Bidding wars: The phrase strikes glee in the hearts of
sellers and dread in the hearts of buyers. In Needham over the last several
weeks, I know of at least five bidding wars. With inventory at historic lows,
there are sure to be more in the coming months. So what do you do if you are a buyer faced with this tricky situation?
First, be prepared. Have a preapproval letter and make sure
it’s current. Know how much you can pay and when you can close. Being prepared
also means knowing exactly what you want in a house and exactly what the market
is doing. Visit open houses, not just in your price range, but higher and lower
ranges as well to give you perspective. Follow sales closely. This is when it’s
wise to work with a good, local agent who is tracking sales and may have inside
knowledge on what’s happening in the field. If you try and use some of today’s
popular real estate websites for information, you may end up basing your
research on incomplete or out-of-date information. Go over all the offer
documents with your agent ahead of time so you know what you’re signing when
the time comes.
Be prepared to act fast. As soon as you see a new listing hit
the market, make a plan with your agent to see it as soon as possible. If the
sellers are only allowing people in at the first open house, becoming common in
this climate, get there as soon as the open house starts. Make sure your agent
knows you are going so he or she can prepare some offer documents in advance.
When you make the offer, make it clean. Don’t jumble it up
with a series of requests or ask for any of the seller’s possessions. Consider
waiving some contingencies if you can. Most importantly, be as flexible as
possible with a closing date. This can be just as important to a seller as
If you do find your offer is one of many, there are three
possible scenarios as to how it will play out, all controlled by the seller.
The first scenario, though most unlikely, is the seller will choose an offer
immediately from what is on the table. It happens, so if you haven’t put your
best foot forward, you might miss out. The next scenario is the sellers will
begin to negotiate all the offers individually, back and forth. But this is
time consuming and in the heat of the moment, most sellers just want to know
what’s the best offer they can get. This leads to the third scenario; the best
and final offer.
Best and final allows buyers to decide the most they are willing
to pay and under what conditions. It allows the buyer a bit of control and an
opportunity to ask some hard questions. How much do I love it? How much am I willing
to pay for it? Most importantly, how much would I be willing to lose it? I
always advise to offer the highest price a buyer is comfortable with but one
that won’t make them cry if they find out somebody else got it for just a bit
more. This is also a chance to clean up any contingencies or dates to make the
offer more appealing to the seller.
If you lose, be prepared to be disappointed. If you win, be
prepared to question yourself about whether you spent too much. A common
reaction. But if you are prepared with market knowledge and set out in your
mind how much you want to pay for the
house from the start, you shouldn’t feel any buyer’s remorse, just excitement
at the purchase of your new home. It’s a new real estate landscape. The tide
has turned to a sellers market in a wide band of price ranges. The key for
buyers today is to have a plan.