How to win a bidding war in a seller's market? If you are buying a home in this market you are feeling this pinch for sure!
Every offer that you make and every home that you see has multiple offers on it. A bidding war is a standard operating procedure and you feel as if you've won the lotto, should the sellers elect to choose your offer, that is probably tens of thousands over the asking price, and a bit more than you are comfortable paying.
Everyone looking to buy a home in this market is in the same position as you: You go out with your agent to look at homes, fight the crowds at the Open Houses, which you might feel should be more aptly named “Mad Houses.” Social distancing, huh? You just had to squeeze in to see a master bedroom with 30 people in it and a 2-year-old pitching a fit in the middle of the floor. And while you always wanted a large master you are still unable to tell if your bedroom set will fit in there.
After getting home, you and your spouse discuss the homes you've seen and which home or homes you would like to offer (sounding familiar yet?). You call your agent to discuss the comps in the area and the price you would like to offer and your agent says something like, “I spoke to the listing agent and they have fifteen offers so far up to thirty-five grand over asking and are asking everyone who submits an offer to release all contingencies and pledge their firstborn as the down payment and release 10k nonrefundable deposit to the seller to have your offer considered.”
Okay, maybe not that bad but you get my drift.
So what can you do as a buyer to offset this, and maybe bring a bit of sanity to your life?
As a real estate broker and agent and team leader here is the advice I give my clients:
Talk to Your Real Estate Agent and Discuss Your Strategy
The very first thing you need to do is have a meeting with your agent to discuss strategy, ability to pay, the price value of the homes you are shopping for, areas or alternative areas, housing types that you are willing to consider, creative offers that you can make to appeal to the seller, availability of off-market properties and your agent's willingness to seek them out for you and what your expectations can be once you head back out to look at homes.
This step is critical so don't skip it! If your agent tells you that they don't think this is necessary, consider getting a new agent. If your agent is unwilling or unable to do this, call us we can help (714) 406-1414
Skipping this step will lead to wasted time and effort and will probably leave you and your agent frustrated. Worst case you will end up frustrated and not buying. This stinks because it means that you are still renting a home and paying someone else's mortgage.
Be mindful of Price and Your Ability to Pay
Let's talk for a second about price and ability to pay. Let's say that you are pre-approved for a mortgage of up to eight hundred thousand. You go home, hop on Zillow and start looking for homes priced up to eight hundred thousand. Stop doing that! Rather when you are having this critical conversation with your agent, look at how much over asking price homes in the area that you are looking in are going over asking price for.
For example, if you are looking for a 3+ 2+ single-family home in the city of Anaheim under eight hundred thousand. In the last ninety days, thirty-eight have sold and of those thirty-eight, thirty have sold over the asking price for an average of fifty thousand dollars over the asking price. So conversely, if you are approved for up to eight hundred thousand, you should be shopping for a home in the seven hundred and fifty thousand range to allow some room in your price cap for offer escalation.
If your agent is unwilling or unable to do this market analysis for you call us, we can help (714) 406-1414. It's free and you are under no obligation to buy a home from us.
Be Open-minded About Other Areas and Types of Homes
Next, let's talk a bit about areas and types of homes. Realistically something is going to have to give in this area.
So I have a story about some amazing buyers that I am working with. They are an incredible young family with two beautiful daughters, the oldest of which is about two years old and who quite frankly warms my heart every time I see them or talk to them, and she is so excited to see me. “Lucas!" she exclaims when I walk up or she hears me on the phone. I love it.
They want to buy here in the OC in order to keep the commute to a reasonable drive. They also would prefer a detached single-family. We have made several offers on homes that they love only to have lost out to a better offer. Yes, I know you might be thinking, “He's going on about offer acceptance and talking about not getting accepted,” no guarantees in life folks, all I can do is advise.
I have recommended several times that they look at some homes in adjoining areas with a reasonable commute such as Corona or Chino Hills, and they have been adamantly opposed to it. I know that for the home they desire at a price that really fits, what they want these areas are the best fit and have more homes available, so therefore they have a better chance of getting their offer accepted. But as of today, they are still resistant to it. Having gone through this a time or two before, I know that should they come around it will make finding the right home for them much easier, and in the end, they will love the area and the home.
The bottom line is, please be open to alternative areas suggested by your agent. If an area change is not possible due to schools, etc., then for sure be open to alternative housing types such as a townhome or a condo in the area where you need to be, with plans to move up to the type of home you really desire in a few years, once you gain some equity and maybe the market is in a different place than it is right now. Remember your home right now does not have to be your home forever. Buying now and building equity while you wait to buy that forever home is always the better move than wasting money on rent and watching everyone else enjoy the benefits of homeownership.
Look into Off-Market Properties
Last but not least let's discuss creative offers and off-market properties. Talk to your agent about what you can do to make your offer different or stand out. Make sure that they are aware of any special needs the seller might have that you can easily accommodate such as time of possession or a longer or shorter escrow period.
As a listing agent whose main business for over 10 years has been listing and selling homes at a high level, I can tell you that the agents who just show the home and send a random offer with no communication beforehand, get their offers accepted way less than the agent who is communicating with us as to what our seller's wants and needs are, and where they have to position their offer in order to get it accepted.
If your agent is unwilling or unable to do this, call us we, can help (714) 406-1414.
First, let me say that when I speak to people about off-market properties they immediately think that they are going to get something that is priced significantly under market value. Stop it! That's not realistic. What you can expect from an off-market property is to make at least a fair market, or a bit over a fair market, offer to a seller who is not currently marketing their home but might be willing to listen to your offer for the right price.
The advantage to you as the buyer is that you are only negotiating with the seller, and not against the fifteen other people who would be making an offer if the home were on the market.
Talk to your agent about finding these homes for you, and if they are unable or unwilling to do so, call us we can help, (714) 406-1414.
This is simple to me: if you do the same things as everyone else, you should expect the exact same results! The solution for us has always been to look at what others are doing and the problems that it creates and solve those problems by simply doing things differently.
Please feel free to call us to discuss your home buying journey and to see how we can help.