Welcome to bidding battles for resales, where the sales price is not the price, and the commission may not be the commission.
Home shoppers find themselves in a battle with an unseen enemy – located somewhere between their will and their wallet.
There are three ways to win a bidding battle
1. As a listing agent, think circus ringmaster.
2. As a buyer’s agent, think cattle stampede.
3. As a bid- resistant buyer’s agent, think fixed price, no bids.
Let’s be real.
Your chances of listing the home are slim to none. Competition for saleable inventory being what it is.
Your chances of your buyer winning the bidding battle are slim and none.
There are exceptions. Realtors who are making those exceptions are exceptional professionals.
When you hear their stories, you sense that if you were buying a home in this agent’s market, you would want this agent to represent you.
Here are two of the best in Orlando based on their listing and sales production.
Orlando Realtor Mary Carpousis does not enjoy the bid battles, but does not run from one.
“Recently, I was bidding against 18 other offers on one property. Yes, 18! We lost the bid. Later, I won the bid but had to pin the listing agent down to accept an offer for a different property that included $10,000 over the asking price. We closed,” Carpousis said.
Realtors find themselves negotiating on behalf of their clients for higher than listed prices in a world that trains them to negotiate lower than than listed prices offered by their home shoppers.
High demand for marketable inventory is driven not so much by traditional reasons such as a need for more bedrooms for growing families, but the need for a home office for work and a study area for home schooling.
Home shoppers find themselves in a paradoxical bidding battle with an unseen enemy – the fear of paying too much and the fear of losing the bid.
The winner must pay the highest price and/or offer the best terms, and in some cases, hope the home appraises.
What then is the best way to prepare your buyer for a bidding battle?
Orlando Realtor and broker principal Pat Taylor of TTT Realty suggests the following steps when dealing with resales.
“My first recommendation to buyers is to have preapproval, not pre-qualification letters ready. My lender will pre-underwrite the loan without a contract to provide additional assurance to the seller that our loan will close.
“Second, buyers need to be prepared to offer full price or more on a property they want.
“Third, if the buyer is committed to a particular property, I suggest adding an escalation clause stating that the buyer will go $5,000 over the next bonafide offer.
“Fourth, I have buyers write a love letter to the sellers about why they want the home, and I find these can help the seller decide in favor of my buyer,” Taylor said.
According to Realtor.com, an escalation clause is a real estate contract, sometimes called an escalator. When a home buyer says: “I will pay x price for this home, but if the seller receives another offer that’s higher than mine, I’m willing to increase my offer to y price.”
Carpousis says she recommends that her buyer’s original offer be a few thousand over the asking price if they are first to make the offer and be willing to close as fast as the mortgage lender permits.
Question: if bidding is so stressful, why not offer a no-bid option?
Both Carpousis and Taylor do precisely that. Both show new construction, with its fixed base price, every chance they get.
Resale agents need to add new homes inventory to their showing schedule.
“New home construction is the easiest sale in real estate,” Carpousis said, “Even if a prospect wants to see resales, I always suggest they at look at new homes selling at the price the prospect plans to pay for a resale, so they can at least see what they can get for their money.
“This not only helps me close more resales, but many of my prospects purchase the new home. Either way, I win, and sometimes list their home if they are local.”
If you are in general real estate, should you be showing new homes?
Is there any doubt? Afraid you will make a mistake?
Someone once said that ‘doubt destroys more dreams than failure ever could.’
In our next piece, we will examine why a new home buy is a ‘no-bid’ transaction and how to find new homes inventory and why they are willing to pay broker commissions in one of the hottest new home market ever.
After all, with new homes, the base price is the price, and the commission is the commission, a refreshing strategy and policy in today’s uncertain resale world.