This sponsored, biweekly Q&A column is written by Andrew Goodman, Associate Broker and top producing agent with Gallagher & Co. Real Estate, Inc. Based in Bethesda, Andrew serves clients in Maryland, D.C., and Northern Virginia. Please submit comments, questions, and opinions in the comments section or via email.
Question: I have been submitting offer after offer on properties and I’m losing to competing offers. What are the keys to winning a bidding war?
I am sorry that you are having a hard time. Bethesda is a hot market and you are not the only one losing bidding war after bidding war.
Currently, the better part of the Metropolitan D.C. area is in a sellers market. Demand for housing is high and the current inventory is extremely low. But yes, there are several things you can do to make your offer stand out from the rest. The key to any sellers market is to remember just that, it’s a sellers market. Sellers are most likely going to have more than one offer submitted on their property and you have to do whatever you can to make your offer meet what they are looking for and at the same time beat out the other competing offers. So what it is that sellers want?
BEST PRICE: Sales price is always the driven force of any transaction. As a buyer, you want to get that “deal.” The problem is that there is another buyer or several other buyers that are willing to pay more for that property which will ultimately take away the once appealing “deal” and now make it sell for true market value. So you have to purchase the home the best way possible before, as all Realtors are predicting, prices increase even higher and interest rates rise.
The pricing strategy and technique you and your Realtor choose will depend on the property’s particular situation. For example, how long has it been on the market? How many offers have been submitted and or have been registered? Data from recent sales, etc. Putting a high offer (or escalation) down may not always work, make sure to prove that you can afford the offer price. This can be done through a lender approval letter, financial information sheet, bank statement, etc. To quote one of my favorite movies Jerry Maguire, “Show me the money!”
ELIMINATING CONTINGENCIES: Contingencies protect the buyer or seller throughout the real estate transaction. Until all contingencies are met, the contract is still contingent and certain items (inspections, appraisals, etc.) need to be performed. Sellers do not want buyers to have contingencies because they protect the buyer if he/she voids the contract per one of those contingencies and at the same time allowing the buyer to retain their deposit. Eliminating or reducing the amount of contingencies will help the buyer’s chances of winning the bid. However, removing said contingencies also puts the buyer and the buyer’s earnest money deposit at risk. Both the buyers’ lender and Realtor should help assist in determining which risks could or should not be taken.
SETTLEMENT DATE: Settlement date is a flexible variable that doesn’t seem that critical, but could very easily win or cost you the bid. Having a settlement date too far out may seem acceptable and realistic, but the seller has been informed of the “hot” market and should be expecting a quick contract. If that were the case, a 30-45 day settlement is typical. Meeting the seller’s settlement expectations is crucial. Do what it takes to make settlement in line with the sellers’ plan. It could pay off and save you money in the end.
LARGE DEPOSIT: The larger the deposit, the stronger your offer is. On one hand, if you remove your contingencies and you decide to back away from the contract for one reason or another, you could be in default and the seller could retain your deposit. On the other hand, putting a larger deposit down is another way to prove that you can afford the offer price. Consult your Realtor to determine what they feel is acceptable.
THE PERFECT OFFER: The perfect offer is one that is cash, which has no contingencies, a large deposit, and a settlement date that fits to the sellers needs. As a buyer, you want to offer as close to “the perfect offer” as possible to beat out the competition. The buyer that can and does will win the bidding war.