John M. Lee: Winning the Bidding War
Due to the lack of inventory and low interest rates in today's real estate market, buyers have to compete with each other and bid over the listed price to buy properties in San Francisco. It is a different mentality from the past, when buyers and sellers actually negotiated.
In the current seller's market, the advantage goes to the seller and buyers will have to know the market and what to do in order to become property owners.
Buyers have to know that if they win the bidding war, they will probably be the highest bidder on the property or close to it. This means that other people might not be willing to pay as much for the property. If you take the long-term perspective, looking back at today's prices 10 years from now, it will not make a difference because prices will be much higher.
Also, keep in mind that the sooner you own a property, the sooner you can begin to write off the mortgage and property taxes, thus reducing your income taxes.
Here, then, are some hints on how to becoming the winning bidder in this current real estate market gone mad.
First of all, know the prices. Follow-up on all the current sales and know how much properties are selling for in the neighborhood you are interested.
Chances are you will be out-bidded on several properties before you become the lucky one. Keep track of those properties and how much they sold for.
Generally, your agent can get you a pretty good idea by asking the listing agent. That way, you will have a basis for comparison because most of the properties are currently selling for more than the list price and you need to know by how much.
Next, get pre-approved for a loan and submit a pre-approval letter with the offer. Sellers are looking for buyers who will give them the minimal amount of problems throughout the escrow process and after closing. If you can position yourself by demonstrating that you are credit worthy and understand the real estate selling process, you will be in a much better position.
Prior to the offer date, go through and approve all the disclosures on the property. This indicates to the seller that you have done your homework and are ready to perform. Check the inspection reports. If they come from a reputable company, perhaps waiving inspections might be appropriate and give you advantage on your competition. If there are no inspections or you must have your own inspections, perhaps shortening the contingency time period will be beneficial.
Have your agent find out how many offers are expected on the presentation date. If there is quite a bit of interest or not that much, you can adjust your offer accordingly. Also, find out the seller's strategy from the listing agent. Some sellers and listing agents will counter the top offers, while others will accept the best one. This will tell you whether you need to go all out on the first round or if you will get a second chance for being one of the top bidders. Ask the listing agent what is important to the sellers. Is a long or short close of escrow important? Are rent-backs necessary? What time frame would be acceptable?
And lastly, work with a reputable and likeable agent. Many deals are put together by agents who have worked well together in the past.
It is currently a tough real estate market for buyers. You will have to be mentally tough and be unattached to the property until you purchase it. It is hard because buyers purchase homes out of emotions, and when it does not work out, they can become devastated. But there will be others and, eventually with persistence and guidance, you will become a proud homeowner in San Francisco.
John M. Lee is a top-selling residential real estate broker at Pacific Union's California Street office. If you have any questions, call him at (415) 447-6231 or e-mail firstname.lastname@example.org.