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Category Archive: ‘Bidding Wars’

Shaking Up Real Estate?

house selling - changesEvery year we hear how the industry is going to change, and specifically, how the internet will cause the sellers of real estate to change their ways.

Zillow and Trulia sell advertising to realtors.  They will be in full support of the status quo, as seen below in the video.  They want the full-commission model to stick around so agents have more money for advertising!

The R-team brokerage is a solo operator who relies on their whiz-bang website to generate customers.  But that makes them potential enemies with Z&T.  Glenn takes a shot at both in this piece, while doing his usual touting his company:

http://www.linkedin.com/today/post/article/20140326183218-5434591-the-state-of-my-industry-why-real-estate-is-taking-so-long-to-change

But his company’s formula has a weakness.  The agents showing the houses are just part-time door-openers, while the agent who writes the offer is back at the office  - they have never seen the house.

They are hoping that reduced commissions and fancy tech talk will overcome this structural flaw.  But without expert advice in the field, buyers will hedge a little on price, and as long as there are multiple offers, they will struggle to compete.  Plus, in a bidding war, will a listing agent select an offer from the red team in a close race?  I have done so, but I’ve also heard grumblings from other agents about doing the opposite.

Then you have Harcourts, who announced this week that they are bringing their auction expert from Australia to show America how to do it.  If they and auction.com could get some traction, maybe the industry will head that way.  But the reserve prices and auctioneers bidding against buyers will be a turnoff.

Zillow seems to be leading the way, so status quo will probably win out.

What do you think?

Posted by on Mar 28, 2014 in Bidding Wars, Jim's Take on the Market, Listing Agent Practices, The Future | 11 comments

Bidding Wars

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bidding warsWhen there are multiple offers on one of my listings, I am happy to divulge the pertinent information to all parties – because transparency benefits the seller.  But most listing agents act like they are guarding Fort Knox, and won’t give any guidance on what it will take to win.

What do you do?

I ask these questions of the listing agent:

1.  “How many offers are there?”  To warm them up, start with an easy math question.

2. “How will you handle?  Will you request highest-and-best from each buyer, or just take the highest offer?”  In almost every case the agent hasn’t given it a thought, and is caught off-guard.  All that matters is how they feel about highest-and-best, and gauge whether they might just sign an offer.

3.  “Have you, or anyone in your office, written an offer?”  I have won a bidding war when the listing agent wrote an offer with their own buyer, but it takes guile and guts to pull it off.  But first, you need to know if that is the case.  P.S. If they hesitate, the answer is yes.

Secondly, rank the property.  Is it in the 95+ percentile of homes you have seen?  If so, big-cash and/or desperation could turn this bidding war into a freak show.  Determine an offer price that makes you uncomfortable, and then add some mustard.

If it is a nice home, but has some warts – then use this as a guide:

Posted by on Mar 9, 2014 in Bidding Wars, Frenzy, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 2 comments

Sample Size Too Small?

C.A.R. should call a few more people outside of the Bay Area….

http://www.mortgagenewsdaily.com/01162014_california_real_estate.asp

The 2013 C.A.R. Home Seller survey was conducted by telephone with 600 people statewide to measure their perceptions of the home selling process. Eligible respondents all closed escrow on their homes within the six months prior to August/September 2013.

The survey found that nearly half or 43 percent of respondents expect home prices to rise over the next year. That number jumps to 58 percent when the time period is extended to five years. In the previous survey 9 percent expected a short term increase while 12 percent thought prices would rise over five years.

Nearly all of the sellers, 98 percent, said they had received multiple offers on their home, up from 83 percent a year earlier. The average number of offers was 5.9 compared to 3.1 in 2012. This competitive market also led to bidding wars and 45 percent of sellers said they had received offers above their asking price and more than a third said they had received three or more such offers. On average sellers received 2.2 offers above their asking price.

multipleoffers

Read full article here:

http://www.mortgagenewsdaily.com/01162014_california_real_estate.asp

Posted by on Jan 16, 2014 in Bidding Wars, Frenzy | 1 comment

How Jim Handles Bidding Wars

Here is the wrap-up report on the 5-offer bidding war we had on Ivy Rd.

Most bidding wars lack transparency – the listing agents just want you to send in your best deal and they decide which is best.

I handle the bidding wars personally, and pit all contenders against one another to ensure top dollar. It takes more work – but it’s worth it:

Posted by on Dec 15, 2013 in Bidding Wars, Bubbleinfo TV, Jim's Take on the Market, Why You Should List With Jim | 7 comments

Why Bidding Wars?

The inventory is extremely picked over, and any house within 5% to 10% of being right on price has sold – leaving only the junkers, bad locations, and OPTs (see video). When a hot new listing hits the market, it really stands out – making buyers jump.

The wild and furious bidding wars for the high-quality properties are likely to continue – if you are thinking of moving, get good help!:

Posted by on Dec 5, 2013 in Bidding Wars, Bubbleinfo TV | 1 comment

Getting Priced Out

Prices are moving up rapidly on the lower-end of each market.

People complain that there is no inventory, but part of the reason is that sellers are pricing much higher. Buyers in the mid-to-higher-end of each market will get a smaller house or yard, but those on the lower-end are quickly getting priced out altogether.

Here are the number of detached homes sold in the last 12 months, and the number of active listings today:

Town and Price Point #Closed last 12 mo. #ACT Listings
Oceanside Under $300K
417
5
Carlsbad Under $600K
445
7
Encinitas Under $700K
186
7
Carmel Vly Under $900K
263
11
La Jolla Under $1.1M
118
10

Where it stops nobody knows, but you can expect the bidding-war intensity to be extremely hot on the lower-ends of each market.

Posted by on May 3, 2013 in Bidding Wars, Frenzy, Inventory, Market Buzz, Market Conditions, North County Coastal | 19 comments

Price Coaching For Bidding Wars

In the previous post I mentioned that when I represent sellers, I give price coaching to agents during a bidding war.

What is price coaching? It is giving hints about the competing bids.

Let’s use the Manzanita case for an example.

Once a highest-and-best offer came in above $700,000, I started telling the other agents that it would take more than $700,000 to win.  It gives others a number to shoot at, rather than the guessing game that feels like a black hole.

I was also very specific that we were not going to let this linger, that we would select a winner on Monday afternoon, which we did.

Putting parameters around the game helps bidders decide their fate.  It is much easier for buyers to say “yes” or “no” to going over $700,000, then to just let them wander around, price-wise.

Once we had three people willing to go above $700,000, I kept giving hints until all bidders said that they had reached their maximum.

This is the opposite of what most agents do.  Most agents will put a note in the MLS that says, “there are multiple offers, send in your best offer”.  They also make it clear that they aren’t going to tell you how many offers there are, what price it will take to win, or even what their process is to select the winner. This is the sealed-bid method.

The sealed-bid process encourages bidders to offer less than their valuation of the item, because everyone wants a deal, and there is no fear of loss to push them to their maximum.

My method creates the closest thing to an auction/open bidding, which is the most effective way to find top dollar.

There are no rules or guidelines on how agents are supposed to handle a bidding war, so every seller and agent are their own.  Get good help!

 

Posted by on Apr 18, 2013 in Bidding Wars, Why You Should List With Jim | 4 comments

Re-Calibration

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.

http://articles.latimes.com/2013/apr/12/business/la-fi-harney-20130414

buyinghouseI 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!

Posted by on Apr 16, 2013 in Bidding Wars, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 4 comments