In my experience, every life lesson worth learning, is hard earned. If there's an easier way, I haven't found it. And sadly, I'm not the only one.
Last week, I put a beautiful listing I represent into contract only to hear from one of the rejected Buyers afterwards that I should do whatever I needed to keep him in play. He's now in back-up at a substantially higher price than his initial offer. (First the test, then the lesson.)
The truth is that had this Buyer come in with his "back-up" price to begin with, he and his family may have very likely, gotten the house, given their ability to pay ALL CASH and close in 10 days.
The triumphant Buyers in first position didn't roll the dice. Instead, they delivered the knock-out punch, knowing they'd need a 21-day close and would likely be facing stiff competition. (They were.)
"I'm going to do the opposite of what I do everyday in business," the winning Buyer confidentially told me, (who represented himself and works in commercial real estate)."We love the house, want to have another child, and view this as a 'life play.' I don't need this to pencil out as an investment; this is our home . . ."
In the words of The Champ, "float like a butterfly, sting like a bee!"
In short, that's how you successfully buy a house you really love in a multiple-offer scenario. You win it DEFINITIVELY(!!!), leaving the others on the mat. This isn't the time to be conservative or to play it safe. Trust me, you don't want to enter the ring tentatively and find yourself in another round, at which point, you may find yourself down for the count.
Is it brutal buying a house in competition? (Yes, it can be.) But it can be a lot tougher losing the house of your dreams because you underbid and talked yourself down from a price you were ultimately willing to spend. If you have a maximum price in mind, my advice is that you offer it when you enter the ring. (BTW, if the Seller countered you at your higher (held-back) price, would you accept? If the answer is "yes," that should guide you.)
Holding something back so you can negotiate further down the road, if you are countered, usually ensures that someone else will take home the prize. It's not the price you pay for the house, it's the cost to carry it, assuming the stretch doesn't break your budget. Typically, the difference in both the down and the monthly are fairly nominal as the vast majority of home purchase funds are supplied by the lender. Thus, it's usually the bank's money we are leveraging to our own advantage. In other words, if you can afford it, go for it.
Here's the not-so-secret SECRET: listing Agents love a clear winner - and so do Sellers. It conveniently takes the emotions out of the equation (in what's often a highly-emotional process) and makes the decision very, VERY clear for everyone involved, as in: "Done, where do we sign?"
No, I'm not trying to be cavalier with your money. I too, work for every penny I earn and I get that no one wants to "overpay" for a house - least of all me, but I've sold hundreds of homes at this point in my career and usually when defeated Buyers hear where the house ultimately sold, they often say, "Why didn't the Sellers issue us a counter? I would have paid that." (But they didn't, and you didn't, and that's my point. You may only get one shot.)
Admittedly, "How much is this house going to sell for?" can be a tough call for a Realtor to make. It's not uncommon for even those of us with LOTS of years of success to be surprised at the ultimate selling price on a property, given this incredibly dynamic marketplace. An Agent's answer to "value" is usually based on comps, context, condition, experience, and the level of competition come the offer date, and still, we can be well off the mark - or in stark disagreement - in spite of similar data points.
Because value is SUBJECTIVE!
Two Buyers, two Agents, two Sellers, two Appraisers . . . can view the value of a property entirely differently, and often do. There are those times too, when a well-heeled Buyer is willing to spend far more than anyone else was on that day. In real estate parlance, we call that,"the gift." AND in the case of "the gift," someone else had the wherewithal to spend more - and did. God bless them; that's out of our control. (We wish them well.)
But in cases, where the playing field is relatively level, and assuming you're in competition with other mortal and motivated human beings, put your best foot forward in round one. It may be your only opportunity. At the end of the day, we're only going to have one winner and the rest of the players will be looking for a home once more. Wouldn't you rather, be moving in, than moving on? (I thought so.)
"And in this corner, the winner by knock-out . . ."
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Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.