There is no way that we are back to the real estate market of 2004-06, but in the past 2-3 weeks my office, including myself, have been involved with several bidding wars on homes, whether we were representing the buyer or the seller. Is it a good sign – yes? Is it the sign of the times – probably not yet.
The good news to report is that many (not all) sellers are pricing their homes to sell and all the buyers on the fence are coming off the fence. They see value in the right priced home as well as finally taking advantage a favorable interest rates, fence-sitters become fence (and house) buyers.
Getting back to bidding wars, both sellers and buyers need to know what to do if you as a seller is lucky enough to have your house as the subject and the buyer is unlucky enough to be involved in trying to attain the home.
Seller. Without a doubt it is exciting to have your home as the subject of a bidding war. It is obvious that your home was fully marketed to enough of its target market through various Multiple Listing Sites (more than one), a slew of web sites, blogging, social and business networking, mailers, newspapers, etc., as well as pricing either at market value or just below it (yes, just below as it brings about many bids and sell for what market value is).
Because a seller has the upper hand in a bidding war, the seller can control the outcome of the final price and conditions. Seller should beware of the highest bidder. Yes the highest bidder is not always the best of the bids and a seller must use their head and not their pocket to decide which offer to accept.
Multiple offers can come in at anytime during the selling process and actually by law, can be presented to a seller up to the moment they close with a buyer. However, in most cases, multiple bids come in when a property is first listed. When they do occur, the seller with their Realtor (and hopefully one who has had experience with them), should review each offer carefully. Do not get caught up in the hoopla as it is a business decision you must make to take the right offer.
Specifically speaking, with your Realtor, review the conditions of the contract: price; mortgage amount vs. all cash; down payment; closing date (the aforementioned items are found on the first page of a contract); items included in the sale; home inspection time limit; and additional contractual conditions, which may include a house to sell contingency, or the like.
From there go back to the offerors with a counter-offer, or ask them to enhance their offer. Try to avoid asking them to come to their highest and best as in my experience, there really is no such thing. It is better just to come back with a counter. If the offers are at full price, revert back to enhancement or you can actually, come back with a price that is higher than the asking price (just be wary of what it is as it may just turn all your bidders away).
The respondents will either not budge from their price, come up to a price, or just walk away to avoid the hoopla. Some may ask for the other offering prices, and although the Realtor Code of Ethics (if you are using a Realtor), with written approval by the seller, requires that the existence of other offers are present be disclosed, it does not require that the other offering prices are. As a moral and ethical standpoint, I believe that the prices be kept quiet. At that point the counter-offers are presented to the seller.
Once that has been done, revisit the contracts for a second time. If they are close, take the second highest offer – not the highest. In many cases, when the highest bidder wins they will either back out because they believe they may have paid too much, what is known as buyer’s remorse, or they will do what they can to make up the difference of what they wanted to pay, through the home inspection issues. And then there is the issue of the home appraising for that highest price (of which we are finding to be a stopping point for a good number transactions today).
Whereas, by choosing the second highest, the buyer is more apt to stay with the purchase and not ask as much after the home inmspection. Giving the seller more control on the buyers requests. Plus, the appraisal process becomes more affable.
When the seller has made their choice, I advise that they keep the other offers as back-ups just in case the negotiations fall through.
Buyers. The buyer is most stressed, especially if this is “The House”. However, it is a lot simpler. Make your initial offer, look at the seller’s counter-offer, and come back to them with yours. Then do not let your emotions take over and make your final price not over your head. Also, be sure to get the assistance of your Realtor who will give you comparables of like homes in the area. This will give you the information for an intelligent decision. You can ask your Realtor for assistance of a purchase price but keep it in a range instead of a definitive price. (Remember, although they know the market, they are not buying the home, therefore, the value is in the buyers head more than the Realtor) If you win the bid, good for you. If you do not, leave your offer as a back-up and keep looking. It may have not been meant for you anyway.
Overall, multiple bidding can be stressful for both sides and getting the assistance from a Realtor will keep your emotions in check while giving you a representative that will work hard for you and your real estate goals. Looking for some real estate advice or to buy or sell please contact Coccia Realty at 973.377.4400 or firstname.lastname@example.org or stop by their offices in Madison, Montville, Rutherford, Kearny or Lyndhurst. You can aslo visit www.cocciarealty.com or www.facebook.com/CocciaRealty.