Ken compared some of today’s tactics to those used at the peak:
They’re back after barely a decade: escalation clauses in real estate contracts, “naked” contingency-free offers and low-ball-priced listings designed to pull in dozens of bidders and turn routine sales transactions into auctions.
I hope listing agents put their foot down about the escalation clause. Every buyer would pay an extra $1,000 if that is all it took to win, so it isn’t a fair way to determine the winner. Listing agents should demand that each buyer commit to a specific price, because those deals are more likely to stick.
No-contingency offers are great for the buyers with loads of money and guts, but wouldn’t you offer less than your maximum to compensate? To encourage more buyers to go this route, it would be smart for sellers to provide a home inspection report at time of listing. The goal is to sell the house, not to collect deposits from failed escrows.
You don’t have to list your home below market today to attract a crowd, just pricing it at the comps will put you ahead of other seller nearby. Either way, make sure your listing agent has specific and adequate strategies on how to conduct a bidding war.
Here are other ideas – for sellers:
1. Provide unlimited access to the property immediately.
On the Manzanita listing, I told the sellers to leave town on Friday, and come back on Monday prepared to make a decision. We communicated over the weekend in case there was a reason to change course, but the strategy worked great. We reviewed offers by email as they came in, and asked all eight to make their highest and best offer. By the time the sellers got back on Monday, we had the H&Bs and picked a winner.
2. Make sure your agent is ready, willing, and able to field inquiries.
The buyer-agents start calling, emailing, and texting within an hour of hot new listings hitting the MLS, if your agent is out to lunch they will burn the most precious first few hours and days of peak urgency.
3. Put an attractive price on it.
Buyers have no problem over-bidding, so resist the urge to tack on a few extra bucks. Chances are good that you added some icing to your cake already, so avoid the pricing overdose! You want/need max bidders so your bidding-war strategy can work effectively – there is nothing worse than having only two low offers, and when you try to get them to bid up, instead they bail. An attractive price will bring 5-10 bidders, and put more heat on them, not you.
Here are other ideas – for buyers:
1. You need a teflon memory.
If you keep remembering comps from last year, you won’t be buying a house anytime soon. I regularly see houses selling for 20% to 40% more than last year’s comps – it is a new day, and you can accept it, or wait.
2. Flash your cash.
The listing agents are telling the sellers to take the strongest offers, determined by who has the most cash. Prepare to provide a bank statement to substantiate your strength, and get fully pre-approved in advance if you want to utilize paragraph 3k.
3. If you want to sell your old house concurrently, you have a problem.
If your agent can do some fancy dancing, you might be able to pull it off. But it is so competitive, it would be a shame to miss the perfect house because you didn’t have this part handled in advance.
Admittedly, it is a quandry – if you sell first and rent, you have to move twice, and you could get priced out if you can’t find a replacement quickly and the market keeps moving.
The other options:
A. If you list your home for sale with an open-ended seller contingency to find suitable housing, you might lose some buyers and sell for less – and if you didn’t find a house to buy, you would have burned up your precious first-time-on-market urgency.
B. Have your house ready to sell, and when you find a suitable replacement, list your house for sale in the same hour and hope your agent is lucky!
C. Make an offer-to-purchase, contingent on selling your existing house – but don’t be surprised if most sellers send you to the back of the line.
Your agent should be able to address the options and offer some advice on the best choices.
Get good help!