Friday, October 3, 2014

7 Strategies to Help You Win a Bidding War for Your New Home

As the Federal Reserve continues to pump more and more money into the economy. Bidding wars are returning for houses. Here are seven tips, via NyPo, to navigating  all-out bidding warfare on a house (and NYC co-ops) you like:
Write a love letter 
If a picture is worth a thousand words, a good letter can be worth a few thousand bucks...The letter should be lean — “Half a page is perfect” ...“You want it to be descriptive enough to say who you are, what you do, how long you’ve been looking.” A few carefully chosen details about the property and why it’s a good fit for the buyer comes next.
This is almost never enough to make up for a lowball offer, or a hole in your credit, but it can make the difference in identical offers...
Figure out just how hot your property is before
Most buyers stumble somewhat blindly into a bidding war, not knowing what other offers are being entertained, but there’s a simple way to figure out how in demand your chosen apartment is.
“Generally you know if you go to an open house on the weekend and you saw 400 people there,” says Lenz.
At Ehrmann’s first open house on the $1.35 million co-op, 100 people showed up. “We had almost a dangerous situation, people were fighting to get in.”
“If they schedule an open house on a Thursday at 2 p.m. that means a lot of offers have come in and they’re giving one last hurrah” before they ask everyone for a best and final that Friday, says Jay Glazer of Urban Compass.

Paperwork is your friend

“My advice is to be very prepared with all the information,” says Lenz, “here’s my net-worth statement, here are my references, here’s why you should choose me aside from numbers.”
A good broker will get the building’s financials and bylaws in advance. You should be able to say, “Look I’ve already gone through the negatives; I’m happy to step up and still be considered,” says Lenz. Buyers should “have their own attorney draw up a standard contract, hand it over with a check to the sellers to prove: We’re really ready, here’s our contract, it’s not just a bid, it’s a contact and a signed check.”
RW Note: The above, re: having paperwork in advance, worked for an acquaintance of mine in getting a beautiful rental apartment in San Francisco. Because of rent controls, the apartment was priced about $1,000 under comparable market price apartments. The management company showed the apartment for 15 minutes on a Thursday morning. Fifty people showed up. My acquaintance went to the management company's web site the night before and printed out the leasing application and filled it out. She went to the viewing with that and a copy of her drivers license, pay check stub etc. and got the apartment.

Money isn’t everything

Sure, it’s important. But the highest offer isn’t always the accepted offer. References can mean a lot. As can an offer to put up a higher down payment or all cash.
By offering a higher down payment, you “increase the stakes; you’re offering a little more collateral,” says Glazer. On an apartment which requires a 10 percent down payment, “Somewhere between 12.5 and 15 percent is well within the realm of reason. It juices the pot a little bit.”
Likewise, co-op boards are notorious for wanting to pick and choose the right kind of people who live in their buildings, making a good reference letter another important distinguishing factor. Glazer had clients who brought with them a reference letter from Michael Bloomberg. “They were pretty much a slam dunk to get any apartment in the city.”

Bid an uneven number

“A lot of financial guys have as their strategy: trading in uneven numbers,” says Glazer. “So instead of bidding $1 million, they’ll bid $1,012,572.”
“First, it’s a little higher [if it were a $1 million property],” says Glazer, “but it looks odd so it gets the attention.”
For those who are skeptical, Glazer says it’s worked before. He recently was working with a buyer trying to scoop up a West Village apartment. “We employed every single trick in the book — everything was in order, we went very hard on our offer, submitted a fuzzy letter, offered a higher downpayment, but we also submitted [an offer of] $4,012 over our standard break point — and low and behold, we got it.”

Know when you’re licked

Real estate is such an emotional investment that plenty of people get caught up in a bidding war that they can’t afford.
Jeremy Globerson, a client of Orrigo’s, knew when to walk away.
Globerson had found a turnkey, 900-square-foot, one-bedroom co-op in the West Village that he fell in love with. It was on the market for less than $2 million.
“When I saw it, the listing broker said I had to give a best and final offer because they had an all-cash offer on the table,” says Globerson. “I came in at $50,000 above the asking price, to be safe.”
It didn’t work. Globerson’s rival swooped in with a couple of hundred thousand dollars more. Globerson bid his dream one-bedroom adieu.
“You have to be less emotional and more business,” Orrigo says. “But the comedown is hard.”

When all else fails, overwhelming firepower usually succeeds

On the flipside, if you can afford it, you can purchase victory with an overbid.
Marianna Dimentman of The Corcoran Group brought her client, Jenkins, to a Clinton Hill one-bedroom condo which was on the market for $599,000 four days after it was listed — the next day they made an offer.
“Our offer was one of eight, all of which were at ask or above,” says Dimentman. “We had all of his documents in a row and made an offer in a professional and organized manner, but really the offering price and qualification of the buyer are the ultimate deciding factors.”
They bid $670,000 — more than 11 percent above the asking price. Jenkins won.


  1. Money isn’t everything.

    "They bid $670,000 — more than 11 percent above the asking price. Jenkins won."

    Money isn’t everything.

  2. I heard from one real estate agent that many high bids were actually not good faith bids. The bidders know the home won't appraise for the offer, and when the loan isn't approved, they'll just shrug and say "oh well, we can't pay that." He said if you require a contract that says the offer will guarantee any cash above the appraisal price, a lot of the bids will "go away."

  3. The number one bid-war winning move is being willing to borrow more newly created money than anyone else.

  4. I confirm that bids over ask are not good ones unless it is a cash offer. The home will not appraise at the higher price and the deal will fall through.