal was reached for the five-bedroom, six-bathroom home — and for $225,000 more than she asked.
“My first reaction was, ‘Wow, I guess we’re really doing this,’” Lynch, 55, said in an interview. The all-cash transaction was completed on April 23. “I was really surprised by this level of interest and how quickly it sold,” she said.
Bidding wars are breaking out for luxury homes in such wealthy Los Angeles enclaves as Brentwood, Beverly Hills and Bel Air as an increasing number of buyers bet on rising home prices and investors return to the market. Even properties in need of extensive renovation are being fought over by shoppers who expect to resell them for more after a remodel or rebuild.
“The percentage of people who think prices are only going to go up is the greatest I have ever seen in my career,” said Syd Leibovitch, president of Rodeo Realty Inc. in Beverly Hills.
Sales of Beverly Hills homes priced at $2 million and higher climbed 11 percent in the first quarter from a year earlier to 39, according to DataQuick, a San Diego-based provider of property information. In Brentwood, whose residents include actress and singer Julie Andrews, they increased 56 percent to 25, and in Malibu they gained 64 percent to 23.
All buyers are sitting on the hotsheet, waiting for new listings – and when they hit, there is an early rush to check them out. It happens a lot these days that when you come across a hot new listing, there will be other people will be there looking at it too. What do you do?
If there is an agent buried deep inside the house who is showing buyers around, as a courtesy, I stay outside and wait for them to conclude.
But if they are lingering near the door or outside the house, and they see me – I’m going to walk into the middle of it to diffuse. The more interest they have in the house, the more they are going to freeze up and panic over the incoming threat, and they won’t want to leave.
I want to gauge their interest, because I might be in a bidding war with them later.
Instead of fumbling around with fake handshakes, I’ll just hit them right between the eyes with the old reliable, “How do you guys like this one?” Usually they are taken by such surprise that they answer honestly, or you can tell by their reaction how they really feel.
When the shoe is on the other foot, and I’m showing people around when another agent arrives – I want to leave immediately without saying a word, and go talk in the street.
Here is the listing for this one, they just paid $300,000 last month.
Hat tip to Mr. T for sending this along – excerpted fromBloomberg:
Matthew and Carina Hensley offered $10,000 more than the asking price for a three-bedroom house in suburban Seattle, then lost out to one of seven other bidders.
Their $270,000 proposal last month came with a family portrait and a letter introducing the couple, their eight-month- old daughter, Harper, and their desire to build a family in the Renton, Washington, house with a yard backing onto a woody hillside.
Bidding wars, absent from most parts of the U.S. residential market since its peak in 2006, are erupting from Seattle and Silicon Valley to Miami and Washington, D.C.
The inventory of homes hovers close to a six-year low, while an increase in jobs and record affordability are tempting more buyers. The number of contracts to buy previously owned homes jumped 14 percent in February from a year earlier, the National Association of Realtors reported yesterday.
“The housing crash is finally giving way to recovery in an increasing number of markets across the country,” Zandi said in an e-mail. “The decline in unsold listings and vacant homes and the increase in rents presage better times ahead for single- family housing.”
Asking prices tend to be higher and inventory tends to be lower from March through May, while sales peak by June and inventory reaches a top in July, said Jed Kolko, chief economist for Trulia, a consumer-oriented real estate information service.
“As housing comes out of hibernation in the spring, demand picks up,” Kolko said in a telephone interview from San Francisco. “Prices peak early in the season and inventory peaks later. Buyers should be more patient, but sellers should move faster.”
Agents encountered multiple bids on about half of offers in Seattle, Boston, Washington, D.C. and Oregon this year through March 15, said Tim Ellis, real estate analyst for online brokerage Redfin. In the San Francisco area, Redfin agents reported that three of four offers involved competition, he said.
One home in Palo Alto, California, received 38 offers and sold for $1.65 million, or $452,000 more than its asking price, said Ken DeLeon, a real estate broker in Silicon Valley since 2002. Another client paid $2.56 million for a home in 2007 and is listing it for $3 million, with the expectation of receiving higher offers, he said. The seller wants to use the proceeds to buy a home in Saratoga, about 18 miles southeast of Palo Alto, where the market hasn’t heated up yet, DeLeon said.
Prices are hitting all-time highs, above Palo Alto’s 2007 peak levels, in the 94301 and 94306 ZIP codes, as buyers rush to purchase in advance of an expected flood of newly minted millionaires when Facebook Inc. (FB) has its initial public offering, DeLeon said. The Menlo Park-based social-networking company filed paperwork in February for an IPO that may result in a market valuation of $75 billion to $100 billion.
The Hensleys haven’t given up on living in the Renton, Washington, area, where both sets of parents live. The winning bidder offered $15,000 above the asking price and didn’t make the sale contingent on successful financing or inspection, according to Kimberly Hobbs, the Seattle broker who represented the seller.
“From this experience we learned that we have to move fast, especially if a house is nice,” Matthew Hensley said. “The competition is fierce out there.”
For those who haven’t participated in today’s market conditions, this will give you a taste. First you got out and look at the houses that has been picked over by everyone else, and determined to be way overpriced.
Then you track the new listings, and rush over to them the first day or two on the market.
The “quality buys” get action immediately – in fact, if there isn’t other interest, you might want to ask yourself why. This listed Thursday (but they were trying to get $1,000,000+ last summer):
You don’t see too often – two quiet acres in the Rancho Santa Fe Covenant under $1,000,000. There were more defects to this property than were disclosed publicly:
Lily has an article about the bidding wars and shortage of inventory downtown:
