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Category Archive: ‘Bidding Wars’

Giveaway Meter

We’re in agreement that the local market has seen all its biggest price gains.

You’ve patiently waited until there were a couple of good comps nearby, and you’ve agreed to list for an attractive price – within 5% of the last sale.  You’ve spruced up the home, and are ready to hit the open market.

You understand the logic about taking advantage of the urgency early on, but you don’t have to sell - and you’re not going to give it away!

How will you know?

Here is my Giveaway Meter:

1. Multiple offers the first couple of days: You hit the jackpot, and it was probably more due to your home’s higher quality and lack of good inventory nearby, rather than you under-pricing your home.  Don’t panic, and don’t raise your price.  Thankfully, you have hired an agent who has legitimate bidding-war strategies – let him do his thing!  P.S. Spreading the offers out on the table is not a bidding-war strategy – though it is the standard answer when you talk to realtors.

2. One offer the first couple of days: Drag your feet to see if anything else comes in – and threats of offers don’t count, unless they come from a great agent who might deliver.  Wait until the offer is about to expire, and counter-offer to buy three more days.

3.  Offer comes in on Day Four:  The fourth day is peak urgency - if the offer is full-price or better and the other terms are acceptable, sign it.  Sellers and agents are highly resistant to not countering – but if you get your price, don’t rock the boat.  Three thoughts:

a.  You have a second negotiation coming over repair requests, and buyers who get worked over in the beginning are more likely to exact their revenge after the home inspection.

b.  Buyer’s remorse starts setting in the minute a buyer signs a full-price offer, and they get indignant if you don’t agree.  They might walk out over the smallest counter-offer, so don’t risk it if the price is right.

c.  Happy buyers are more likely to close escrow.

4.  Offers After Day Four: Tread carefully, because your urgency is completely drained by Day Seven.  You’re not giving it away, and appreciate that you have properly tested the market.

5.  You don’t get any offers:  Lower your price 5% to keep the urgency higher.  After 30 days on the market, buyers will already be pricing in a 5% to 10% wrong-price factor, so you might as well stay ahead of them.

You can spend a million dollars on advertising and do open house every day, but if the price isn’t right, the home won’t sell.  Once you have accepted that fact, and realize that you and your agent are conducting a search for what the market will bear, use the Giveaway Meter to guide you.  Yes, there is always a chance for a lucky sale, but if you go that route, you should list in short spurts (1-2 months) so buyers won’t see a long stretch of failed listing period on your record.

Posted by on Nov 16, 2014 in Bidding Wars, Jim's Take on the Market, Thinking of Selling?, Why You Should List With Jim | 6 comments

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