The white stucco house was 40 years old and charming, with a new kitchen and a fresh coat of outside paint. Moreover, it was set in a tree-lined hamlet served by award-winning schools.
The first day the home went on the market, a young couple visited there twice and concluded it was just what they wanted. Early that evening, they returned with their agent to submit an offer.
Wisely, the agent had the couple wait in her car outside the home for a full hour until details of the deal could be worked out between the two parties. That way, they were available to sign off on slight alterations to the terms, without any time delay that might have cost them their chance to own the home.
“They bought the house right out of the chute,” says Helen Soesbe, a broker-associate for the Re/Max chain, who represented the young couple, an engineer married to a computer specialist.
In many prized communities, such as downtown Chicago and surrounding neighborhoods, quality properties offered at a fair price are now in short supply.
Savvy agents have many strategies for helping buyers in competitive markets move to the head of the line or beat out rivals seeking the same property.
“You have to get into that `hurry up and move’ mode,” Soesbe says.
Here are some pointers for searching for a home in neighborhoods where sellers have the upper hand:
– Have your agent prepare multiple contract bids.
“When I know I’m in a really hot market and my clients are competing for a home, I’ll write up five different offers at the same time,” says John Rygiol, the owner of an independent real estate company that caters solely to buyers.
In a multiple-bidding situation, when several agents are presenting offers to the owner at roughly the same time, Rygiol likes to arrive early for his appointment. Although he cannot be present when the other agents outline their offers to the homeowner, he can linger outside the home, chatting with the other salespeople while they wait their turn to be heard. That way, he often garners clues as to what the other bidders may be offering and how high his buyers will have to go to obtain the property.
As a buyer, of course, your goal in competing with others is to pay no more for the home than necessary.
– Have your buyer’s agent present your offer to the listing agent or homeowner in person, rather than fax it in.
There are several advantages to this strategy, Rygiol contends.
An offer that’s presented directly to the homeowner (who usually has his own listing agent present) will seem more personal and therefore more persuasive.
In presenting your bid, for instance, it’s a good idea for the buyer’s agent to convey to the owner what you like about the home because many owners take pride in their properties and will favor someone who appreciates them, too.
In addition, having your agent go in person gives him a better feel for whether other offers are actually coming in as expected.
– Avoid the temptation to pay way too much when the competition is heated.
Beverly G. Pickrell, an agent for Prudential Realty, allows that it’s often necessary to offer more than the list price if you know that other bidders are as avid about acquiring the home as are you.
Still, how much over list you go depends on the price range in which you’re shopping, she says. At the lower end of the price spectrum, a relatively small sum–perhaps even $100–can raise you over the competition and give you the winning bid. On a midpriced home, you may need to go over the list price by $2,000 to $5,000, while on a high-end home, it may be necessary to top the list price by $10,000 or more to prevail over rivals.
All this assumes, however, that the list price was correctly set at the outset, which is not always the case. The only way to be confident that the list price is more or less in line with the true market value is to ask your agent to research comparable sales that have occurred recently in the neighborhood, Pickrell says.
If you find yourself in a bidding war over a home that was overpriced in the first place, you may want to bow out to avoid risking an excessively high bid that you’ll live to regret when it’s your turn to sell.
– Submit a clutter-free contract if possible.
Suppose you have your heart set on a lovely condo unit on Lake Shore Drive. You are positively certain that multiple bids are coming in on the condo, which features a gourmet kitchen and a lovely view.
To compete with the others you’ll want to give the sellers a contract as free of special demands as possible, Pickrell says. Do you really need the 10-year-old refrigerator that the sellers would rather keep? Then why not strike a request for the refrigerator from your deal?
Even more important is to strike out any extra conditions on the purchase that you can live without. If possible, you could please a seller by removing a clause that makes the purchase of the new condo contingent on the sale of your current one. “Make your offer as clean as possible,” Pickrell advises.
Buyers don’t have the luxury of time in today’s market, says Tobby Fried of Beliard, Gordon & Partners in Chicago. “You may not be able to come back for a second or third viewing, so be extremely thorough the first time you visit a home,” she advises.
Fried offers this advice for buyers dealing with multiple-offer situations:
– Go in with a full-price offer unless the listing price is unrealistically high. If your offer is lower than others, you may not get a second chance.
– If possible, limit contingency clauses in your offer to two, one for attorney’s review; the second for a professional inspection. If you are confident you can get mortgage financing, it’s a good idea to drop the mortgage contingency clause.
– Try to accommodate the seller’s preference for a closing date.
“While multiple offers are much more common now, they still are the exception rather than the rule, and usually occur only in certain property categories where there is a shortage of inventory,” says Catherine Fay of Sudler & Co. in Chicago. “It’s important for buyers to know if the home they are looking for is in short supply.
“Right now, for example, categories with a real lack of inventory include vintage condos and co-ops in the Streeterville-Gold Coast area priced from $350,000 to $550,000 and single-family homes within a 20-minute drive of the Loop in the $400,000 to $800,000 range.”
Fay makes several other points:
– See if your lender will give you a mortgage preapproval letter, which represents a more substantial commitment by the lender than a typical mortgage prequalification.
– If you’re concerned about other offers coming in, make your top offer effective for only a short time. That way it’s hard for the seller to “shop” to other interested parties.
– In multiple-offer situations, sellers essentially are picking the buyers with whom they are most comfortable. For that reason, buyers may want to consider submitting a brief biography with their offer so that the sellers know who they’re dealing with.
– Don’t be afraid to walk away from a property if the seller gets greedy.
