The Red team reported that of the potential home buyers they surveyed, the biggest concern was competition from other buyers. There is an easy fix – work with a good agent who has experience with winning a bidding war.
Category Archive: ‘Bidding Wars’
More talking while driving….safely:
Our listing on Cherokee closed yesterday.
It was the 2,527sf three-story house that backed to the I-15 freeway – the one where we had 200+ people attend the open house.
The final tally at the Zillow page was 3,745 views, and 77 people had saved it as a favorite home, which are both extremely-high counts. (Josh was the seller)
Yesterday, we marveled at how the bidding war ended up. The listing had hit the MLS on a Saturday, we had the open house on Sunday, and by Monday we had six offers.
Because not every bidder knew there was competition, we gave everyone the chance to submit their highest and best offer by Tuesday at noon. I like to keep a tight timeline and promise buyers that we’ll select a winner promptly in order to retain as much urgency as possible.
The list price was $549,000.
At the end of the highest-and-best round, we had a $565,000 financed offer, a $570,000 cash offer, and a verbal $571,000 cash offer (the other three stuck with their $549,000 or $550,000 original offers).
The agent who wrote the $570,000 offer was 80 years old, and was using forms from five years ago. I actually had to hand-write his original offer for him, but thankfully he was able to scratch out a one-sentence H&B.
Because I had concerns whether he could make it to the finish line, I pressed the $571,000 agent to get his deal in writing. But he called back with bad news – his buyer, a savvy, multiple-property owner, decided it was too rich.
I called back the $570,000 agent, knowing that I’d be carrying his luggage for the next three weeks. But he had more bad news – he took his buyer’s family to the house, and they vetoed the sale.
With the other three bidders unwilling to budge, we signed the $565,000 financed offer…..before they changed their mind!
Most people would have been tempted to hold out. Yes, it would have been sexier to close escrow in 2-3 weeks with a cash buyer. But after 200+ open-house attendees and 50+ showings, are there two in the bush?
Though my phone hasn’t rang like this since back in the REO days, there was no disputing the facts – most people didn’t make any offer, and those that did weren’t in love enough to go crazy. It was a trend that was likely to continue.
In spite of casual observers telling me we were giving it away, or it was too cheap, the actual results were telling. The duty of the listing agent is to check the ego at the door, and focus on the facts.
We made the deal at $565,000, and it stuck.
Seen at Mish’s blog:
A Point Grey house with a stunning view has sold for more than $9 million — $1,172,000 over the property’s list price. The 1928 house on Bellevue Drive was offered for sale for $7.888 million.
Realtor Bo Park said the seller received 11 offers on the property after the first open house weekend. They were all cash offers with no subjects and most were for more than $8 million.
All but one of the offers were from Chinese buyers, she said.
“It was fast. I was surprised by the number of offers and the price it sold for,” said Park, a realtor with Sutton West Coast Realty.
“It was the view. It is spectacular.”
She said the house was an estate sale and the buyer plans to rent out the place then rebuild within a couple of years.
“The house needs a lot of work — at that price it makes sense to rebuild,” Park said.
Last week, a Kitsilano house on a standard city lot sold for $735,000 more the asking price.
“I’ve been doing this for close to 25 years and I’ve never seen anything like it,” Park said.
“There is not much product out there — that’s why things are so crazy. How long will this last? I have no idea.”
A twitter guy wants a yes or no answer to whether it’s a good time to buy.
— Bill Wendel (@RealEstateCafe) April 6, 2016
He claimed that I said Yes, because of my post about it being a great time to buy if you’re selling a cheaper home and buying a more-expensive home. It’s because the higher you go price-wise, the colder the market gets. Fred said it is a good time to buy as long as you don’t plan to move in the next five years.
It’s a question that deserves a full answer, not just yes or no.
The most common blog chatter is that history always repeats itself, and it will just be a matter of time before this cycle runs out.
The economic cycle will sputter again, but the housing market is different now.
Because distressed sales are well-managed.
The California Homeowner Bill of Rights mandates that loan modifications be dangled in front of anyone in trouble. The foreclosure process gets drawn out for months and years so we’ll never see a flood of trustee sales again.
As a result, making your mortgage payments has become optional.
If we have another economic downturn where homeowners can’t pay, then the government will insist that lenders give them a break. The cast was set in the last crisis – the government will create bailout programs that allow everyone to kick the can down the road.
With distressed sales few and far between, the vast majority of home sales will be elective. Sellers with the mantra – “I don’t have to sell, I’m in no hurry, and I’m not going to give it away!”
Prices will maintain a tight range of +/-5%, because the minute a seller thinks he is being forced to ‘give it away’, he will object. Different neighborhoods will have periods of stall-out, where few or no buyers will pay what sellers want, and real estate loitering will be common.
But days of drastic price dips are gone.
The other buffers to a housing downturn include reverse mortgages, rampant flipper business, and baby-boomer estate distributions.
If today’s buyers have assurances of pricing protection, is it a good time to buy? Well, yes, if that’s all that matters.
But for most, it is a terrible time to be a buyer, which is different.
If you are on the low-end of your market, you can forget about buying your “dream house”. The competition is fierce, and compromise required – if you can even get your hands on something.
My listing at 2022 Cherokee in Escondido – the one priced at $549,000? We had six offers, and four of them were all-cash. All were at list price or higher.
It was viewed 3,198 times on Zillow since Friday, and I received 100+ phone calls and texts from agents. I had over 200 people visit the open house on Sunday, and it was probably shown at least 50 times between Monday and Wednesday.
Almost all of the lookers didn’t offer, so they will be competing against each other on the next one – literally hundreds of buyers floating from new listing to new listing, hoping for a miracle.
Was it a giveaway? Agent comments included, “Price was fair and reasonable’, and ‘The defects were properly discounted’ (defects included no direct access from house to backyard, master suite downstairs and kids’ bedrooms up, and it backs to the I-15 freeway – the rear fence was the CalTrans chainlink).
Buyers have to endure bidding wars on anything decent, no rules about how to win, and shady realtor tricks that seem to favor insiders. Buyers are quick to jump to that conclusion, but it is more due to a realtor’s incompetence that bidding wars are vague and hard to win.
If you can get a house into escrow, it almost always happens that it’s condition is worse than imagined. But sellers are in the driver’s seat, and do little or nothing to assist. Buyers usually end up feeling like they are buying an over-priced turd.
But it will probably be your turd forever!
Another fast-paced market loaded with bidding wars! Link below:
BOSTON (CBS) — See a house for sale in Boston? Like the price? Don’t get too comfortable.
If you want to buy property in certain areas around the city, real estate agent David Bates says you should be prepared to shell out a lot more money than what the sellers are asking.
“We’re seeing, literally, condos selling for hundreds of thousands of dollars more than the list price,” said Bates. “It’s almost like their listing prices don’t exist.”
Bates says limited inventory and a steady demand has created a market where buyers are typically going at least $50,000 over the asking price–and sometimes, a whole lot more.
“The highest over-ask in Boston was $675,000 more than the list price,” said Bates.
He says he’s never seen such a competitive market. He said another of the most extreme examples was a $15 million condo.
“Because the competition was so intense for it, it ended up selling for $15.4 million, $400,000 over,” said Bates.
Bates, who also authors the Bates Real Estate Report, says buyers need to know that going in, so they’re not shocked when a bidding war ensues.
“Buyers aren’t trying to negotiate value in Boston anymore,” Bates said. “They’re trying to win.”
The problem, Bates said, is happening in other markets, too–but he cautioned buyers who want their money to go further to consider a town or neighborhood just a little farther down the line.
“If you’re thinking in Cambridge, you can move one market over and consider Somerville,” suggested Bates. “If things seem too overwhelming, too competitive that you’re not getting enough for your money, consider the next market over.”
Bates says he warns his clients to be ready so they can make a decision–either offer up more money, or consider a different location.
Could a booming real estate market continue longer than expected?
The historical norm has been a ten-year pattern – five years up, and five years down. But we’ve never had the government-sponsored artificial market benders like ultra-low rates and a no-foreclosure policy before.
I was speaking with some Canadians yesterday, and they said the Toronto market has been positive for twenty years straight – and now a decent house cost $3,000,000. The dollar valuation on both sides of the border has contributed, but the market psychology is such that prices keep rising. The supply and demand is out of whack, and bidding-war strategies are in place on every listing.
This Toronto realtor mentioned that only 1 out of 200 deals fall through, and that the ‘bully offer’ tactic is common but rarely successful. Instead, they employ the ‘offer night’ strategy:
This is why listing agents host “offer night” in the brokerage, and encourage buyer’s agents to show up in person, and even bring their buyers. Try and picture that lobby, with eight agents, all waiting, all sizing each other up. Maybe two or three agents brought their clients and are pacing outside. A couple agents are on their cell phones, and others are whispering in the corner of the room.
That is how you create artificial demand, through emotion, anxiety, and an all-around frenzy.
Read more here:
One of the commenters there also suggested this strategy:
What the real estate business needs to implement is a ‘Stalking Horse Auction’. Stalking Horse Auctions are common in bankruptcy proceedings because they offer stakeholders the greatest transparency and maximise value.
It starts out with the “stalking horse” bid, this is one person who generally agrees to be the “stalking horse” to put forth the opening bid which will be revealed to all other participants. Other people who wanted to submit a bit would then see what the initial offer is going to be decide if they want to bid higher. Those bids are then disclosed to the ‘stalking horse’ who then decides if they wish to put forth a bid higher than those other bids. If the ‘stalking horse’ decides that they want to best the highest bid then they would walk away with the house, if not it goes to the highest bidder.
The ‘stalking horse’ is selected by having everyone sending in their initial bid and the highest one takes it.
There are advantages and disadvantages to both. Stalking horse sets the market and might bid too much in their initial offer. The other bidders get to see the ‘stalking horse’ offer and have an opportunity best that offer but could again be bested by the ‘stalking horse’ in the end.
The reason these auctions would never work in Toronto real estate is that their fair, transparent and take the power away from the agents and put it in the hands of the seller.
There could be more to look forward to if this market keeps going!
Happy New Year!
Are you thinking of selling and/or buying this year?
Here are some ideas to hopefully give you an edge in conquering what usually ends up being the 1% to 2% difference between the thrill of victory and the agony of defeat!
- The new listing agreement suggests getting a home inspection prior to hitting the market. It’s a good idea; fix what’s wrong in advance, and then give buyers a copy to demonstrate your pride of ownership.
- Know where you are going to move, and only hit the open market when you are 100% committed to selling. You might get an offer the first day.
- Showing the house is inconvenient but necessary – the more you do it, the better your chances. Be ready to show the house on the day it hits the open market – and expect dozens of lookers to visit in the first 7-10 days.
- Do two things to make a great first impression; spruce up the curb appeal and insist on top-quality photos.
- Be smart about price.
- Ask agents about bidding war strategies, and recent experiences. Spreading out the offers on your coffee table and picking one isn’t a strategy.
- Avoid gimmicks like range pricing or ‘coming soon’. A clean, straight-forward approach is attractive to buyers.
- Determine if a company brand name is a benefit or a crutch.
- Real estate ‘teams’ means you get passed around. Make sure to identify who handles the buyer inquiries, and that they are top-notch sales people.
- The buyers you want to attract – the ones that pay too much – are represented by lousy agents who don’t know the difference. Get Good Help – hire a listing agent who can carry any agent to the finish line.
- See more houses in person. You have to keep your chops up, because low inventory causes complacency. If all you do is shop online, you’ll look for any reason NOT to buy, and stay home. But there are no perfect houses.
- Start looking at least six months before your lease is up.
- There aren’t many rules, and every listing agent is different. Work with an agent who has a track record getting buyers to the finish line.
- Don’t expect much from sellers regarding repairs.
- Be open to fixers. To get more comfortable, line up contractors in advance and ask for a sample quote so you know what to expect.
- Expand the target zone, but buy in a great school district.
- If affordability is an issue, compromise on size before location. You can always add on later.
- Properly evaluate the negatives, and the appropriate discounts.
- Know what to do in a bidding war.
- Your agent should suggest an offer price, and a strategy behind it.
These are some basic, general tips, but the best thing you can do is to get an experienced agent on your side – someone who is closing at least a sale per month (check at zillow). I am available, and would love to assist you!
Zillow is already one of the primary real estate portals for consumers. Though there are rumblings from realtors about mounting a challenge, it’s unlikely that anything will topple the Z-brand in the short-term.
As a result, we increased our Zillow advertising this month.
Not only do we expect that more consumers will be using the tools there – but it also seems inevitable that Zillow will develop additional ways to promote their agent-customers too.
I’m not a big believer in anecdotal evidence in the real estate business. There are too many random events – and sales – created out of dumb luck that you can ever draw many definitive conclusions.
But after not getting any new Zillow inquiries during the previous 3-4 days, I received THREE buyer inquiries on Christmas Day!
There has to be pent-up demand in the marketplace. It doesn’t guarantee that buyers will pay higher prices, or even buy at all. But I’m guessing that the streets will be full of lookers in the coming weeks. On Wednesday – just two days before Christmas – I ran into the second 4-offer bidding war of the week!
I think the heightened activity will cause sellers to add even more icing on the cake – leaving a beleaguered buyer pool with tough choices. Either bite the bullet and pay the highest price ever, or wait and see.
It will show up differently in different areas.
In neighborhoods where we see a surge of still-somewhat-reasonably-priced listings, the market will look like it’s on fire as waiting buyers gobble them up. Other areas will look more stagnant than ever (like RSF, which has 25% of the NSDCC active inventory but only 8% of the closed sales over the last 30 days).
My advice to buyers and sellers?
Don’t over-think it – get in, get out, and get on with life! Don’t let the desire of grinding out the last couple of percentage points get in the way of moving.
A family member in a hot market is trying to move up.
They have lost out a couple of deals, so the right kind of frustration is starting to set in, but they keep coming across the same tactic – sellers who want to occupy after closing.
It’s not enough for these sellers and listing agents to get a premium price. On top of that, they make more outrageous demands that gives you the feeling that you’re being toyed with – just to see how high you will jump.
In this case, the sellers are wanting to rent the house after the close of escrow for 90 days at $2,000 per month UNDER the current market rate. There are multiple offers, so they’re figuring one of them will bite.
What are the pitfalls?
- The loan documents require owner occupancy within 30 days. Most lenders do random checking by having a fraud detector knock on your door to see if you live there yet. If not, the bank could call your loan due.
- Buyers are now landlords, and bill collectors. Try to collect the total rent due at the close of escrow, and a deposit if possible. Most sellers reject the thought of a deposit, so make sure all of the rental terms are clear before signing the purchase deal.
- The insurance policy should be for a rental property. If the sellers/tenants fall down and break a leg, you could be sued, and you need the proper coverage.
- Sellers asking for 90 days must not have found their next home yet – how do you know that they will move out? Make a provision that any holdover rent will be double the current rate – sellers usually object, but it doesn’t cost them a penny extra as long as they move out as agreed.
- Damages? Hopefully a deposit was tendered, but either way, make sure to conduct a Pre-Move-Out inspection so any damages caused by the sellers are acknowledged and remedied.
I told the family member that if they have any major objections to seller rentbacks, then they aren’t desperate enough yet – because it’s likely that one of the bidders will comply with the demands, and you’ll lose another one.
As long as you have a solid agreement in the beginning, you’ll forget all about it six months from now.
If these types of demands are too uncomfortable, there is an alternative. Buy an inferior house – they don’t have nearly as much competition.