Interest rates have been inching up for the past nine consecutive weeks, and more buyers are moving away from their temporary side line retreats to make buying decisions. Multiple bidding is occurring with increasing frequency especially for entry level homes and well priced properties under $2M. As competition heats up, it’s worthwhile to review four competitive bidding tips.
I’ve never liked the term “bidding war” because it connotes hostility. Submitting a competitive offer is all about strategizing and being reasonable. If you’ve lost recently in a multiple bid situation, don’t fret or lose confidence. Get back on the horse, act with determination, and heed this advice:
1. Collaborate with a pro
2. Line up your ducks
3. Go the distance
4. Rush to contract
Collaborate with a pro. The stakes are just too high to go it alone. Unrepresented buyers suffer serious disadvantages, not the least of which is lacking the distance required for the give and take of bargaining. While many believe they can shave a portion of the commission by going directly to the Seller’s Agent, the reality is experienced agents prefer to do business with other experienced dealmakers. Contrary to lay opinion, veteran brokers acknowledge that when each side has separate agency representation, the transaction proceeds more smoothly and with less risk of derailing.
When I’m representing buyers in negotiations, before I submit any offer, I engage the seller’s broker in a “feeler call,” and we speak in a shared code about key points which they are less likely to convey directly to a buyer. What, if any, offers have been rejected? Have the sellers identified their next home? Do they need a holdover? What is their timing?
Line up your ducks. When you’re ready to bid, be prepared to act quickly and decisively. If you plan to finance, written preapproval from a recognized lender means that the bank already has checked your credit history and reviewed your income, assets and liabilities. If there are blemishes on your accounts, resolve these before you apply for a loan. Your agent can direct you to credit service companies to clean up delinquencies and settle disputed claims that damage your credit score.
To compete with cash bidders, consider waiving the financing contingency. Your lender will be able to tell you whether the building is on the bank’s approved list, and if not what needs to happen to correct that. Appraisals also can be ordered before contract signing to avoid low estimate surprises. For contingent contracts, tightening the time of the contingency clause from 45 to 14 days will shorten the risk to the seller.
Give substance to your bid with personalized employment and financial profiles. You need to demonstrate that you not only have the funds to close and income to support your monthly carrying charges, but that you also have the post closing liquid assets needed to gain board approval for a co-op. Determine the seller’s time frame so you can express flexibility with respect to closing and occupancy. Also line up an attorney who specializes in NYC real estate and add this to your offer letter to show the seller you will sign promptly.
Go the distance. In a best and highest scenario, put your best foot forward and bid the most you can afford without overextending. You probably won’t get a second chance to improve your offer. In a competitive environment, go to the last dollar beyond which you would not kick yourself for having lost the apartment, but at which you will feel good about signing.
There are factors besides money to make your offer more attractive than a rival’s. The best bid is not always the highest. In competitive situations, the terms of the deal matter and the buyer’s qualifications count, especially in co-ops where the board approval process can be worrisome.
Personal notes help to humanize negotiations. If you discover that you have something in common with the seller—schools, charitable interests, club memberships—put this in a "love letter." Tell the seller how you can see your family growing in the space they have lovingly maintained. If your agent is known to the other side as an experienced dealmaker who will facilitate a closing, that’s a plus. When everything else is equal, intangibles often tip the scales.
Rush to contract. When your bid is accepted, instruct your attorney to expedite contract negotiations and due diligence. Parties are not bound until the contract is fully executed. With backup bidders in the wings, delays can cost you money and the property. Stay positive and remain civil even if you wind up being second best in competitive bidding. Never slam a door. It ain’t over till it’s over, and I’ve seen many a backup bidder move to first place when the dust settles.
Good luck bidding. Call us, we're happy to guide you.