If you’ve been looking for a home these past two years, or in the pre-bubble era in the mid-aughts, you likely have been party to a disappointing result in making an unsuccessful offer on your dream house while competing against several (or many) other bidders. Low inventory and the improving economy has created this perfect storm for buyers. Especially in the entry to mid level price ranges in Seattle ($400-$1M), bidding “wars” are the norm, not the exception.
After 26 years of brokerage work and participating and winning in hundreds of these scenarios, we’ve learned there are several essential components to putting together a “winning” bid. In order of importance:
- Price. At the end of the day, a good listing (seller’s) agent will be careful to ensure that the seller is getting the most money out of the sale. I recall submitting an offer many years ago on a then-$2,000,000 house in Magnolia, owned by a prominent Seattle family. When I presented to the listing agent and the owner’s son, I gave a long pitch about how great my buyer’s were, how they’d continue the legacy of ownership, and gave them a letter from my buyers — now known as the “love letter.” The son looked at me and said: “This is great. Really appreciate it. And my mom will never see this letter. This is a business transaction.” I understand that, and in some cases a warm fuzzy might be worth slightly more than an all-else-equal nod. But just slightly more.
- Contingencies. This is where you can differentiate yourself.
- Inspection Waiver: When expecting multiple offers, we always recommend a pre-inspection so that our buyers can go into their offer without this standard contingency as part of the package. We have negotiated with several inspectors to do an oral “quickie” inspection that covers all of the major systems, but is half the cost of a written report and can be done in an hour or two. In addition, after hosting so many inspections, we can typically forecast for our buyer what we think might get called out in the process so we can get bids for whatever work might be needed.
- Financing: Ideally we get so confident of our buyers’ ability to qualify for a loan (and the house’s ability to appraise) through our preapproval process that we can enter into a purchase and sale without a financing contingency. This does mean if you can’t get a loan…you lose that earnest money. So there’s a risk that we need to get comfortable with. But it helps you compete against “cash” offers, because at the point you waive the financing contingency, even if you subsequently get a loan…you’re the same risk to the seller as a “cash” buyer.
- Other – Home sale contingencies are nearly impossible to sell in this type of scenario. RPA does bridge financing in some cases, and we have other strategies we employ in the situation where our buyer has another home to sell.
- The intangibles
- That love letter isn’t valueless. We help our buyers write it and we included it with the offer
- Offer presentation – if we can, we want to meet with the seller and we want to be the last broker to do so. We want you in the parking lot when we do it so if we need initials on a counteroffer, we can get them right away. There’s more to it than that, but the idea is that we want to close this with them before they bring back other buyers for a “highest and best round.”
- Relationships — I would never suggest that we leverage our relationship with a listing agent to the detriment of their client. But in this bidding frenzy, having been a broker in Seattle for so long and having worked with most of the top agents in the city, experience and reputation are HUGE differentiators. As a listing agent, with whom would you rather work? An agent you’ve worked with in the past (or one who has worked with your coworkers) who is known to have the experience to close deals? Or a new agent, or someone’s assistant, or an agent working for a salary without that incentive to get paid on the closing? There’s at least one good reason to pay a broker a commission — it’s because we get paid on performance — at closing — not just on satisfaction.
There’s a list of criteria that we have when on the other side of this table, representing the seller as a listing agent — most of which our buyer’s list takes into account.
Good luck…at least in this game, we get to pick the cards we want to play!
Co-Founder and Managing Broker
Real Property Associates, Inc.