Agents, Any advice on how you advise your clients to bid in multiple bidding situations? Do you have a formula for how much to go over price?

Asked by Terry Bell, Santa Rosa, CA Sat Aug 21, 2010

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13
Tom and Joan…, Agent, Boston, MA
Sun Aug 22, 2010
BEST ANSWER
Terry:

In multiple bid situations it is not always about the money. I believe that the terms of the offer can be just as important. If I have a client that is really serious then I might have them hire a home inspector to do a walk through before making the offer. We make sure there are no major road blocks and then we can submit an offer with out an inspection contingency and if we feel the financing and appraisal will be good we can offer without a mortgage contingency.

In my world, the money is important, but closing is more important. The more Domino's that are taken out of the equation the more value the offer has. Remember to get outside of the box in this market. Best
1 vote
Scott Sheldon, , Petaluma, CA
Thu Sep 23, 2010
Get the Pre- Approval In and call the listing agent till they say "Yes"! Oh, yeah get the 20 day close on the loan too.
1 vote
Gina Storeho…, , Charlotte, NC
Mon Sep 13, 2010
Terry,

Since it's been a few weeks since your post, you have probably already moved forward with your bid. But I wanted to add my two cents because you will probably be in this situation again. I agree with many of the other posts below. I first have an honest conversation with the buyers about the CMA and then discuss what their comfort level is. Suggesting they go with their highest and best offer up front, both in price and with the most favorable terms that will entice the seller (i.e., closing date, inspection period, EMD, etc). Ultimately, I suggest they offer the highest price they are comfortable with while knowing they won't beat themselves up if they don't get the home. I always add my personal belief that everything happens for a reason, and although they might not have the winning bid and it will be hearbreaking, hind sight is always 20/20. There is a better home out there we haven't found yet and we need to jump right back on the saddle and start looking again.

I also wanted to add a little tip that I haven't seen anyone mention. I try to appeal to the sellers emotion by having the buyers write a letter about themselves and their move. If they are buying their first home and recently married - they write about starting their lives together, what a great family home it will make and how they can imagine someday having the kids play in the backyard. If they are move-up buyers - they write about their reason for moving, which is usually more space for the kids and how the area or schools appeals to them because of the kids. If they are retiring - they write about their dreams for retirement and how the house will be the perfect fit to spend their golden years together. Of course, it is personalized to each situation and I work with the buyers to make it as appealing as possible. This draws on the sellers desire to see their home sold to a "good family" and that it will be loving taken care of for years to come. If the other offers are close on price and terms, this can set your buyers apart. I have had sellers tell me at the closing table that they accepted our offer because of the letter!!

I hope your bid won!!!!

Gina Storeholder
704-299-5254
gstoreholder@cbunited.com
1 vote
Jen Butel, Agent, Austin, TX
Mon Sep 13, 2010
It depends on the property. When bidding on foreclosures for my investor clients, there may be multiple offers, but that usually means multiple low offers, so we often use the 65% of ARV, Less Rehab costs formula. For my more traditional homebuyers, it is all about the market value and submitting a prequalified offer with terms that are agreeable to the seller. If my client really loves the place and will be heartbroken if they can't own, "THIS HOME," we will have a discussion about the pricing and market value and go from there, but I don't have a formula.
Web Reference:  http://www.jenbutel.com
1 vote
Kamal Randha…, Agent, El Sobrante, CA
Tue Aug 24, 2010
I agree with Diane...she hit it right on the dot! Can you please give me a thumbs up? LOL

Kamal Randhawa
Broker
510-932-1066
1 vote
Dianne Scott, Agent, Eustis, FL
Sun Aug 22, 2010
Hi Terry,

First, I have them determine how they are going to feel if they lose the bid. Then, they have to decide what is the most they are willing and able to bid. They have to not get carried away get caught up in the frenzy. Then, make sure what they are offering makes sense from both the buyers' and sellers' point of view. Are they grossly overpaying for the home, or are they grossly under market in their bid? Under bidding mostly seems to happen when the home is priced well under market value If they can afford to come in at market, and they just can't live without the home, have them go as high as they possibly can within reason, up to or slightly over market value. Then, if it doesn't work, it just doesn't work. If they have given it their best, then they won't beat themselves, or you, up over the loss. If they are financing, an over bid will still have to appraise. Explain that they are running the risk that the Seller won't reduce the contract price to the appraised value, but that it gives them best shot at getting the home. Chances are the Seller will realize that the home won't sell for that price to anyone else either, and will just meet the appraised value. Be sure to simplify the contract as much as possible. If they are changing out the appliances, don't put the appliances. If they are not intimidated by the condition, don't ask for inspections or be willing to get them done in 3 days, etc. Sellers like simplicity, and the fewer contingencies, the better. Also, when I represent Sellers, I like larger deposits and pre-approvals. As mentioned before, be sure to have the buyers' ducks in a row before putting in a bid.
Web Reference:  http://www.DianneScott.com
1 vote
Jenet Levy, Agent, New York, NY
Sun Aug 22, 2010
Great question. Good point already brough up is it is not just the purchase price, but the whole package. Stronger financials on the buyer can make an offer more desirable than a higher offer from a less qualified buyer. A competitive bidding situation is always stressful, and it's easy to get carried away. Do you have only one opportunity for a best and final, or will you be presented with what you have to top? Slightly different strategies apply for each situation.
1 vote
Ryan Smith, Agent, Murrieta, CA
Sat Aug 21, 2010
Hi Terry,

Good question. I would do a couple things depending on the loan type. Cash or conventional buyers tend to stay around asking because they have the clear advantage. FHA and Va buyers usually go somewhere between 5 to 10 percent over assuming the asset is already listed at market value. That's my formula in my market area and I have been successful. The key I found is talking to the listing agent and a lot of follow up with the listing agent.

good luck
Chris Blasic
Realty World
1 vote
Dave Birkett, Agent, Santa Rosa, CA
Sat Aug 21, 2010
Pre-approval is the key. It's all about credibility in todays market. Streamline the purchase contract and make it comfortable and reliable at a glance. The formula is to be a buyer and not just an offerer. After you've done it a few times, you'll learn.
1 vote
Monique and…, Agent, Beverly Hills, CA
Sat Aug 21, 2010
Hey Terry,

If the comps support multiple bids go for it. Go over asking based on comps your client considers just as good no more than 3 months back

Monique Carrabba
The Carrabba Group
Keller Williams Hollywood Hills
mcarrabba@kw.com
(323) 899-2900
1 vote
Scott Sheldon, , Petaluma, CA
Thu Sep 23, 2010
Get the Pre- Approval In and call the listing agent till they say "Yes"! Oh, yeah get the 20 day close on the loan too.
0 votes
Scott Sheldon, , Petaluma, CA
Sun Sep 12, 2010
I agree with Dave pre-approval, how about a 20 day close? That's aggressive:)
0 votes
Dianne Scott, Agent, Eustis, FL
Sun Aug 22, 2010
Hi Terry,

First, I have them determine how they are going to feel if they lose the bid. Then, they have to decide what is the most they are willing and able to bid. They have to not get carried away get caught up in the frenzy. Then, make sure what they are offering makes sense from both the buyers' and sellers' point of view. Are they grossly overpaying for the home, or are they grossly under market in their bid? Under bidding mostly seems to happen when the home is priced well under market value If they can afford to come in at market, and they just can't live without the home, have them go as high as they possibly can within reason, up to or slightly over market value. Then, if it doesn't work, it just doesn't work. If they have given it their best, then they won't beat themselves, or you, up over the loss. If they are financing, an over bid will still have to appraise. Explain that they are running the risk that the Seller won't reduce the contract price to the appraised value, but that it gives them best shot at getting the home. Chances are the Seller will realize that the home won't sell for that price to anyone else either, and will just meet the appraised value. Be sure to simplify the contract as much as possible. If they are changing out the appliances, don't put the appliances. If they are not intimidated by the condition, don't ask for inspections or be willing to get them done in 3 days, etc. Sellers like simplicity, and the fewer contingencies, the better. Also, when I represent Sellers, I like larger deposits and pre-approvals. As mentioned before, be sure to have the buyers' ducks in a row before putting in a bid.
Web Reference:  http://www.DianneScott.com
0 votes
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