Written by Gretchen Rosenberg, Kentwood Real Estate President and CEO
In a recent sales meeting, we discussed the astonishingly low inventory in Colorado and particularly in our company’s markets along the northern Front Range. Buyers are in a frenzy with very little to see and homebuilders are 12-18 months out on delivery.
There are strategies that can help buyers win the day but trying to go it alone is bound to lead to disappointment. Here are the top 5 strategies to help you succeed in winning a bid for your next home.
1.Start with a Lender
Unless you’re a cash buyer, get yourself preapproved (not just pre-qualified) before you begin looking at houses or commercial property. There are several compelling reasons for this. First, you’ll be ready to pull the trigger and you’ll be more competitive when you do find the right property. Second, with COVID showing restrictions, it’s not time to be a looky-loo. Brokers are permitted to take qualified and bona fide buyers through occupied homes. They will not take you on a fishing expedition. I used to occasionally tell buyers it was okay to “go look before your approval to give you a sense of what’s out there.” That’s not how it works these days. Prosperity Home Mortgage is our outstanding mortgage affiliate, and the team are experts at helping pre-approve buyers and being ready to close quickly to make your offer stand out.
2. Understand Contract Contingencies
Colorado’s purchase agreement is notoriously slanted to buyers. There are myriad contingencies that favor buyers and relieve them of the obligation to perform while receiving their earnest money back. In order to win in multiple offer situations, it’s imperative that you understand each of those steps along the way and where you may be able to give a little to get a seller’s attention. Waiving the home or property inspection is not optimal. Redrafting the final Loan Conditions clause could be a good way to emphasize good faith.
3. Be Ready
You’ll likely have to move more quickly than you’re comfortable with. If your real estate broker tells you the house you’re looking at will be in multiple offers within a few hours, believe them. Brokers aren’t out there just trying to arm wrestle you to buy. They’d prefer you have time to think it over too. The reality of the residential real estate market means you may not have time for a second showing and you may need to be ready to jump into the fray more quickly than you’re comfortable with. Experienced brokers have a sense for which houses will be popular and will be apt to move quickly.
4. Make Your Best Offer
Some buyers and real estate agents like to utilize the “escalation clause” tactic. That’s when a buyer makes an offer at a certain price but agrees to increase (or escalate) that price if a competing offer is higher. This becomes very tricky when there are multiple escalation clauses. It also telegraphs that the buyer hasn’t made their best offer yet. I’ve personally seen escalation clauses work, but just as often I’ve seen them backfire. Sellers have been known to kick out all offers and push back for “highest and best, no escalation.” They’ve also been known to just take the best offer and not attempt to escalate – feeling that the highest offer was from buyers who were ready to be serious.
5. Practice Flexibility
We’ve used the word “pivot” a lot this year, but it reflects a perfect picture of the flexibility one needs in this business environment. Negotiate with a flexibility that will help you prevail. There are many important aspects of an offer to sellers. Price is huge, but sometimes a delayed possession, a quick close, or the ability to carve out certain exclusions can resonate. Have your broker ask the listing agent what’s important to the homeowners and try to give them as much of their wish list as you can.
You can relieve yourself of the disappointment buyers feel who lose out over and over by practicing this advice and by hiring a seasoned broker to facilitate the process. Kentwood residential and commercial brokers stand ready to help you WIN your next bidding war.