Competition
There are certain segments of the market in San Carlos which are much more competitive than others. The $850,000 – $1,000,000 range, as well as the $1,400,000 – $1,600,000 range, are currently fiercely competitive. The former range makes up the current starter home price points in San Carlos, the latter is considered to be the move-up market. The two are directly connected. Those looking to sell in the $850,000 – $1,000,000 market are looking to move into the $1,400,000 – $1,600,000 segment. When quality homes in these ranges do come on to the market, the competition to secure them has escalated. This escalation has been fueled by interest rates hovering around 4%. In a multiple-offer situation, gaining an advantage over other buyers is absolutely critical. While I cannot give away my entire strategy in these instances, I can illustrate a few points below that will at least highlight some of the larger concepts and pitfalls that surround these types of situations.
The Key
When you find yourself in a competitive situation, understand the primary goal: You must paint yourself as the best choice for the seller.
Many people automatically assume that the highest price wins. Incorrect. In fact, if I look back at all of the multiple offer situations that I have been involved with, I would say that a good 40% of the time we were not necessarily the highest offer on price – but still obtained the property. If you are going to take anything from this post, I would encourage you to understand that in multiple-offer situations the winning offer is normally the offer that is the total package: price, terms, contingencies, due diligence, behavior and certainty of close.
Your Agent in a Multiple-Offer Situation
Please understand that this is not a post on real estate agents. Additionally, I am well aware of the many differing views on real estate agents. However, the one thing that I can tell you with 100% certainty is that there is no other situation in real estate that will arise where the importance of your selected representation will be more critical than in a multiple-offer situation. There are a lot of moving parts….and they move quickly. Thus is the reason they need to be mentioned so prominently in a post such as this. Keep in mind the following:
(1) If the listing agent or the seller (during the offer presentation) has even the slightest doubt as to the capability of your agent to get the deal done, your offer will be DOA.
(2) When drafting your offer, keep in mind the rule above about painting yourself as the best choice for the seller. This is the part of the post where I need to stop short, but understand there are many different things you can do within the offer to create the comfort that comes along with certainty of close as it relates to the seller. Too often, buyers and some agents stop short of thinking outside the box on their offer simply because there is not a check box or form for what they are considering offering. Take the totality of the circumstances and draft your offer accordingly.
(3) Sometimes in these situations sellers and their respective agents can get a little greedy in multiple-counter-offer situations. Even the most level-headed buyers can get caught up in the emotion of the situation and sign their name to a price that they wish they had not in the following days. If your representation is solid, the agent will reel in the situation and make you aware that the price has gone beyond what the market can bear with regard to the prospective property.
Some General Dos and Don’ts
Keeping in mind the idea that many multiple-offer situations are a bit of a beauty pageant in terms of finding the right offer, here is a list of other details you may want to keep in mind:
Dos
* Find out as much as possible on the seller’s situation and tailor your offer to best match their situation. Make it easier for the seller to say yes.
* If you first spot the home at an open house, introduce yourself to the listing agent. It may help them put a name with face during the offer process. Remember, the agent is concerned about certainty of close for his or her clients. Any favorable impression you can make will only help your case.
* From the first moment you realize you are going to submit an offer, talk strategy with your agent. Generally, the sooner you know you are going to put in an offer, the more time you have to work on some terms that may give you an advantage. Time is normally in short supply, but the more time you have the better.
Don’ts
* Do not talk to anyone else about your possible price, terms, etc. This is San Carlos….people talk.
* Do not waive your rights in the contract to anything that you cannot cover yourself on ahead of time, such as property inspection rights. You may feel pressure to do so. It’s too risky.
* Do not get caught up in a bidding frenzy. Establish your price points and evaluation of the property ahead of time.
Comment
Great advice. As someone who has lived here for over 20 years, I can attest to the fact that a buyer accepted my offer because I was a ‘financially well qualified buyer’ but probably more importantly was willing to rent back to them for as long as they needed to buy another home. The sellers did ‘rent back’ and my home’s value increased during the time they were paying my mortgage. Before I moved in they were incredibly gracious and told me about all of the utilities, neighbors and everything else I needed to join the neighborhood.
During another real estate transaction, we discovered that a different home was structurally unsound and had been remodeled without permits. Fortunately, we had not bought the home without covering ourselves for defects which would have cost us close to 15% of the purchase price. Money we didn’t have as the home was priced as an up to code ready to move in home.
As a buyer, my advice is to remember you need an agent you can trust and also be aware that whenever large amounts of money are involved, do not blindly trust the seller. Verify permits, etc.