April 17, 2015

Offer Accepted!

Nine. Nine offers on nine different properties. That’s how many it took before we had one accepted. Nine. It’s a crazy, crazy seller’s market.

We could have ended the war sooner if we really wanted to by accepting counters. The problem was most of those counters were for more than the comps supported. In some cases, countering would have just bought us a seat to the next round of bidding. It wouldn’t even guarantee an acceptance.

On the on the second home we put a bid on our offer was 4.2% over asking – at the high end of what the comps supported. The seller told us that the highest bidder was 8.4% over asking, and if we went up to that price, he’d consider accepting. In other words, he’d take our new offer to squeeze even more than the original 8.4% bidder! That wasn’t the worst one. The offer we put on the fifth home was 5.4% over asking, and way more than the home was worth. Our agent knew the seller’s agent and we felt like we had the inside scoop on what the seller was looking for. We were tired of house hunting, and acting emotionally rather than rationally. We were the highest of two bidders, but the seller suddenly decided she wanted an additional 21%! We were the highest bidder and she still countered us! It almost makes the 6.2% above asking (and above the comps) the seller of the sixth home wanted seem downright cheap. In that case we were the only bidder and had already offered 3.1% over asking. It was another case of us making an above asking offer and still getting countered by the seller.

Then there was the rent back many of the sellers wanted. Rent back is when the seller needs additional after the sale of the home is complete before he or she can move out. Essentially you become a short term land lord. The length of the rent back is part of the closing negations. The seller of the second home we bid on wanted to stay in his home for an additional four months after closing. Alexis would be eight months old before we would be able to fix our current situation of the girls practically on top of each other in a too-small-for-us apartment. In fact, we offered the 4.2% over asking without such a long rent back hoping the seller would take his family to Hawaii for a month or something. We were desperate.

It’s a crazy crazy seller’s market out there. We did learn some valuable life lessons, should we ever find ourselves in this situation again (and by golly I hope we never do!)

Life lesson #1 of buying in a crazy seller’s market without going crazy yourself: Be Willing to Walk Away

We do not bid against crazy, and we do not bid against ourselves. I try to adhere to this philosophy in all my auction type settings.

Many of the homes we toured were easy to fall in love with. Alas, if we fell in love with it there was a good chance someone else would to. If someone else is willing to bid above what the comps support, or above what we deemed the house to be worth to us, we let them have it. Even if the other bidder’s offer was just a tick above our own. We witnessed too many times where these small increments added up to something substantial. If we were going to go up another category in spending, we’d prefer that to go along with another category of home!

Twice we were the only bidder but the seller held off on responding to our offer, waiting for additional bids would come in. Each time we had the option to change our offer in an attempt to get the seller to accept early, and ignore any additional bids. As tempting as it was to offer more in these cases, we knew it would signal that we were desperate. We would essentially be bidding against ourselves. In our estimation it was far better to wait for that second bid and hope for a chance to counter. Of course that means we have to be comfortable walking away.

The most important lesson I learned buying in a sellers market is to walk away, least you become one of the crazy bidders.

Life lesson #2 of buying in a crazy seller’s market without going crazy yourself: Do Not Fall In Love

I was bummed when we lost out on the first home, it just seemed so perfect with it’s custom lighting – a photographers dream! The second home had such an interesting layout, with a downstairs bonus room that could double as a suit for grandparents visits and master retreat complete with fireplace that would have made for a nifty home office. But the one I really fell in love with was the sixth home. The homeowner had decorated it exactly as I would, right down to switching the living room and the dinning room so that the second fire place was in the dinning room. I could picture setting up that second Christmas tree Domingo and I have been talking about. It had a beautiful spiral staircase, walk in pantry, and marble fire places. We may have started as the only bidder on that one, but they quickly collected quite a few more.

To be willing to walk away I had to keep reminding myself that no home was perfect. We ended up wanting a bigger home than the first one we bid on. The second one had virtually no yard, and the sixth one was in the hills without reception, and one of the less desirable school districts. I kept reminding myself of those facts when letting go.

As much as possible we tried to approach things analytically. We can always repaint or redo the floors. We could replace wrought iron balusters with wood. Heck, we can even knock down and put up walls. It’s an expense and aggravation I’d rather not take on, but it is possible. Falling in love is a luxury of buying in a buyers market.

Life lesson #3 of buying in a crazy seller’s market without going crazy yourself: Put in Multiple Offers, on Multiple Properties

Hot homes consume all the oxygen from potential buyers. They were off market in less than a week, amassing anywhere from ten to fifteen offers from opening weekend. We were never going to win against that kind of competition without going crazy.

Our strategy quickly became to look for the non-hot homes: homes that matched our criteria, but for whatever reason didn’t show as well, and had less competition. Usually they were the homes that weren’t fully upgraded, or needed minor improvements. These weren’t always easy to identify, so we’d pick a couple that seemed like good candidates that we would be happy with and put in strong offers knowing eventually one would land.

And one did.

Now for escrow.

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