After last week's "unfriendly" beating at "Words With Friends," I invited "Rickster55" ("Rick" to his friends and family outside the gaming world) and his wife, Amal, over for a good old-fashioned game of cards at our home instead and redeemed myself by summarily beating them all. Not that I'm SUPER competitive or anything, but "Winning!" feels so much better. (Charlie Sheen may have been crazy but he wasn't entirely wrong.)
Like most card games, this one involves a bit of good luck, as you trump one another to take tricks with ever increasing hands. (Tricks aren't necessarily just for kids). But irrespective of the aces, kings, and queens one is dealt, the real skill set is more about identifying your options, sizing up the potential competition, committing to a bid, and then meeting the number you have set. This is easier when the hands are still small, but as they increase in size, it gets much more difficult to calculate what everyone else will do and how everyone else will play. Hmmm . . .
That's true of Real Estate as well, where analyzing the competition is critical to the success of the deal. The more popular a property, the more scare the supply, the more anticipated offers . . . the more difficult this becomes. While identifying the home may seem like the hard part, it isn't. Figuring out what to bid, IS!
"What's this house going to go for?" is the question I'm most often asked, when a Buyer finally identifies the home they'd like to purchase and we suspect the competition is going to be stiff. To which, I must reply,
"What is it worth to you?" In other words, "How competitive are you willing to get?"
Until I have a clear sense of the other interested parties, the Agents representing them, and the Sellers' motivation and expectations, anything I say in that moment is going to be nothing more than a shot in the dark. In order to advise you in a meaningful way, I've got to dig much deeper before offering an opinion of "value."
But truth be told, even if you are the only interested Buyer at the party, it's still uncertain what a Seller will be willing to accept come the offer date. When pressed, I may throw out a potential number, but until I've gathered more facts, asked pertinent questions, read the disclosures, and have studied and analyzed the market in whole, anything I say is just an estimate.
Without knowing what someone else is willing to write, how strong their motivations may be, or how DEEP their pockets actually are, we can't really know how the hand will ultimately play out or where the price may finally land. And while I might steer you toward a number that I believe will more than likely keep you in the running, I can't tell you how much risk you should be willing to assume, OR what you should pay either. (That's entirely up to you! )
However, we can discuss what other "like-kind" properties have sold for in the neighborhood, the heft that other Agent's offers typically bring to the party, whether "values" are declining, holding steady, or climbing, and with further inquires, what the Sellers might need or want - (a rent back? additional time? a quick close?). All of these details inform us, so they become significant as we craft a winning offer - or at least a viable one.Ultimately, "value" is always going to be subjective.
What's a walk-away property for you ("I can take it or leave it") may be someone else's non-negotiable proposition. As such, they're likely to be willing to pay more when faced with competition, in order to secure the home.
What if two or three offers are close in price?
When price has been determined by the market, the TERMS become critical. If two or three offers come in at - or near - the same price and one is "ALL CASH," it's very likely to trump ALL other offers at the table. With the ability to waive inspections and loan contingencies AND the advantage of closing in as little as a week, an "ALL-CASH" bid is difficult to pass up, even for higher financed offers. (Winner, winner, chicken dinner!) Unless you are the fortunate ALL- CASH Buyer, there's nothing to be done, but move on to the next opportunity.
Still, you might consider tightening up your time frames and increasing your down payment in order to improve your chances considerably. It may not be an "ace up your sleeve," but it should provide the makings of a solid hand. With good planning and a thoughtful strategy, you will have a better shot at securing the home and emerging the victor (because there's no denying it - "winning" does feel better.) Once you've done the best you can do, the rest involves a little timing and some luck.
Care to deal?
Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.