It is called an escalation clause. It is an addendum written to accompany an offer, you can specify the amount of overbid and limit. The bad news is that the seller knows and there is no way to stop the seller from telling other buyers about your plan.
I would suggest a different strategy: In any given market a fairly large number of homes are overpriced. How do you know? Because if there were priced correctly, they would be sold. So pic some homes with long market times, have your Realtor approach the listing agent, find out why they are selling, when they need to move, and then present an offer, with comparable sales to make your case, and make the offer at market price.
In answer to your question, yes you can make an offer that is $1.00 over the highest offer and you should most defiantly put a cap on the amount that you are willing to offer. Unfortunately as Joan has indicated this may not be the answer to your dilemma. There is a new law regarding the FHA flipping rule (but there are guidelines) which might help make more properties available, but until the banks release more of the properties it still might be a problem for you to secure a property.
I know it is tough out there to buy a home. I am out there every day showing properties to buyers and everyone is getting frustrated. I would not recommend bidding $1.00 over the highest offer. This will not necessarily get you the house. There are many factors to be taken into consideration. There are buyers out there who have all CASH, yes you heard me, CASH, to pay for a house. So, it would not matter if you bid $1.00 over the highest bid. Sometimes all cash offers are even a bit lower and the reason sellers go with them is because they can close sooner and there are typically no contingencies.
Then, there are the conventional offers which typically have more money down than an FHA loan. When a seller sees this, they see that the buyer is more committed as they are putting down more money. Times are hard right now for realtors as well. We can work and write many offers and nothing gets accepted. The bottom line is that you need to keep trying. Persistence pays off in the end. Don't fall in love with any house until you have opened up escrow.
My advise is to have your agent run comps (comparables) for homes that have sold that meet the same criteria as the home you are writing an offer on. This way, you know what the price should be when it sells or around there. Of course, there are always the buyers willing to pay more than the appraised value to which brings up a whole new topic! However, my advice is to try try again. It will happen, you just need to get out there when something is first listed, get an offer in, stay within your price range, or square footage (prices right now are not really reflecting what the homes should sell for).
You will get into a home, be patient and most but not least don't give up. Home prices are the lowest I have seen in a long time along with interest rates. It will happen!
Joan Patterson, B.A., G.R.I., A.S.P., Realtor, License #01431647
Keller Williams Realty
Julie Lozano, Realtor
Prudential California Realty
If it helps you any, you are not alone in any regard in your home shopping efforts. Many, many buyers are being outbid on properties for months on end. It is a time consuming process for all involved but a necessary one if you truly intend on owning a home in the somewhat near future.
Remember that the homes that are being sold are purchased by buyers who are well prepared, well qualified with documentation to prove it, not asking for any repairs or concessions and making offers well above the list price ($10,000 - $30,000+ over). You also need to be patient and determined. I promise that you will prevail with the right amount of these factors involved and a good Realtor to help you through the process.
Best of luck to you. And, I wouldn't try Ebay. No warranties and many scams. Traditional home buying practices with a bit of "kick" will do.
Diane Wheatley, Broker
I did not see the show however there are some companies that require a close written bid, I havenâ€™t seen this process for about 3 years. If that was the case, then yes they could do a written bid that says $1.00 over the highest with a cap. If more people do that, then who ever has the highest cap will get the bid. That would be the only way that I am aware of a bib being able to be written for a $1.00 over.
Now as Tisza said if you have an agent who is willing to talk to the other agent and make sure that you can be presented in the best light. You need to be pre qualified, have proof of funds and have an agent who knows how to write a good offer that shows they know what the transaction process is, and then you have a good chance of getting your offer accepted. That offer would be made with a specific dollar amount. Also when speaking to the other agent, letting them know that you are very interested and asking them to not count you out but to please counter if necessary, sometimes works.
Your best option is to work with an agent who understands the market and the real estate transaction and one who can explain it to you.
If you are looking for that agent, I would love to apply for the job.
Yes, you can do this in California. Theoretically, if a seller gets multiple identical offers and one offers $1 more than any competing offer, that buyer has the highest offer. In reality, the offers are not likely to be identical in price and terms. By offering an amount "higher than any competing offer," you could stay in the running when there are many offers. Just keep in mind that other buyers may be doing the same. When there are multiple offers in the same range, the seller's agent probably will ask every prospective buyer for their "highest and best" offer.
This is a frustrating market for buyers. Ask your agent why he or she thinks other offers are accepted over yours and to recommend a strategy that will be more successful.
Well, I didn't see the show she is talking about but I can make a pretty educated guess about what was going on there :-) She may have been seeing a property that was being sold by auction not a home being sold in a more traditional manner. This would account for the "cap" on the high dollar amount. And, yes it is indeed legal to bid one dollar over. Basically, if the seller and the buyer both agree, unless it is forbidden by local, State or Federal law, its legal.
Here's the thing, the rules (and the contracts) say that as an agent, unless I am forbidden by my client in writing, I can tell someone the highest dollar value for an offer my seller has received but I am not allowed to tell what the lowest amount they would accept is. If I am representing a buyer; I am not allowed to tell what the highest amount they would be willing to pay would be.
So, what that should mean is that I could ask an agent representing a home you wanted to buy to tell e what the highest amount they have been bid on the home is so that we could write an offer that was just a little higher so that you would "win".
Unfortunately, most agents haven't ever really read the contracts that they have their clients sign so they don't realize that this is what they can and should do. After all, seller's hire us to help them get the most we can for their home. Since they don't know the "rules", there are heaps of folks out there who don't play by them.
I always ask what the current highest bid is, and I am usually pretty good at getting that information (which is why my client's usually "win"). I am also very good at helping to educate my clients so that they understand pricing and what the market is telling us about value in order to help not write offers that can't be accepted.
While I don't know your personal circumstances, I can tell you why you have been unsuccessful thus far in finding and ultimately buying a home. It truly all does come down to price and if you are consistently being out bid on homes you want, you might be undervaluing these homes. A good, long, hard look a the market area you are shopping in and an in depth analysis of what you find regarding pricing might be able to help you revise your strategy in order to help lead you to success. Remember, a good agent will be able to not only help you get what you want, they will also be able to help you get it at the best price the market supports and also to try to get you additional concessions from the seller like credits, repairs or allowances for them, and closing costs among other things.
Jumping back for a moment to the auction scenario... These are very different beasts than a traditional sale and can bring with them some great opportunities but also a whole host of new challenges as well. Personally, I am not a fan of buying or selling a home via the auction process. I don't think it gives the buyer of the home the kind of protection I want to see my buyer's have. I also really don't like seeing large amounts of money being put on the line without an assurance of success.
And, there are some costs that, while they might not be truly hidden, certainly aren't put out there in the forefront like the buyer's premium which is an additional charge that can range for a few thousand dollars to 5% or more of the value of the final purchase price added on top.
In an auction, the costs and expenses of the sale are paid for by the buyer, including any and all commissions the buyer's agent receives. In a more traditional sale, there are some fees associated with the purchase that the buyer does indeed pay (called closing costs, like the escrow fee, title insurance, prorated taxes, etc.) but the actual main expenses of the sale, including the agent's commission is paid by the seller.
I hope this helps somewhat. If you have additional questions or need additional help, please feel free to get in touch.
Take care and have a great day!
Tisza Major-Posner, Realtor DRE#01784679, IVPG Realty (909) 837-8922
Sometimes even the highest bidder will not get a house if it is over the appraised value. There have been numerous bidding wars in my area over homes. It is not always the highest offer that gets the home. Sometimes it is the way the offer is written as well as how much money is put down and the type of financing. It totally is up to the bank or the seller as to which offer they feel comfortable with. Sometimes even the pre-qualification letter means a lot more if it is from a well known lender instead of ABC Mortgage because many times sellers worry about the buyers being able to obtain a loan.
So, no, bidding $1.00 over does not actually always get the offer accepted and also many times, you will not know who has the highest bid. The reason you are getting outbid is the fact that inventory is down and there are many people in the same position you are up against. There will be more offers if the supply of homes are down.
Don't get discouraged, everyone is in the same boat right now. It is frustrating for everyone right now, but I heard more bank homes will be coming on the market soon!
Joan Patterson, B.A., A.S.P., G.R.I., Realtor
Keller Williams Realty
8250 White Oak Avenue, Ste 102
Rancho Cucamonga, CA 91730