Friday, December 19, 2014

Pressure Drop [Bidding Wars and YOU]

by Osman Parvez

It's hard to believe that a listing in December could generate five offers and go under contract less than 24 hours after hitting the market, but that's precisely what happened yesterday. 
We Expected This to Happen

We did everything right.  My client and I saw the house the same day it was listed.  They decided they wanted it, so we wrote an offer and sprinted to the finish line.  

Our offer featured a shiny cover letter highlighting its competitive strengths.  Our lender letter was from a well known, local credit union. My strongest Additional Provisions were in place, designed to keep us at the bidding table.  Our offer was above asking and featured an escalation clause, fifty percent down, short closing date, limited inspection, and optional increased buyer liability for default. We delivered it by the submission deadline.   

But it didn't happen.  


Instead, This Happened
Yesterday afternoon, I got the "sorry, let's just be friends" call.  

According to the listing agent, all five offers were similar in price and terms.   The sellers accepted the first offer at the table without countering and without checking to see how high my buyer was willing to go.   

I know.  It doesn't make sense.   

Why would the sellers leave money on the table?  I have my suspicions.  I can read between the lines.  I could speculate but instead, let's stay positive and focus on the future.  


Best Practices for Bidding Wars
When a hot property hits the market, it's time to drop everything else.  In my mind's eye, it's like being in the Situation Room.    Every single moment counts. 

The pressure is intense.  All that pressure has dropped on you. 

Do you know the intrinsic value of the property?   How high should you go? What's the price trend in this neighborhood?   What's the depth of market for a property of this value in this location?  What contractual contingencies should you waive and which ones should you keep?  Have you done your homework and do you fully understand the contract?   Strategy - are you going to choose "highest and best" and risk money left on the table or will you use an escalation clause?   What other strategies exist?

The time to discuss market value and negotiation strategy is NOT when you're in the house.   You should have done it weeks earlier.    Agents often use second (and third) offers to the table as leverage to improve the first offer.   Sadly, speed to submission is a competitive advantage.   


I like the pressure to perform and frankly, I get emotionally invested in the outcome.   I want to do my absolute best for my client.  As you can probably guess, I also HATE losing.   

The inventory shortage took hold (three years ago), and bidding wars are now the norm for desirable, well priced properties. After dozens of competitive negotiations, most of which were successful,  it's time to talk about best practices for buyers and sellers.   It's time to revive our Meetups. 



Want to Learn Best Practices for Bidding Wars?

Step 1:  Sign up for the Boulder Real Estate Meetup. Click HERE.  

Step 2:  Watch for an announcement in early January for our Meetup Date.  You'll see it here and on our Facebook page

Step 3:  Attend.  

I promise, you won't be disappointed.   This is what your agent isn't telling you.

OK, Toots. Sing it.  




image:  Philo Nordlund and Grey World
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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

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