It wouldn’t have been surprising if Sara Handy and David Boylan-Kolchin had thrown in the towel. Earlier this year, the couple got involved in bidding wars on three D.C. properties and lost all three. Each time, the reason was different — one winning buyer paid all in cash, another waived contingencies, and another just offered a higher price.
“It was frustrating, and there were some tears on my part,” says Handy, 33, who works as a biologist. “You have to get emotionally invested in a house to want to put an offer on it, so it’s hard to lose it.”
They finally prevailed in their fourth bidding war, buying a three-bedroom, single-family home in D.C.’s Takoma neighborhood.
Their winning strategy? Accepting the house as-is and bumping up their original offer by $15,000.
“We were willing to spend more if that was what it took,” Handy says.
Inventory levels in the D.C. area are extremely low for properties at every price. As a result, house-hunters are likely to find themselves competing against other eager buyers. Presenting the best offer can mean the difference between landing your home-sweet-home or starting the search all over again.
“Assume that anything that’s appealing to you is going to appeal to several other people,” says David Bediz, principal of the Dwight & David Group at Coldwell Banker (202-387-6180). “Go into attack mode from the very beginning.”
To prepare their battle plans, buyers should have their agent do a little reconnaissance by asking the property’s listing agent about what’s motivating the seller.
“Are they going through a divorce or a job transfer?” says Lindsay Dreyer, broker/owner of City Chic Real Estate (202-470-0737). “We can get an idea of what’s important to the seller, whether it’s price or a settlement date.”
Taylor Wood, 26, learned that the seller was getting married when he looked at a one-bedroom condo in Columbia Heights. “I asked if the seller needed flexibility on the closing date,” he says. That willingness to negotiate — along with an offer that was slightly above the asking price — helped Wood win out.
A buyer’s ability to actually pay for the property is always crucial to sellers. So buyers need to have their mortgage situation in order before putting in any offers.
“In this market, buyers must be prequalified by a lender,” says Bonnie Casper, a Realtor with Long & Foster in Bethesda (301-907-7600). The stronger a buyer’s finances are, the stronger the letter a lender can write supporting a buyer’s ability to get a mortgage.
Put a Limit on Price
While it doesn’t guarantee victory, offering a higher price than the other buyers often seals the deal.
Buyers need to determine their cutoff point before they find themselves in the heat of the moment.
“Figure out the highest price you can pay before you get into a bidding war,” says Rick Bosl, an associate broker at Keller Williams Realty in Arlington (703-224-6035). “Review the comps [comparable sales in the neighborhood] and set your limit.”
Some sellers want a transaction that’s as smooth as possible. Removing elements that could cause bumps in the road increases the likelihood of wrapping up the sale quickly.
“The perfect offer in the eyes of a seller is one that’s offering all cash, no contingencies and a quick settlement,” Bosl says.
Since not everyone has the ability to do that, buyers have to decide what they’re willing to skip and what they’re not.
Waiving the home-inspection contingency, which gives buyers the right to ask sellers to make needed home repairs, can be a gamble worth taking.
Handy and Boylan-Kolchin did this. They said they would take the home as-is, and, instead, conducted an informational inspection. “We let the seller know that we weren’t going to come back and say we wanted money for fixing the roof,” Handy says. “But we could still walk away if something major was wrong.”
Waiving a home inspection can work for condos, since the condo association, not the owner, is often responsible for big-money repairs such as windows and roofs.
Skipping the appraisal contingency — in which the buyer can renegotiate the sales price if an outside inspector determines the home’s value to be less than the offer on the table — can be riskier. In a hot market, the sales price can wind up being higher than appraised value. A lender won’t give you a mortgage for more than the appraisal price, so it’s up to the buyer to cough up the extra.
“If the appraisal comes in at $50,000 lower than the selling price, you will need to feel comfortable bringing that extra $50,000 to the table,” Dreyer says. If you’ve got the cash, this strategy might work. If not, you might get beaten out by someone who does.
Avoid the Battle
To avoid a bidding war, stay away from fixer-uppers, which are hot properties these days. “So many developers are itching for good projects,” Bediz says. “You’ll be up against people with all-cash offers and no contingencies.”
Instead, consider a property that’s been on the market for a while.
“Different things appeal to different people,” Casper says. “Maybe it’s a property that’s just waiting for a particular buyer. There are a lot of hidden gems out there.”
From the Seller’s Side
A bidding war can be as stressful for a seller as it is for a buyer. Here are four strategies to help sellers assess multiple offers and choose the best for them:
Know what your goals are.
“Is it the highest net profit, the quickest settlement, the cleanest no-contingencies contract?” asks Lindsay Dreyer, owner of City Chic Real Estate.
Time your listing correctly.
“Get it on the market on Thursday or Friday,” says David Bediz of the Dwight & David Group at Coldwell Banker. “Enough time to sink in when people are planning their weekends but not so much time that you get offers before the first open house and think, ‘Should I take this or wait for something better?’ ”
Look at the size of the deposit the buyer is willing to make.
“Are they offering $500 or $50,000?” asks Rick Bosl, an associate broker at Keller Williams Realty. “It’s easy to walk away from a $500 deposit; I haven’t seen anyone walk away from $50,000.”
Don’t base your decision solely on price.
“Sometimes an all-cash offer may be $10,000 lower than the highest offer, but it has no home inspection, appraisal or financing contingencies,” says Dreyer. That could mean a cleaner, quicker transaction. B.L.