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Offer #6

We received the five offers and completed the highest-and-best round with all.

On the way over to the sellers’ house to discuss the results with them in person, Offer #6 arrives by email – and it’s all-cash with an escalation clause, which makes it a real contender. We have a horse race now!

Most agents would jump on the offer with the escalation clause, and call it a day.

But I had already discussed with agent of Offer #1 that escalation clauses aren’t fair to the losers  – because every buyer at this price point would gladly pay an extra $5,000 to $10,000 extra to win.

With the sellers’ permission, I tempted #1 to raise their offer again – for the third time – after telling them about the cash offer.  After a brief deliberation, they declined.

The cash offer was completing a 1031 exchange, and their relinquished property had already closed escrow – which means that they were in their 45-day identification period.  Buyers in that position are feeling the pressure, and they have to buy something. If they don’t identify up to three properties within the 45 days that they might purchase over the next four months (they have six months from their escrow close date), then they will be forced pay capital-gains tax on that previous rental property.

Time is of the essence!

It is crucial for me to ‘read the room’.  I’ve exhausted the other buyers #1-5, and the sellers are ready to sell their house. How much farther can I push it with the cash offer?

Rather than go back and forth with my auction format, we decided to just counter $50,000 higher, at $2,150,000, to the cash offer, instead of using the escalation clause.  I called it in to their agent and told him that if that was acceptable, we’d send him a signed counter right away.

But then 90 minutes went by with no response.

We have an acceptable offer on the table with owner-occupants (those are more likely to close) and a good agent.  The sellers had baked cookies and swapped stories with us for over an hour as we analyzed the different angles, and it was time to make the deal. During that time, the sellers got more comfortable with foregoing the extra $50,000 and opt for the sale that’s more likely to close.

I told the agent of the cash-offer that we were taking the other deal.

It happens regularly that sales are won and lost in hours, if not minutes. No lollygagging!

Get Good Help!

Me telling the story on video:


Hire Jim To Sell Your House

We spent all afternoon with the sellers!

Our multiple-offer process is complete.

List price: $1,795,000

Offers, in order of receipt:

Offer #1: $1,850,000

Offer #2: $1,915,000

Offer #3: $1,945,000

Offer #4: $1,929,000

Offer #5: $1,950,000

Every other agent would have recommended that their seller sign the $1,950,000, which is a whopping $155,000 over list price. Who wouldn’t be happy with that?

My thought? We have five strong offers over list. At least one buyer will probably go higher.

Because I know how to properly handle a bidding war, we gave EVERY buyer a chance to submit their highest-and-best offer (unlike the Redfin agent who told me she only counters the serious offers after I submitted an offer that was $250,000 over list).

Guess who won.

That’s right, the $1,850,000 buyer won it with their highest-and-best offer of $2,100,000:

You should list your house with me!

 

Open Houses Are Complete

We have three more showings today and then almost 200 people will have seen the house since Friday! Next we will engage in open bidding by phone with all interested parties and let the MARKET decide the winner, not the listing agent (which is how everyone else does it).

Here’s a buyer-agent strategy that can be really effective, especially with weaker listing agents:

Heavy Demand, 2022

To demonstrate the imbalance between the supply and demand, look at the view counts of our new listing on the two search portals in the first 33 hours on the open market:

Views: 3,051

Saves/Favorites: 171

I received three phone calls from agents letting me know that they have interested buyers and will be attending the open house today – part of the rapport-building process that some have included in their repertoire of buyer-positioning tactics. One agent implored me to do a James Bond video, and even though Mitch has his Aston-Martin available, I had trouble getting into my black suit!

There were THREE other agents who requested an earlier showing time, so I’m getting started at 11:30am today to accommodate. On a Friday morning!

How pent-up is the demand coming into 2022?

Sacramento isn’t the same as us, but consider:

If there are multiple offers, what else can buyers do to compete, besides price?

  1. Butter up the listing agent. It doesn’t work with me, but most listing agents want to select somebody who they like to be the winner. They justify it with it being a ‘good match for the neighborhood’ or some other garbage, but it is pure discrimination – though completely unconscious.
  2. Bring the kids, for the same reason above. If you don’t have kids, grab an infant on your way over.
  3. Figure out if there is any predetermined process for selecting the winner. When I ask a listing agent this question, at least 90% of the time the answer is “I don’t know, I let the seller decide”.
  4. Big down payments, and big deposits. Though the chance of the buyers cancelling is the same, the naïve listing agents think those mean something.
  5. Ask for seller disclosures, and if there is anything unusual, then waive that contingency.
  6. Spend a lot of time at the house. It makes you look like you’re serious.
  7. Be one of the first visitors, and the first offer. It impresses most listing agents, and mentally they have designated you as the probable winner.
  8. At an open house last year, an agent brought me a sandwich. He still lost, but I’ll never forget it!

I heard an agent say, “If my buyers like the house, I tell them to offer $100,000 over list. If they love it, I tell them to offer $200,000 over list”.  A great example of how dumbed down the business is!

Besides, buyers are doing better than that:

 

Our New Listing in SW Carlsbad

1065 Goldeneye View, Carlsbad

4 br/3 ba, 2,706sf

YB: 1998

LP = $1,795,000

This 4-bedroom (plus loft/office), 3-bath home has been meticulously maintained and upgraded with stylish light-colored wide plank hardwood floors, plantation shutters, crown molding, newer central A/C and high-grade artificial turf, front and back. Downstairs bedroom and full bath, newer kitchen with walk-in pantry, 3-car garage with workbench and loads of storage! The larger backyard is a real treat, and the mature landscaping provides unusual privacy – you’ll love it! The only house for sale in the coveted Seabright community, which is walking distance to Poinsettia Park and the highly-acclaimed Pacific Rim Elementary School. The house three doors down just closed for $2,125,000 on Jan. 4th!

Open house 12-3pm on this Friday and Saturday!

https://www.zillow.com/homedetails/1065-Goldeneye-Vw-Carlsbad-CA-92011/52506745_zpid/








Above are the views & saves between 10pm and 6am!

Here is the Zillow 12-hour count:

Frustration Fee

Why do buyers offer $100,000-$200,000 over the list price?

  • The sellers and listing agents aren’t demanding it.
  • The home isn’t priced $100,000-$200,000 under value.
  • Half the homes are selling for list price or under.
  • There will be others for sale.

There isn’t a threat of transparency either – every listing agent (besides me) does blind bidding, and then just takes the highest offer.  It would be understandable if there were rounds and rounds of open bidding and the buyers’ ego kicked in because they KNEW they had to out-bid everyone else to win.

But with blind bidding, you don’t know anything about the other offers (if any).

The extended frenzy is causing buyers to voluntarily sacrifice hundreds of thousands of extra dollars in trade for the hope of ending their frustration – and if they still lose, then they offer even more next time!

The frustration builds over time, and buyers go through a fairly predictable sequence:

Early-on: I’m not going to play that game – I’m not desperate.

After losing 2-3 houses: These people are nuts.

After losing 4-5 houses: Ok, this is ridiculous. I gotta get this over with.

The biggest problem is that it seems there are always people with more horsepower who started the process earlier and, as a result, are MORE frustrated than you.

Once buyers reach the peak frustration level and end up winning a house, they are left in disbelief with the one universal thought: “Oh, what have I done?”

It becomes obvious that buyers are paying tomorrow’s prices today, but they come to terms with it later because there are enough other reasons to buy this house that paying the frustration fee gets forgotten.

If overpaying is part of the environment, what can a buyer do?

  1. Get to the peak frustration level quickly, and/or just buy the first house you see.
  2. If you are going to overpay, then insist on buying a superior home.
  3. Only buy an inferior home if the defects can be fixed with money.

You will have a 15-minute tour to size up the home and make decisions that will affect the rest of your life.

You’d be crazy to attempt that without a solid, experienced agent to assist you!

Yet, even with all this pent-up frustration among buyers, it doesn’t occur to listing agents to go back to all the other bidders and give everyone a chance to overpay.

Get Good Help!

Cash Sales

Taking a cash offer is a sexy option but no guarantee to get past the home inspection. The best buyers work with the best agents, and another variable worth considering when selecting the winner.

Almost 27 percent of San Diego County home sales were in cash in the third quarter — the highest in seven years.  Attom Data Solutions said cash purchases, instead of loans, were up from 15.4 percent at the same time last year.

Sellers typically prefer cash buyers because it guarantees money for the home quickly, whereas mortgages can be delayed — or fall through — for a variety of reasons. San Diego has seen an increase in cash offers before, said Attom records going back to 2000. The real estate data provider said 36.2 percent of homes were purchased with cash in the first quarter of 2013 as the region came out of the Great Recession. At the time, many loan programs were still suspended from the housing crash and that made cash sales more of a necessity. The last highest level for cash sales was in the third quarter of 2014, with 27.2 percent.

The difference now is potential buyers face increased competition for a limited number of homes for sale and are trying to make the best offer possible, said Raylene Brundage, a Windermere agent who sells in several North County communities. “If it’s not contingent on a loan, there is less that can go wrong,” she said.

Brundage said sellers often go for cash sales over other loan types designed for first-time buyers and the military. Those types of loans require appraisals and inspections, making it possible a transaction could be halted. Cash sales not only mean money flows quickly into bank accounts but inspections, which are needed on loans, are often waived. A deal with a mortgage could take a month or longer to complete.

Brundage said she worked with two millennial couples this year who borrowed money from parents so they could make cash offers. Both were successful in getting homes. The majority of cash sales are coming from typical homebuyers, not investors.

Attom said 7.9 percent of the San Diego County sales in the third quarter came from institutional investors, which was lower than much of the nation.

In Atlanta and Phoenix, investors are making up 19.5 percent of sales; in Charlotte, 19.3 percent; in Jacksonville, Fla., 19.1 percent; and Tucson, Ariz., 18.4 percent. Parts of the South and Midwest have some of the smallest interest from institutional investors. In Madison, Wis., investors made up 2.3 percent of sales.

(more…)

Goodbye 2021!

People say to me, “I bet you’re loving this market”, expecting that realtors are raking it up these days.

Not really.

I lost 50+ bidding wars with buyers this year who lost out to others who insanely overpaid with no regard for the comps, or because listing agents were too lazy to give everyone a fair chance.  Neither of those are healthy for the market in general, yet no change is on the horizon for 2022.

I found myself in two more bidding wars this week!

The two properties weren’t the superior buys in top condition – instead, both were very average and priced with no regard for the comps. Yet they both had multiple offers over list price during the week between Christmas and New Years?

This is my 698th blog post of 2021, and the best way to review the year is to scroll through the highlights and lowlights here:

https://www.bubbleinfo.com/category/2021/

or here:

https://www.bubbleinfo.com/category/bidding-wars/

For those who like the videos, here is the full collection:

https://www.bubbleinfo.com/category/bubbleinfo-tv/

I’m off to play golf with Kayla – she extended her stay for another week! I’ll comment more later.

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