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use some of today’s popular real estate websites for information, you may end up basing your research on incomplete or out-of-date information.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 price.
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.