Partying like it’s 2003. Multiple offers – Aargh!
“What’s going on inside that house?” passers-by wonder. “Is it Black Friday again? Do they have cheap TV’s or free iPads? Is someone throwing a party, and we weren’t invited? Or maybe all those people are still waiting to vote. No, wait. That was Florida.”
Nah. Nothing to see here. It’s just a new listing.
Lately, those of us who commit random acts of real estate for a living have been partying like it’s 2003. And by partying, I mean we have been spending our days and evenings and weekends lining up in various driveways waiting our turn to set our lascivious sights on a real, bona fide house for sale.
There aren’t many of those lately – houses for sale. And as we turn the corner on the brave new year of a recovering real estate market, the shortage of inventory will remain our biggest albatross.
Any agent with buyers in tow knows that the first thing one does when one sees a new listing hit the market is call the listing agent.
“How many offers do you have?” the buyer’s agent asks sheepishly, while simultaneously clinching a rabbit’s foot, rubbing Buddha’s belly, tossing a little salt over the shoulder, and praying for, if not redemption, a bit of good fortune. And granite counter tops.
“But we have only been on the market for seven minutes!” the listing agent replies.
“HOW MANY? SPILL IT, SISTER!”
OK. So I made that up. Sometimes the answer is “nine” or “fifteen,” but you get the idea. Supply and demand are just a teensy bit out of whack.
This morning in Scripps Ranch, for instance, there are a total of 27 detached and 8 attached homes on the market. Total homes on the ground? About 12,000. The last time I saw numbers like this was in 2003. Back in those days, God help you if the yard sign installer drove within five blocks of your home. The result was a thundering herd of agents and their buyer clients hurling purchase offers at your front door… just in case. People were afraid to roll their trash cans to the street lest they return accidentally under contract.
Multiple offers. Aargh! I have been on both the sending and receiving side too often lately. And believe me when I tell you that “fun” doesn’t begin to describe it, unless you consider watching the hopes and dreams of a dozen first-time buyers being extinguished in casual, reply-to-all fashion to be a real laugh fest.
So what is a would-be buyer to do? There is no magic formula to getting your offer accepted in a multiple situation, of course, but there are some things you should consider in order to have a fighting chance.
1. Do NOT wait until you find your dream home to sit down with your agent and go through the contract. You won’t have time. Do a dry run before you start looking. Familiarize yourself with the forms and the process. That way, when the time comes, you will be ready to point and shoot. Speed counts.
2. Do NOT wait until you find your dream home to begin considering how nice the neighbors are, how great the local school test scores are, and how competitive the prices at the nearest dry cleaner might be. You won’t have time. While you are driving the commute route in the morning, the evening, and on weekends just to “make sure,” while you are canvassing the neighbors about barking dogs and other demographics, and while you are polling your friends and coworkers about the merits of homeownership in light of recent events in Syria, someone else has purchased the darn house.
3. Do NOT wait until you find your dream home to submit all of your documentation to a lender. New listings – the good ones – last hours, not days or weeks. And no one will look at your offer without a solid pre-approval letter tethered to it.
4. Comps, schmomps. Of course you need to understand neighborhood values and comparable sale prices. But do not forget that we are in an (albeit gradually) appreciating market. Granted, there are some external unknowns that may impact our real estate market (rising interest rates, fiscal cliffs). But, for the foreseeable future, prices are not going down. More to point, when there are many, many offers on a home, offering below asking price is not a good strategy, because the fact that this home at it’s current price and condition has attracted numerous interested buyers should tell you something about perceived market value. You aren’t going to steal it. Either you want it or you don’t.
5. A home is worth what it is worth to you. Let me explain. I recently had clients ask me what the “right” price was for a home they were interested in, what it was “worth” – this, a home that already have four offers. A home is ultimately worth what a buyer is willing to pay, and with multiple offers, it will be worth something different to different people. The “right” price in a multiple situation is the price at which you would be happy to consummate the purchase if selected but would be comfortable sleeping nights knowing you gave it your best if your aren’t. In other words, take your best shot. You are not operating from a position of uber-strength here. The whole “let’s leave a little room for negotiating” strategy is not necessarily the best strategy in multiple offer scenarios, as you may never get the chance to don your Donald Trump hat.
6. Do NOT muddy your offer with stupid stuff. If the seller says that their washer and dryer do not convey, do not write an offer asking for the washer/dryer, the pot rack, the sectional sofa and the family schnauzer. And give them stuff that doesn’t cost you anything – shorter timeframes or a larger deposit. Sometimes, it comes down to the devil being in the details.
7. Pick a good – no – a GREAT agent. I cannot emphasize enough the importance of having a seasoned, experienced agent on your side. You see, a whole lot of stuff goes on behind the scenes. A great agent is lobbying for you – groveling, even, on your behalf. They are talking to the listing agent (I know; it’s crazy) — about the seller’s expectations, wants and needs, and about the nature of the competing offers before writing the offer so that yours might have the best chance of standing out. They are following up after submittal – to confirm receipt, yes, and to answer questions and generally ensure that, worst case, you get a counter offer. It is their job to try and keep you in the game. And the offer has to be well written. As a listing agent, I am always amazed at the offers I receive that are incomplete or incorrectly filled out. I am amazed at how many offers mysteriously show up in my inbox with no warning – no call or communication from the agent prior to or after submittal. This kind of stuff puts a buyer at a disadvantage, because no listing agent wants to work with a buyer’s agent that appears to be less than competent. They are going to have to live with them for the next 30 to 45 days.
Do all of these things, and you may still end up on the losing end of a multiple offer situation. If you need a loan and three other buyers are sitting on buckets of gifted cash, there simply isn’t much you can do about it. But, do these things, and you will have at least have a decent shot.