Bidding War Strategy

open bidding

Reader 3rd Gen SD asked yesterday,

“You regularly mention pricing to engineer a bidding war. Do you have a post you could link to that describes your strategy, including how you manage same?”

There are no rules or regulations on how to handle a bidding war – each realtor is on their own to devise a strategy.  As a result, most don’t do more than spreading out the offers on the seller’s table and picking one.

Back in the REO days, the banks would insist on countering each bidder for their highest-and-best offer, and that is the most common solution.  But agents are reluctant to tell bidders how many offers there are, or at what price point – they just want you to bid blindly.  In those cases, at least every bidder has a chance to win, but without some guidance they are likely to be conservative.

When my sellers get multiple offers, I’m working the phones myself.  I am asking questions to qualify each buyer, and giving their agent some coaching on what it will take to win.

It’s the pitting of each buyer against each other that results in top dollar sales.  They are much more likely to pay a higher price if they have a number to shoot at – AND they feel like they have been treated fairly.

Here are specific examples of how I do it:

https://bubbleinfocom.wpenginepowered.com/2013/12/15/how-jim-handles-bidding-wars/

https://bubbleinfocom.wpenginepowered.com/2012/11/30/open-biddingtransparency-live/

https://bubbleinfocom.wpenginepowered.com/2013/04/18/price-coaching-for-bidding-wars/

Why doesn’t every agent handle multiple offers this way?  Because they don’t have to – sellers still think they did well, price-wise, and they can tell their friends and family that their house was sold in a bidding war.

Thinking of selling? Hire Jim the Realtor!

SD Case-Shiller Index, Oct. ’14

San Diego Case Shiller Index

The San Diego Case-Shiller Index declined for the third consecutive month, but the rate of change is so small that even David Blitzer called San Diego, ‘flat’.

Here are the non-seasonally-adjusted readings for 2014:

Month
San Diego NSA Case-Shiller Index
Jan
194.94
Feb
196.97
Mar
199.45
Apr
200.81
May
201.99
Jun
203.10
Jul
203.68
Aug
203.47
Sep
203.22
Oct
203.15

The October reading is 4.2% higher than January’s low for the year, and 40.7% above the trough in April, 2009!

Shiller called the housing market, ‘fragile’, and mentioned his usual ‘anxiety’ that a slowdown could be a precursor to prices dropping.  Video was skyped from what had to be his office, which looks like a professor’s domain:

http://video.cnbc.com/gallery/?video=3000342418

JtR Year in Review

Jim Updated Left Color

Here are a few stories from 2014:

A. I should have known it was going to be a wacky 2014 when the second offer I wrote in January wound up in a bidding war that could have been very entertaining, but instead flopped.  The listing agent decided to entertain cash offers only, even though there was nothing wrong with the house, she didn’t represent the eventual buyers, and they did a standard 30-day escrow.  By eliminating the seven financed offers, she left at least $50,000 on the table, and probably more.

B.  There was one case early in the year where the seller thought the market was moving higher, and wanted more money.  Our buyer had been performing as planned and was ready to close on time, but at the final walk-through he made it clear that he wasn’t moving out.  The listing agent threw in his entire commission and bailed, so I had to step in to make it right.  I met with the seller and got him to agree to vacate within 5 days after closing, and after that it would cost him $500 per day.  He left as agreed!

C.  On one of my listings, we entered into an agreement within the first 10 days on the market.  The buyers visited the house several times, but on the last day of their contingency period, they backed out due to road noise.  But the road noise didn’t change during those couple of weeks, so there’s no telling if that was the real reason, but it shows how sellers are in limbo during the contingency period.

D.  I had three potential sellers decide not to sell because they didn’t meet the 2-out-of-5-year residency period and qualify for tax-free gains up to $500,000.  I am careful to discuss that before listing – I had another sale this year where I represented the buyers, and the sellers figured it out after opening escrow that they didn’t qualify and got taxed instead.

E.  I lost two sales due to government inflexibility on zoning.  In one case the county would only allow one house to be built on 15.8 acres due to it just being down-zoned to a minimum of 8-acre parcels.  The other was a city not allowing any residential development on a parcel that had residential across the street and around the corner.

F.  There were three instances where I asked a listing agent if the seller might consider a price that was well under the list, and they scoffed at such an offensive idea.  Of course, they later sold them for my price or under – and in one case the agent called me to tell me that her seller did consider an offer under a million (list was $1.2M), and she just opened escrow.  Don’t you call me before opening escrow to create a bidding war?

G. I saw one seller get offered $390,000, which was within the advertised range on a condo she owned since the 1990s, and is paid off.  She refused to go any lower than $400,000, and the buyer walked (not mine).  Doesn’t there have to be a way to make that work!

It will probably be just as zany in 2015 – Get Good Help!

Inventory Watch – End of 2014

We are wrapping up 2014 much like we did in 2013. There are 7% more active listings today, and list-pricing is about the same.

One significant difference is in mortgage rates. Last December the average Freddie rate was 4.46%, and today we’re at 3.91%. Look for a fast start in 2015!

The UNDER-$800,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
November 25
95
$376/sf
47
1,988sf
December 2
79
$371/sf
50
2,047sf
December 9
72
$383/sf
43
1,954sf
December 16
81
$378/sf
42
1,948sf
December 23
77
$374/sf
49
1,937sf
December 30
76
$373/sf
51
1,950sf
January 6
74
$370/sf
49
1,995sf
January 13
71
$381/sf
44
1,921sf
January 20
72
$384/sf
41
1,877sf
January 27
75
$399/sf
40
1,891sf
February 3
78
$409/sf
41
1,876sf
February 10
82
$395/sf
38
1,927sf
February 17
85
$387/sf
35
1,929sf
February 24
90
$383/sf
37
2,008sf
March 3
82
$397/sf
39
1,942sf
March 10
88
$377/sf
37
2,008sf
March 17
89
$366/sf
34
2,038sf
March 24
79
$369/sf
34
2,031sf
March 31
78
$367/sf
39
2,069sf
April 7
87
$373/sf
32
2,054sf
April 14
97
$380/sf
31
2,000sf
April 21
87
$377/sf
32
2,062sf
April 28
107
$379/sf
29
2,044sf
May 5
114
$376/sf
27
2,046sf
May 12
108
$385/sf
31
2,012sf
May 19
107
$385/sf
0
0sf
May 26
105
$375/sf
34
0sf
Jun 2
102
$376/sf
36
0sf
Jun 9
102
$377/sf
37
0sf
Jun 16
104
$369/sf
35
0sf
Jun 23
111
$380/sf
34
0sf
Jun 30
119
$376/sf
36
0sf
Jul 7
122
$387/sf
36
0sf
Jul 14
127
$388/sf
34
0sf
Jul 21
135
$381/sf
36
0sf
Jul 28
144
$382/sf
37
0sf
Aug 4
148
$379/sf
39
0sf
Aug 11
135
$375/sf
42
0sf
Aug 25
135
$374/sf
43
0sf
Sep 1
126
$377/sf
46
0sf
Sep 8
130
$375/sf
46
0sf
Sep 15
134
$369/sf
45
0sf
Sep 22
127
$376/sf
49
0sf
Sep 29
132
$378/sf
48
0sf
Oct 6
130
$367/sf
48
0sf
Oct 13
131
$378/sf
44
0sf
Oct 20
130
$385/sf
45
0sf
Oct 27
128
$375/sf
48
0sf
Nov 3
128
$371/sf
49
0sf
Nov 10
126
$366/sf
52
0sf
Nov 17
115
$367/sf
51
0sf
Nov 24
122
$373/sf
46
2,007sf
Dec 1
113
$375/sf
46
2,007sf
Dec 8
113
$372/sf
50
2,028sf
Dec 15
108
$366/sf
53
2,053sf
Dec 22
101
$364/sf
52
2,044sf
Dec 29
92
$365/sf
57
2,019sf

(more…)

What to Expect When Selling Your Home

lets get started

Are you thinking of selling?  We’ve discussed preparing your home for sale here:

Preparing Your Home for Sale

What can you expect once it hits the open market?

FIRST DAY

Buyers jump on the attractive listings the first day they hit the MLS.  Provided that the listing gets imputed early in the morning, you should get calls/showings on the first day.  If you don’t get calls, it’s because the photos are bad, the satellite view doesn’t look right, and/or your price is wrong.

FIRST WEEK

You’ll know if your listing is hot if you are getting showings and offers during the first week.  Don’t be shocked – anxious buyers react quickly.

Do you live in the house?  It would be a good time to take a vacation – especially if you have little kids (just stay near your email for electronic signatures).  Agents will want to show your house with little or no notice, and having to keep the house clean and tidy at all times is a hassle – let alone wanting to leave the house for each showing.  Make sure your agent has an effective video tour available, and conducts open house right away to help satisfy some of the curiosity.

SECOND WEEK

Showing start to taper off, and the listing is going stale.  You’ll see that the average time-on-market is currently 95 days for active listings of houses in San Diego.  But that’s not when the magical offer suddenly appears – it is the average time it takes for sellers to get their price right.

30 DAYS or LONGER

You haven’t had many, if any showings over the last few weeks, so the writing is on the wall – your price isn’t a match for today’s market.  Either wait it out and hope the market improves, or lower the price by 5%.  Everyone knows that if you lowered your list price by 5% to 10%, it’s likely that you’d still sell it for more than it’s ever been worth.  Pigs get fat, hogs get slaughtered.

There are agents who refresh their listings every month, and it’s not a bad idea because some buyers and their agents aren’t paying attention.  But you’re not fooling the majority.

WHEN TO MAKE A DEAL

You have reached maximum exposure by the fourth day on the market.

If you have an offer or offers, then negotiate promptly and strike a deal.  Why?  Well, yes, there might be two in the bush, but the most motivated buyers have already stepped up, and they don’t like their offer being shopped around.  Their enthusiasm starts to wane a day or two after they make an offer, as does their willingness to pay top dollar.

The market’s holiday lull is over.  New listings will be popping up nearby that dilute your chances, and the longer you’re on the market, the lower buyers expect you to go.  Your value is dropping at least $1,000 per day in their mind.

WHEN TO WAIT

Seven of the 24 NSDCC houses that went pending during Christmas week had been on the market for more than 140 days – and that’s not counting the relists.  If you don’t have any offers, and don’t feel like lowering your price, then waiting for the ‘lucky sale’ is your option.

The unique, premium houses have the best chance of a lucky sale.  If you are selling a run-of-the-mill tract house, then pricing is more rangebound.  Buyers will want to lowball to make room for remodeling and keep their investment value within the neighborhood’s range.  Monitor the new listings nearby that hit the market after yours – if their list prices are exceeding yours, then you’ll look more like a deal every day.  If not, then they are just using yours to sell theirs.

We saw HERE that pricing didn’t get better last year during the spring selling season.  Keep the big picture in focus – if you can net $500,000 and close in 30 days, don’t hold out for $510,000 and risk no sale.  Get Good Help!

Blog Down

2015

Bubbleinfo.com was down for a while this morning.

This blog is hosted in Germany, and my main WordPress guy is in Ireland – the internet is an international market!  We had changed from BlueHost to MediaLayer, and since then I haven’t noticed any problems with the blog being down over the last couple of years.

Has anyone experienced any problems connecting to the blog?

I want to make sure everything here is running smoothly, because I’m going to come out blazing in 2015 – more listings, more videos, and more Kayla!

Best of 2014

“If you’re looking for a hideaway worthy of a Bond villain, look no further than by Australian prefab designers Modscape. Designed to dangle dramatically off the side of a cliff, the multi-story vacation home can be entered solely through the top-level carport. At the bottom level, an open deck allows you to catch the sea breeze:”

best

A list of the best home designs this year:

http://www.fastcodesign.com/3039873/10-of-the-most-fabulous-housing-designs-of-2014

Surge of Boomers Retiring

Did everyone have a nice day off?  Great, let’s get back at it! From John Burns:

http://www.realestateconsulting.com/blog/john-burns/big-idea-2015-rethink-your-business-due-retirement-surge

More people were born in the 1950s (41 million) than in any other decade, and they are dropping out of the workforce in droves. Those born in the 1950s will begin turning 65 in 2015. In fact, in the last 10 years, we have transitioned from roughly 2.5 million US residents per year turning 65 to 3.5 million per year, and that number will trend up to almost 4.5 million by 2025 before it starts trending down again.

boomers graph

This seismic shift will have a huge impact on the economy, as the traditional working age population of 20-64 will transition from growing 1.0 percent per year for decades to growing 0.25 percent per year. 20- to 64-year-olds earn and spend the most, so you can almost guarantee that the economy will grow more slowly than it has in the past.

While the economic growth will  be slower than usual, and the burdens on Social Security will skyrocket, entrepreneurial opportunities will abound to serve an unprecedented surge in retirees who, by the way, also happen to be the most affluent retirees ever.

My big idea for 2015 is to plan for a slower growing pool of workers and to take advantage of the surge in retirees, no matter what your  business.

Here is a nice clip from CNBC discussing the success home builders are having targeting retirees, even in non-traditional retirement markets such as Atlanta:

Pin It on Pinterest