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Blog

How to Win a Bidding War

Vlad Popach

Let’s face it. The 2017 housing market hasn’t been easy for the typical homebuyer. The number of homes for sale has fallen for 17 months straight, and with historically low mortgage rates beginning an upward ascent, there’s more demand from homebuyers than we’ve seen in at least four years. The result is bidding wars and escalating home prices. In February, one in five homes that sold went for more than its list price. That’s on par with the levels we saw in 2013 but the difference is that four years later buyers are even savvier and understand the competitive conditions better. And the stakes are much higher now. Home prices have increased 30 percent since then.

If you’ve done any research on how to win a bidding war or if you’ve already been through one or more yourself, you know that cash is king, and that waiving one or all of the several contingencies meant to protect the buyer is often what it takes to win, especially in hot markets like San Francisco, Seattle and Denver.

But that leaves typical, financed homebuyers who don’t have that kind of cash or who aren’t up for the risk of waiving contingencies wondering if they even have a shot at winning a home in this market. We talked to Redfin agents who’ve helped homebuyers win bidding wars this year in some of the most competitive neighborhoods across the country to find out what strategies have worked for them and their customers so far. Most often, the secret to success was being creative, thinking outside the box, and approaching each bidding war as if it were as unique and special as the home itself. Our agents wouldn’t share all of the tricks that give them their competitive edge, but we were able to gather several powerful techniques to try if faced with competing bids this spring.

1. Choose the right agent

Your agent’s toughest job in a competitive situation is to win the attention of the listing agent and sell you and your offer to them, so the relationships they have with other agents in the neighborhood can go a long way. When you’re evaluating agents, consider how they present themselves and if they’re the right person to represent you, build a case for you and fight on your behalf. Choose someone who is confident and aggressive, but who listens to you and can help you stay grounded in the heat of the moment. Most importantly, choose an agent who has a good track record. Find out how many bidding wars they’ve competed in this year and how many they’ve won. Remember that the market has been changing quickly, so what it takes to win a bidding war today could be drastically different from what it took even three or four months ago in the same hot neighborhood. 

2. Get to know the seller and offer them exactly what they want

When a seller has several above-asking offers to choose from, they’re often looking for one that stands out from the rest. Most buyers make their offer unique with a written, personal letter to the seller describing themselves and what they love about the home. This is an important opportunity to connect with the seller on an emotional level and humanize the transaction. To find a way to tug at the seller’s heart strings, pay attention to cues when you’re walking through the house to find something you can relate to them about–like sports team memorabilia, artwork or kids’ activities. Don’t be afraid to dig for information on social media too. Find something you have in common or something specific they care about and build your letter around it. For tips and examples of how to write a great cover letter, read more here.

Personalize the offer terms to cater to the particular seller. An easy way to do this is for your agent to simply ask the listing agent what the seller’s preferred close date is and whether they prefer that the buyer use a certain lender or title company and write those terms into the contract. Most sellers are buyers too, and they might need extra time to find their next home, so consider offering them a rentback or leaseback agreement, in which they are able to stay in the home and rent from the buyer after closing. To sweeten the deal, let them stay on for free for a period of time. Beyond typical offer terms, find out if there’s anything else the seller wants or needs… and we mean ANYTHING. We’ve seen buyers win competitive bidding wars by offering to adopt the sellers’ dog, by agreeing to keep the chickens in the backyard and by offering them a free vacation.

3. Make your offer as close to cash and as close to non-contingent as possible

Even if you can’t offer cash and you don’t want to give up your standard protections, there are ways to make your offer nearly as appealing to the seller. Here are some tools to consider:

  • Pre-Inspection: Conduct the inspection before submitting the offer so that you know exactly what you’re buying and can waive the inspection contingency without waiving your right to an inspection.
  • Large earnest money deposit: The earnest money deposit is typically 1 to 3 percent of the offer price, but consider making yours significantly larger if you can. This shows the seller that you’re serious about this home and have the funds needed to close.
  • Non-refundable deposit: We’ve seen buyers offer an additional deposit with the guarantee that if the deal doesn’t close, the sellers can keep the cash.
  • Fully underwritten pre-approval: Have your lender go several steps beyond the standard pre-approval letter and fully underwrite the loan in advance. This ensures the seller that the financing will be approved by the lender and helps many buyers feel comfortable waiving the financing contingency. Not all lenders can or will do this, so it’s an important question to ask when choosing a lender.
  • Shortened contingency periods: If you aren’t able to waive contingencies, consider shortening the timelines associated with them. A three-day inspection contingency is much more appealing to a seller than a standard one that can last a full week or more.
  • Agree to make up for an appraisal deficiency: If you can’t waive the appraisal contingency, agree to cover part of the difference, up to a certain amount you can afford and are comfortable with, in the event the appraisal comes in low.

4. Have your agent do an in-person escalation clause

In many parts of the country, buyer’s agents write an escalation clause into the contract stating how far above the highest-priced offer the buyer is willing to go, up to a defined limit. In this in-person version, the agent uses the same technique but pre-prints out several different versions of the first page of the offer with the different purchase prices on it depending on how high they need to go to beat the other offers in the room. Once a price is agreed to in real time, the agent can hand over a final and complete offer package.

5. Be fast… or last

In some markets and situations, being the first to submit an offer (especially if it’s at or above the asking price) can win you the deal. In others, especially if there’s an offer deadline, it pays to wait and find out what the seller is looking for and how many other bids you’re up against to help inform your strategy before submitting an offer. Either way, getting in to see a home right away gives you and your agent time to prepare the best offer possible.

Make sure you’re searching on a brokerage website, like Redfin, that shows complete, accurate and up-to-date information about all the homes for sale in your area. Redfin pulls the listings shown on its site and mobile apps straight from the multiple listing service (MLS), the database agents use to list homes and updates its feed about every 10 minutes. Redfin offers several other tools to help you find out about and get in to see homes quickly:

  • 6. If at first you don’t succeed, get in the backup offer position

About 17 percent of homes that go under contract end up coming back on the market. This presents an opportunity for buyers whose offers don’t get accepted in the first go round. Backup offers can be formally or informally accepted, which is usually up to the listing agent and the seller, but it’s worth it to ask for a formal backup offer contract. If the listing agent won’t accept a backup offer, favorite the home on Redfin.com so you’ll be alerted right away if it comes back on the market and can be first with a new offer. When it does, find out what killed the original deal and guarantee you’ll be easier to work with. For example, agree to use the original buyer’s inspection and if it was negotiations over a certain repair that caused the deal to fall apart, agree to cover the cost of that repair yourself.  

If you still find yourself sitting on the sidelines:

With most homes in competitive markets igniting bidding wars, many times with dozens of bids, the odds may still mean that it could take several tries before getting an offer accepted. Here’s some advice for buyers frustrated after one or more failed attempts:

  • Find out exactly why your offer wasn’t chosen. If your agent didn’t tell you why you lost, ask her to be blunt about it. If she doesn’t know, it can’t hurt for her to follow up with the listing agent and find out.
  • Consider a fixer-upper or a home that has been on the market for a long time.
  • Consider a new construction home. While there may be campouts and lotteries for highly sought-after new construction homes, there typically aren’t full-on bidding wars because the price the builder is charging is the price, and there’s rarely negotiating in a competitive market. So you just have to be first in the door and willing to pay full price.
  • Try house hunting and making offers during an off time like school vacation week or during a storm to avoid competition.

 

Written by Rachel Musiker on March 24, 2017

A New Condominium Tower In Downtown Seattle

Vlad Popach

NEXUS Condominium Debuts

The Burrard Group, a Vancouver, BC–based real estate development firm provided a first glimpse of downtown Seattle’s next generation condominium tower called NEXUS, and plans to break ground by late 2016 for first occupancy in 2019. The developer has appointed key members of the development and marketing team and confirms that all units will be offered for sale, citing a point of inflection in the buy vs. rent debate amongst urban dwellers in one of North America’s fastest-growing cities.

 

“NEXUS will be the first of several significant projects we plan for the Seattle area,” said Christian Chan, Executive Vice President of The Burrard Group. “We view downtown as a fundamentally strong housing market and believe trending will increasingly favor homeownership as home values grow, interest rates remain low and thousands of renters contemplate the benefits of homeownership, especially upon Tax Day.”

Chan points to Seattle-area rents, which have grown by 35-percent in the last five years as the city now ranks among the top ten most expensive apartment markets in the US according to CNN Money. That’s despite nearly 10,000 new apartments that have been built in the downtown submarket since 2011. Condominium values and corresponding supply are also making a comeback with 22-percent median home price increases year-over-year during the first quarter of 2016, according to an internal report prepared by Realogics Sotheby’s International Realty (“RSIR”) and O’Connor Consulting Group. They project 17,000 new housing units in the pipeline could deliver over the next five years but 85-percent are expected to be rental. NEXUS is among a new generation of units for sale, however the total condo supply is projected to be less than the past condominium market cycle a decade ago.

“NEXUS will anchor an emerging vertical village in the northeast corner of downtown Seattle where high-rise zoning and a meteoric number of developments are creating a glimmering new, multi-billion dollar neighborhood,” said Dean Jones, President and CEO of RSIR. “This kind of transformation has occurred in peer markets like False Creek in Vancouver, BC, Williamsburg in New York City, or Mission Bay/SOMA in San Francisco. Now it’s taking shape in downtown Seattle.”

Jones says NEXUS provides a unique opportunity to own the future as these homes can be purchased two years before delivery, offering savvy homebuyers the opportunity to lock in preferred home plans and presale prices, as well as personalize their new condominium. He believes an increasing percentage of apartment dwellers will migrate to ownership as new ownership opportunities are presented.

A virtual tour of NEXUS and this future skyline called “Cityscape 2020” is jointly released by The Burrard Group and Parsons Brinckerhoff, which showcases the burgeoning neighborhood in 2020 after more than two dozen projects including residential towers, hotels, office buildings and the Washington State Trade and Convention Center expansion are set to open.

“We will help to establish a new core for urban living with immediate access to downtown Seattle attractions, residential services and adjacent to thousands of new and relocation jobs at employers such as Amazon, Google and Expedia, to name a few demand drivers,” adds Chan. “We also anticipate downsizing empty-nesters, second home buyers and international investors will gravitate to NEXUS. Presale buyers will be ahead of the curve. Seattle is a global city on the rise and values are following the trajectory of more mature gateway cities like Vancouver, San Francisco and New York.”

The Burrard Group recently appointed Terry Bendrick as the project’s Development Director, who contributes more than twenty-five years of development and construction management experience working within top five global construction firms. He is recognized for delivering iconic projects including Microsoft’s $750M West Campus in Redmond, the Denver International Airport and Taipei 101 Tower in Taiwan, one of the world’s tallest skyscrapers.

“I’m thrilled to be working with The Burrard Group and will soon add NEXUS to their impressive portfolio of iconic developments,” said Bendrick. “This will be one of the most transformative residential developments in North America with dynamic floor plans, high-tech amenities and the kind of thoughtful hospitality that The Burrard Group is internationally known for.”

At forty stories (or 440-feet tall), NEXUS is planned to comprise up to 403 condominium units offering a range of floor plans from efficient urban one bedrooms to three bedrooms, including a select number of two-level Sky Lofts and expansive penthouses. Owners will enjoy multiple levels of amenities including a service-oriented retail and lobby level; the 7th level which contains a co-working space, fitness center, dog run/lounge, great room, media facility and outdoor patio; as well as the rooftop-level Sky Club offering social spaces, an exhibition kitchen, private dining, sky-bar, recreation room, view terrace with open air kitchen, and fireside lounge with commanding views of downtown Seattle, Lake Union and Capitol Hill. Owners will have the opportunity to reserve in-building guest suites, flexible parking options, business center amenities and other services via a custom app that is in development.

Prices at NEXUS are expected to start in the $300,000s with low down payment options and mortgage payments that are comparable to prevailing rents. O’Conner believes NEXUS will meet pent up demand for attainably-priced homes as nearby condominiums in downtown Seattle’s urban core have all but sold out of inventory below $900,000. Fewer than 75 resale condominiums remain available in downtown Seattle, according to the Northwest Multiple Listing Service.

“Prices are rising quickly in downtown Seattle and NEXUS will offer owners the potential for capital appreciation, unlike rent which only benefits the landlord” said Brian O’Connor, Principal of O’Connor Consulting Group. “This debut is well-timed with IRS Tax Day. I believe renters of those newer apartment buildings built since 2011 have missed an estimated $40 million in income tax deductions in 2015. Sellers of principal residences also enjoy tax free capital gains up to $250,000 for single owners or up to $500,000 for married couples.”

Realogics, Inc. will provide marketing services and Realogics Sotheby’s International Realty will be the exclusive listing broker for NEXUS.

For more information, contact Vlad Popach. 

Bellevue Busting at the Seams

Vlad Popach

Down Town.jpg

Puget Sound Business Journal recently released an article rumoring Apple and Amazon's expansion into Bellevue. The article went on to claim that Amazon will lease Centre 425, a 16 story office building currently under construction. Apple also reportedly expressed interest in moving into the property, however they've declined to comment on status. 

Many of you have reached out asking what this means for the Bellevue housing market? In short, the expansion will surely create a huge impact. Bellevue's downtown condominium market will likely see the biggest increase in values. The greater Eastside (Bellevue, Kirkland, Issaquah, Redmond, Sammamish, Bothell) will also see growth as new talent begin to settle in.

When comparing Bellevue's condominium market to Seattle's, Bellevue is significantly less expensive. Prior to the 08' market crash, Bellevue condos were being built faster than you can count. Once the market crashed, condo units were converted to apartment rentals. Recently, however, towers such as Washington Square began re-converting those units to condominiums available for purchase. Due to the influx of units in the market, condominium prices in Bellevue are low compared to Seattle - a surplus in inventory means lower values. If you've ever considered purchasing a condominium in downtown Bellevue, there's never been a better time! Downtown condominium values have not seen significant growth since 2006 and with these two behemoth corporations looking to settle in Bellevue, values are bound to increase! 

Check out my new favorite Bellevue Condo listing (listed at $13.9M - 6,398 sq. ft):