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Category Archive: ‘Bidding Wars’

Real Estate Tips for 2016

moving tips

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!

Home Sellers

  1.  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.
  2.  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.
  3.  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.
  4.  Do two things to make a great first impression; spruce up the curb appeal and insist on top-quality photos.
  5.  Be smart about price.
  6.  Ask agents about bidding war strategies, and recent experiences.  Spreading out the offers on your coffee table and picking one isn’t a strategy.
  7.  Avoid gimmicks like range pricing or ‘coming soon’.  A clean, straight-forward approach is attractive to buyers.
  8.  Determine if a company brand name is a benefit or a crutch.
  9.  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.
  10. 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.

Home Buyers

  1. 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.
  2.  Start looking at least six months before your lease is up.
  3. 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.
  4.  Don’t expect much from sellers regarding repairs.
  5.  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.
  6.  Expand the target zone, but buy in a great school district.
  7.  If affordability is an issue, compromise on size before location. You can always add on later.
  8.  Properly evaluate the negatives, and the appropriate discounts.
  9.  Know what to do in a bidding war.
  10.  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!

Posted by on Jan 1, 2016 in Bidding Wars, Jim's Take on the Market, Listing Agent Practices, Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links | 4 comments

2016 Starts Now

start

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.

Posted by on Dec 26, 2015 in Bidding Wars, Forecasts, Jim's Take on the Market, Market Conditions, North County Coastal | 2 comments

Perils of Seller Occupancy After Closing

market insanity

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?

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Posted by on Dec 13, 2015 in Bidding Wars, Jim's Take on the Market, Listing Agent Practices, Market Conditions, Real Estate Investing | 0 comments

PQ Follow-Up

Yesterday this comment was left by angryPQneighbor:

Why did you list this one so cheap? The same model sold almost a year and a half ago in a bidding war over $610K!

We are listed for $639,000 in most places, and on the range $619,000- $639,000 in the MLS.  He/she didn’t say what they thought the price should be, just that my price was wrong.  Do we expect double-digit appreciation every year?

They haven’t been following the pricing discussion we’ve had on the blog here, or considered that, given the current market conditions, it is better to price attractively to take advantage of the urgency that a new listing enjoys – at least for the first week or two before going stale.

The attractive list price makes the listing stand out, and grabs the attention of the buyers – have you noticed that most listings aren’t priced attractively?  We were on the open market for six days (including Halloween), and here’s how the market responded:

Trulia:

Chaco stats on Trulia

Redfin:

Chaco on Redfin

Zillow:

Chaco on Zillow

The frenzy died a couple of years ago.  Why?

Because the prices stopped looking attractive.  But using the same pricing principles, a mini-frenzy was created here.

We received six written offers!

However, they were all within the range. Is that it?  Do you just select one?

No – we’re not done yet!

I carefully and respectfully caused each bidder to consider going higher on price, and we ended up over $650,000!

Get Good Help!

Posted by on Nov 5, 2015 in Bidding Wars, Frenzy, Jim's Take on the Market, Kayla Training, Listing Agent Practices, Why You Should List With Jim | 5 comments

Get Good Help

The difference is that when you hire me to sell your house – you get me, a long-time veteran of bidding wars and how to handle them with specific strategies so you sell for top dollar.

Anybody can shuffle multiple offers – my skill is getting them to compete against each other and drive the price higher.

Posted by on Sep 23, 2015 in About the author, Bidding Wars, Jim's Take on the Market, Listing Agent Practices, Thinking of Selling?, Why You Should List With Jim | 1 comment

Low Inventory Driving Markets

sf

Could prices keep going higher?  Yes, due to the lack of inventory.  It is a game-changer that we haven’t experienced before – usually as prices rise to new levels, sellers tend to flood the market to get out at the top.

Not this time.

Our local NSDCC inventory has been steady – no big rush by sellers to cash in, mostly because they have nowhere to go that is any better.

NSDCC Total Detached-Home Listings, Jan 1 to Aug 15

2004:  3,671

2005:  3,706

2006:  4,369

2007:  3,823

************

2012:  3,151

2013:  3,471

2014:  3,403

2015:  3,474

Could it continue?  Yes, it could.  We all know about how the San Francisco market has been fetching extraordinary prices.  Yet, their inventory is not exploding – instead, it’s going down.

From the WSJ:

A scarcity of listings is sending prices to new highs. In June, the number of new listings in San Francisco was down 23.1% from a year prior, according to the San Francisco Association of Realtors. The average listing spent 26 days on the market, compared with 31 days in June 2014. Median sales prices were up to $1.177 million—a 12.1% jump from a year ago. Real-estate agents say bidding wars are most common on properties priced below $2.5 million, and that buyers often make offers on numerous properties—anywhere from two to 20—before finally winning one.

Read the full story here, with many bidding-war examples:

http://www.wsj.com/articles/in-san-franciscos-bidding-wars-home-prices-go-ballistic-1440683103

Posted by on Aug 28, 2015 in Bidding Wars, Inventory, Jim's Take on the Market, North County Coastal | 9 comments

Underpricing on Purpose

From sfgate.com:

http://www.sfchronicle.com/business/networth/article/SF-home-buying-insanity-means-paying-1-6347687.php

Bravo’s reality show “Million Dollar Listing San Francisco” debuts July 8, but I already have an idea for a spinoff — “Million Dollar Over Listing.” It would feature homes in the Bay Area that sold for at least $1 million more than the list price.

There were at least 10 such sales in San Francisco over the past year, 14 in Santa Clara County and five in San Mateo County, according to Multiple Listing Service data. They ranged from teardowns to mansions.

A home at 178 Sea Cliff Ave. in San Francisco, for example, sold in April for $11 million, which was $4.7 million or 75 percent over the $6,298,000 list price.

Patrick Carlisle, chief market analyst with Paragon Real Estate Group, chalks it up to the “general insanity of the overheated market,” which stems mainly from demand outstripping a long period of below-average inventory. In addition, “many agents have adopted a strategy of egregious underpricing,” he said.

In San Francisco especially, underpricing is so prevalent that most buyers search for homes well below their target price, knowing the sale price will be much higher.

“If you price (a home) where it should be, it will sit,” said Realtor Alan Canas.

Canas represented the sellers of a home at 44 Everson St. in San Francisco’s Glen Park neighborhood. The four-bedroom, four-bathroom home was somewhat dated but had magnificent views, which were hard to value.

Canas priced it at $1.8 million in October, expecting it would sell for $2.3 million to $2.4 million.

“The offers we received, it was shocking,” he said. He made counter offers to the two highest — $2.65 million and $2.725 million — asking them to come up to $2.8 million. “One jumped, the other jumped too late,” he said.

What if he had listed it closer to his expected price? “If we had priced it at $2.2 million, I honestly don’t think it would have seen the play (it got) at $1.8 million,” Canas said. “It’s psychological, almost a game.”

The top two offers were both all cash, which is good because if the buyer had needed a loan, “I don’t think it would ever appraise at $2.8 million,” he said.

Read full article here:

http://www.sfchronicle.com/business/networth/article/SF-home-buying-insanity-means-paying-1-6347687.php

Posted by on Jun 25, 2015 in Bidding Wars, Jim's Take on the Market, Listing Agent Practices, Market Buzz, Market Conditions | 0 comments

Seller Demands

This article lays out the basic 12 tips for homebuyers to use when preparing to buy a home:

http://money.usnews.com/money/personal-finance/articles/2015/04/13/12-tips-for-spring-homebuying-in-a-sellers-market

The local market has been very competitive lately, with multiple offers on every quality offering.  Here are other things for home buyers to expect from sellers once you start making offers.

These aren’t thought out clearly by listing agents; instead, they are things done to them on previous deals so they will want to impose them on you whether they make sense or not:

1.  They will want you to shorten your contingency periods.

The common belief is that shorter periods will make you move faster, and then blow you out quicker if you aren’t a player.  But in reality, buyers get irritated and want to pay less or cancel as the manipulations start mounting.

2.  No appraisal contingency.

Buyers are prone to think, “But this is your price, and you want me to risk the appraisal coming in low?”

3.  Seller rentback.

Sellers want you to fund their retirement account, and have you let them live in your house for free for weeks or months.  Make sure the rent is retail-plus with heavy penalties if they don’t leave on time to ensure they move as agreed. Consider that the seller could declare bankruptcy the day after closing and make your life miserable for six months.

4.  Ernest-money deposit.

Even though it is refundable until you sign off all contingencies, the sellers will want you to increase it, just to make sure you know who the boss is.

 5. Buying ‘as-is’.

It already says in the contract boilerplate that the property is sold “as-is”, but the listing agents will mention it again just so you don’t get any ideas about asking for seller repairs.  Once you complete your inspection, the sellers and agent will expect you to live with any defects – regardless of how much you paid.

6.  Seller disclosures.

The confidence is already running high, so if there are any borderline disclosure issues, they might get left out by the sellers.  Make sure you thoroughly inspect the property, neighborhood, and HOA!

7.  Escrow and title companies.

Don’t even think about selecting your escrow and title companies, and expect that the seller choices on both will include some ‘co-ownership’ fine print later (i.e. kickbacks).

8.  Removing attached items.

Items attached to the home are part of the real estate, and are included in the sale by definition.  But don’t be surprised if the sellers strip out all the good stuff (TVs, lights, window coverings, etc.), and leave you with holes.

9.  Termite clearance.

Ha ha, very funny.  The sellers will expect you to live happily ever after with their termites, just like they have.

10.  Listing agent dominates the home inspection.

Buyers deserve to have a good look around during the home inspection, and get comfortable with what they are buying – chances are they have only seen it for a few minutes before then. Yet the listing agent wants to be there to “answer any questions”, and use that as a guise for snooping on the inspector to see if the problems and defects are really that bad.  Kudos for being concerned, but uncomfortable buyers are less likely to close escrow.

Because a bidding war feels like hitting the lottery, sellers and their agents get giddy and don’t consider how their demands can turn off buyers, and make them want to pay less, not more. 

If you want to sell for top dollar, hire a listing agent who can tactfully include safeguards that don’t cause buyers to go backwards.

Posted by on Apr 15, 2015 in Bidding Wars, Market Buzz, Market Conditions | 2 comments