Between trying to watch the Padres game on my phone and the crowds of people looking at the house yesterday, I couldn’t get any more footage than this:
After having roughly 300 people attend the two open houses, we have received 14 offers!
We have countered all of the offers because agents don’t know who will go higher – why limit the seller response to just the top 3 or 5 offers? We countered $1,150,000 to every buyer to narrow down the group of contenders willing to go to at least that amount, and then I’ll do the jimjamalama.
We did adjust the price upward this morning to alert the newcomers to our new starting point:
There were a few comments, mostly from neighbors, that accused me of deliberately starting with an ultra-low price to attract more people. Given the recent sales nearby, the current market conditions, and especially the active listings sitting around unsold, I thought it was an attractive price. I never fear pricing too low because I know how to handle a fair bidding process so everyone has a chance to pay top dollar.
Because I wanted to make the competitive bidding all about price, I was willing to live with the other terms in each buyer’s offer.
The winners included a $50,000 good-faith deposit in their full-price offer – which was a little light. Typically, the deposit is 3%, which would have been $101,850. But every buyer can blow out of escrow during their contingency period, regardless of their deposit amount, and once they do release all contingencies, they must be satisfied enough that they intend to close.
I’m not going to give them a reason to walk away from $50,000, so it would take a catastrophic event for them to cancel after releasing all contingencies. Would they walk away from $50,000, but not $101,850? It’s possible, but if it’s a catastrophic event, then the extra $50,000 probably wouldn’t matter.
When you treat people right, they don’t cancel.
We spent the six weeks preparing the home to be spectacular, which included repairing the water leak that happened right as we got started. The master shower faucet leaked inside the wall, and it went straight down to the family room fireplace and TV niche. We had our mold remediation guy handle the re-construction, plus did a mold test that came back clear. Everything gets disclosed to the buyers, so you might as well do it right the first time.
The buyers reviewed the information, and were satisfied.
When you treat people right, they don’t cancel.
The house is 18 years old. When the seller bought it, the home inspection noted that the HVAC was nearing the end of its useful life, and that there were several fogged windows. We expected that the home inspection by these buyers would reveal the same.
Buyer’s remorse is real, and it gets magnified in a bidding war. When paying above the list price, it is natural for buyers to want to claw back some of it. We expect it, and are prepared for it.
The previous seller gave us a credit for the fogged windows, so it was just a matter of getting them done, and we knew the approximate cost of a new furnace and air conditioner.
We discussed whether we should replace the HVAC and windows in advance, but decided against it – and left them for the buyers to claw-back instead. Once requested, we were happy to oblige – unlike most agents who want to start World War 3 over every repair request.
On February 27, 2019, our seller purchased 1463 Paseo de las Flores for $1,950,000. At the time, it was one of the top four highest-priced sales EVER in Encinitas Ranch, with two of the higher sales being $1,970,000 and $1,975,000 (plus a $2,100,000 back in 2005).
I have always kept an eye on a house further down the fairway because its first owner was Jill Kammerude, a close friend and fellow realtor. We had shared her Padres season tickets from 1998 to 2009 when she unfortunately passed away.
Her 4,612sf house on the golf course had sold again on April 8th of this year for $2,405,000:
I had been to this house a few times, and though it had more of the older look, it was comparable to the home we sold on Paseo de las Flores. I sent the link to my client, and congratulated him on picking up a cool $500,000 in appreciation in just two years.
I asked if he would consider moving, to which he said, ‘Maybe’.
We began talking regularly about where to move, taxes, repairs, etc., and in mid-September he committed to selling. We began our 6-week tune-up, and on October 21st, we hit the open market listed for $3,395,000, because there had been a flurry of $3,000,000+ sales nearby.
I told the story previously……that I had received two solid cash offers during the open house, and was telling attendees that I was going to sell it that day. Both buyers were anxious, so once I left the open house, it was time to determine the winner.
I do take pride in utilizing sophisticated high-tech tools, and this day was no exception.
I pulled out my Super-Duper Bidding-War Bonanza sheet, and went to work:
I went back and forth between the agents on the phone, telling them the price to beat – and they filed the bids above. Buyer #1 delivered the knockout blow with their $3,760,000, and we had a winner – and Buyer #2 went right over to Lynwood and bought it instead.
How I handled the communication was critical – it takes more than a fancy notepad.
In particular, because we did the bidding verbally on the phone, I had to get the buyers to commit to their price in writing before they cooled off – which I did, and it closed today for $3,760,000.
Keeping the buyers happy for a month, helping the seller move, and delivering the house in excellent condition was all part of the process too. Thank you Donna!
It would have been easy to discard the first cash offer of $3,395,000 because the buyers saw the house via FaceTime, and instead taken the $3,500,000 cash offer from the buyer who saw it in person. Almost all other agents would have done so. But with me at the helm, my seller made an extra $260,000.
It sold for $700,000 more than the model-match that sold on October 25th, one block over.
It sold for $992,100 more than the zestimate!
It sold for $1,360,000 more than its approximate value in April, which is a 56% pop in six months!
It sold for $1,810,000 more than the seller paid, which is a 93% return in 32 months!
You know there are agents out there thinking, “Jim, you sniveling little baby – why don’t you just get your buyers to offer more money so they can win the bidding war?”
First off, a bidding war is when participants are bidding against each other.
What is practiced around here is blind bidding, where buyers just guess at what offer might win.
Nobody wants to pay more than they have to, or more than they should. With no other influence, buyers will submit their bid based on the comps, or their comfort level.
But when presented with a price to beat, emotion takes over. With the fear of losing the property being a real possibility, buyers are much more likely to go higher than they originally thought, in order to win.
It becomes more about winning and losing, than paying a comfortable price.
There will be an occasional blind bid that swamps the boat, and produces a sales price that others wouldn’t have touched. But how do you know? You don’t.
Conducting an auction-like process where bidders are pitted against each other and know the number they have to beat is the most reliable way to reach top dollar. The fear of loss is real, and motivates people to do things they wouldn’t have done on their own.
Yet, realtors around here won’t consider! Why not?
Most everyone thinks it’s against the rules, but this is in the contract:
Offers not necessarily confidential: Buyer is advised that seller or listing agent may disclose the existence, terms, or conditions of buyer’s offer unless all parties and their agent have signed a written confidentiality agreement. Whether any such information is actually disclosed depends on many factors, such as current market conditions, the prevailing practice in the real estate community, the listing agent’s marketing strategy and the instructions of the seller.
Agents can include the confidentiality agreement but it doesn’t mean anything unless all parties agree.
In my bidding war on Saturday, the agents were happy to participate. They enjoyed the transparency, and the chance for their buyers to determine their own fate!
I mentioned the cash offer we made on Saturday on behalf of buyers hoping to purchase a home in Carlsbad. It finally came to a conclusion last night.
It went the same way all of the other multiple-offer situations have gone:
It dragged on for days.
Little or no communication.
No transparency about the process or how a buyer will be selected.
No open bidding.
After a day of being kept in the dark, I suggested to my buyers that we should improve our offer and just hope for the best. We submitted a new offer above the list price, 14-day closing, and free 30-day rentback. A worthy offer!
I got the call late yesterday – Sorry, we’ve gone in a different direction.
I appreciated the call because they usually come by text so the listing agent doesn’t have to offer any explanations. Because I had the agent on the phone, I pleaded with him to give me the winning sales price, which he did.
When I told my buyer about the winning bid, he said,
“I would have paid that.”
“IN FACT, I WOULD HAVE PAID MORE THAN THAT.”
It’s not just about treating all buyers and buyer-agents fairly (part of the Code of Ethics).
It’s about LEAVING MONEY ON THE TABLE, which is happening everywhere because listing agents are too lazy or inexperienced to conduct a proper bidding war. Even if you don’t have the guts to do open bidding like I do, then at least give every buyer a chance to make their highest-and-best offer, which used to be the standard up until this year.
Now, the listing agents only worry about grabbing their favorite offer, and going back to sleep.
You say ‘full transparency’ and blah, blah, Jim – what do you mean? What happened? Give us the dets!!
We received two cash offers during the open house on Saturday, one from the first people who saw it on Friday, and the other from a buyer who attended the open house – which was a quick turnaround because I told her that we already had a cash offer.
Each buyer had their own agent, and the terms were similar. It was going to come down to price.
They are called ‘bidding wars’ in this business, but the way the vast majority of agents handle them, it’s really just a collection of offers. The listing agent might use a spreadsheet to organize them, but in the end, they are presented to the sellers who then just picks a winner – usually after the listing agent chimes in with their preference.
It’s not right that the listing agents get to play God and decide the outcome. I want the market to decide it, because that’s what is fair to all buyers, all buyer-agents, and especially the sellers.
Plus, I don’t want to delay the outcome for hours or days and risk that the buyers might cool off – which is what usually happens as listing agents let days go by after their first offer is received, thinking it might get better, later.
I started my bidding war as soon as I got in my car to leave the open house.
I called the agent for the first buyer and told him he’d been outbid, THEN I TOLD HIM BY HOW MUCH, and asked if he wanted to go higher.
He called back in ten minutes with his new bid.
I went back to the agent for the second buyer and told her that SHE HAD BEEN OUTBID BY X AMOUNT, and asked if they wanted to improve their offer.
My slow-motion auction lasted until one of the buyers ran out of gas about 90 minutes later.
It worked great, and maybe even better than a live auction because bidders don’t feel rushed to make an instant decision. They were able to confer with their agent and make a deliberate new bid.
Both buyers had a fair and clear chance to purchase the home, which is missing with the Offer Collection method. When listing agents just pick their favorite offer, instead of requesting higher bids, it leaves money on the table and it makes the remaining buyers wonder what happened – most of which would have made a better offer, if they were only given the chance.
The seller of our new listing in Encinitas Ranch has been discussing a move for six months. He contributed his decision to sell now primarily to what he read here on the blog.
Specifically, that what appears to be a frenzy slowdown is NOT reflective of the market normalizing – instead, it’s due to just the opposite; a continuing decline of inventory.
What’s my #1 tip for sellers? Sell when everyone else isn’t!
The Encinitas market is starved for higher-end luxury homes, especially those sexy, turn-key ready homes that can be occupied within 30 days (a dearth made worse by most listing agents demanding 60-days free rent after closing for their sellers).
We thought if we went on the market in October and appeal to the buyers who wanted to close and occupy by Thanksgiving, we’d have a special niche all to ourselves.
But we had work to do to maximize the appeal, so we spent the last two months and $50,000 to get the home in tip-top condition. By yesterday, it was perfect – thank you Donna!
What happened next wasn’t luck or happenstance.
It was a planned strategy to maximize the opportunity for buyers to not only purchase a home yesterday, but to also have the process be a fair and clear competition utilizing full transparency. I made sure that everyone knew the rules of engagement, and how to win.
Today, I get to go back in the jungle.
We made a cash offer with different clients yesterday who are hoping to buy a home in Carlsbad, and got the usual routine. Agent doesn’t answer his phone, doesn’t call back, doesn’t acknowledge receipt of the offer until today and leaves a cryptic email suggesting that he might have multiple offers but no other game plan on how the winner will be determined. You know, the normal way agents handle their business.
Full transparency is the best way to achieve top dollar, and you can only find it here!
Kim Rohrer was looking forward to leaving the leaky windows in the two-bedroom Berkeley rental duplex that she shared with her husband and two small children.
The couple recently found a three-bedroom, two-bathroom chalet-style house in Berkeley listed for $799,000, which seemed relatively affordable for the area.
The house needed significant work, including plumbing upgrades, but the couple wasn’t deterred. “It was like a dream house,” said Ms. Rohrer, who works in human resources for a tech company. (Her husband works at the University of California, Berkeley.)
The couple offered well above the asking price: $850,000. They knew there would likely be multiple offers but they also needed to save some money for the necessary repairs. They didn’t get the house.
They didn’t even come close. The home sold for $1.4 million — nearly double its asking price. “It’s terrible,” she says of her house hunting experience so far. “Completely terrible.”
Here’s a great snapshot of how the vast majority of listing agents handle multiple offers. They just grab one, and kiss off the rest – which isn’t good for the sellers, it’s not good for the losing buyers who might have made a better offer if there was a highest-and-best round, and it’s not good for the buyer-agents who should have the right to compete fairly to sell the home.
But the listing agent gets to go back to sleep, so there’s that.
The most common response? “I just did what the seller wanted to do”. But isn’t it your job to advise them of a way to create a fair competition that could get them a better offer and more money? I think so.