Going on three years now, the current seller’s market has allowed agents to hone their bidding war skills – something the agents at Golden Real Estate have come to do quite well. In this week’s column, I’ll share some of ways we find success for buyers in this challenging market.
Of course, agents from other brokerages use many of the techniques I’ll describe here, and occasionally we learn from them, as they do from us. In our weekly sales meeting at Golden Real Estate, we share what works and doesn’t work, cognizant of the fact that what is effective in one situation might be ineffective in another.
The more contingencies buyers waive, the stronger their offer will be. The first and biggest contingency is the sale of an existing home. A buyer may want to sell his current home in order to purchase the replacement home, but if he can demonstrate he doesn’t need to do so, his offer can omit this contingency. If the contract includes a loan, his lender can provide a letter indicating he is qualified or pre-approved for a loan without selling his current home. Even better is when a buyer can show liquid assets that can be sold in order to pay cash at closing. If he goes under contract with, say, a 45-day close, and allows us to price his current home correctly, it’s entirely possible that we can negotiate an earlier closing on his current home than on the new home. Under such a scenario, although the assets are in place to complete the purchase without selling his current home, the buyer is able complete the transaction without having to deploy those assets or close on a new loan. We have accomplished this for many buyers.
For example, I had a buyer who was already under contract for a new home in Arvada. I listed his existing home for $275,000, got competing offers and was able to negotiate a sale at $315,000 with a closing the day before the seller’s closing on his new home. He had arranged a bridge loan to buy the new home, but was able to cancel that loan and pay cash for the new home. That’s just one of many such successes we’ve had.
Waiving inspection and appraisal contingencies are common practices when competing with other buyers, but my preference is to leave those deadlines in the contract and include additional provisions that 1) the buyer will use the inspection deadline only to terminate, not to demand any repairs, and 2) the buyer will not demand a price reduction if the home doesn’t appraise for at least the contract price. Note, however, that if you inform the listing agent you are going to terminate because, say, the furnace needs replacing, the seller is likely to make that repair, knowing that they’d have to disclose that condition to the next buyer and they don’t want to start over. A similar scenario can often work if there’s a major appraisal problem. Perhaps the seller will compromise with a minor price adjustment, if not lower the price to the appraised value.
“Love letters” written by the buyer to the seller can pose Fair Housing problems but are still a common practice — and they can be effective. Just this week I saw my first one in the form of a video clip showing the cute couple standing next to their wedding picture on the wall. (The seller accepted their offer over several others.) In composing the buyer’s message, it helps if you know something about the seller. I recently submitted a buyer’s offer that was $20,000 below the listing price, despite being told there were two other offers. We didn’t submit a “love letter” but I did say in the cover message that my elderly buyers loved the home because they’d be close to their daughter who lives in that subdivision. To my surprise, the listing agent said that if we could raise our offer by $10,000, the seller would accept it over other offers they received.
At Golden Real Estate, we do have one “ace up our sleeve” when the sellers still live in their home and are moving locally. We offer free moving for the seller using our own trucks, moving boxes, packing materials, and even, on occasion, the labor. This has won the bidding war for our buyers more than once!