What should we offer in a bidding war? How do we know the right amount?
There is no science to winning out in a bidding war. However, there is a great deal of art involved. Overwhelmingly, our buyers tend to win out in bidding wars – and not necessarily as a result of paying the most amount for the property. Instead, the terms that we are negotiating in the purchase offer, as well as pre-existing relationships with other brokers, helps to give us the edge. Here are a couple of our most effective strategies…
· If our clients are able, we encourage them to increase the amount of earnest money deposit – it’s usually not any additional burden for the buyers, and could signal a greater financial ability when sellers are looking at a contract.
· Additionally, if our clients have the ability (not everyone does), we encourage them to pay cash. The old adage, "cash is king," certainly is relevant in the world of real estate bidding wars. All-cash offers are usually the first offers that a seller will respond to. Why? All perspective buyers can increase the amount of money that they're going to pay for a given property. However, not all buyers are able to pay all cash. A seller’s best strategic move is to, first and foremost, see if a cash buyer is willing to increase the amount of money that they would want to pay (in cash). So how is it that one goes about paying all cash? There are several options. Perhaps mom and dad can loan a sum of money for a few months time until you can pay them back by securing a mortgage. How about borrowing against your retirement savings? If you already own a property, why not have, set in place, a home equity line of credit that you can draw against? In other words, there are creative means by which one can get their hands on several hundred thousand dollars if needed.
· We always have the pre-approval letter attached to the contract when submitting. Agents representing sellers want to know that the agent representing the buyer has all of their T’s crossed and I’s dotted and that the transaction will proceed without any hiccups. By being thorough with the contract and documents that accompany it, we hope to signal to the agent that we’re going to be cooperative and make their lives easier.
I’m always proud to hear that a member of our team has prevailed on behalf of their clients as a result of the selling agent putting their thumb on the scale in our favor. We hear, with frequency, that because of our ability to professionally and efficiently administer contracts, and because of our known reputation for closing on 98% of all of the contracts that we write, we often have the upper hand when it is that agents are deciding which contract to go with. Interested in hearing some more of our strategic secrets? Call us today!
All that being said, price, of course, is a huge issue. We begin the conversation of how much to offer by telling our buyers what it is that we think the property is worth. We also tell our buyers that they usually have one chance and one opportunity to impress the seller. We then ask them what is the most that they would want to pay for the property without feeling as though they overpaid. Said another way, if they were willing to pay $100,000, but found out that someone else purchased it for $101,000, would they be kicking themselves? Would they be upset? This often helps to determine what is the most that a buyer would be willing to pay without feeling remorse if they were to lose.