Bidding Wars are Heating Up

TIP #1: Set up your buyer’s expectations:

• Tell your buyers to expect to be in bidding wars.
• Refer to the asking price as the starting line, not the finish line.
• They must act quickly (when they see something they like, don’t hesitate).
• They must submit clean offers (e.g. fewer conditions the better).
• They should not ask for extras (e.g. chattels) as they complicate the offer.
• They must be flexible on closing date to work with the seller’s schedule.
• Do a buyer consultation presentation up front. Ensures they understand the current challenges and your solutions.
• Sign a Buyer Representation Agreement to protect yourself – otherwise you risk working for free.

TIP #2: Ensure buyers are 5-star certified:

Negotiations are fiercer now than they have been in since 2007. Your buyers will have a better chance of winning in bidding wars if they are completely prepared and their offer stands out. Years ago, when I was working in Denver, CO and the inventory was critically low. The President of Coldwell Banker Colorado came up with a 5-star buyer certification program to help his agents make their offers more competitive.

In a multiple-offer situation, our first instinct is to offer OVER asking price or put in escalation clauses, but this may lead to appraisal and financing issues. Instead, your buyers can use these strategies to make their offer stand out:

1. DEPOSIT: Offer a large deposit. This proves to the sellers that your buyers are serious, and they are less likely to walk away if little issues arise.
2. PRE-APPROVAL: Get their financing pre-approved and submit a commitment letter with the offer, so it is as strong as a cash offer.
3. WARRANTY: Get the buyers to buy a home protection plan warranty to protect both them and the seller in case of major mechanical failure. It guarantees the seller has no major expenses before closing should something break down, and the buyers are covered for the first year they are in the house.
4. MOVING EXPENSES: Get the buyers to offer $500 (or another amount) on closing towards the seller’s moving expenses. The sellers can use a moving company of their choice.
5. COMMISSION: Ask your buyers to pay a percentage of the seller’s commission to the listing agent. It doesn’t inflate the purchase price but puts more money in the seller’s pocket.

Chances are, none of the other offers you are competing with include these incentives, so your buyer’s offer will stand head and shoulders above the others. Include a letter to the sellers with your offer explaining the benefits they receive from having your buyer 5-star certified.

TIP#3: Present offers in person if possible.

My last recommendation is to request to present your offer in person. This is rarely done these days, but it will allow you to make your buyer’s case to the seller and explain why they should accept your buyer’s offer. Presenting in person takes the negotiations to a more personal level. Instead of just seeing words and numbers on a contract, when you humanize the negotiations your success rate will go up.