D.C. Real Estate Game
Also published on the Huffington Post
There’s nothing I love more than when a client finds THE house and you can see it on their face before they say a word. There’s nothing I hate more than finding out there are multiple offers.
My land development training tells me that you never want to be the winning bidder of a piece of property because it ultimately means you paid too much. I still operate under this school of thought, but I have to remind myself — sometimes several times a day — that the conditions under which I was buying land were business decisions. When people are buying houses in which they plan to live, it’s personal. There are many intangibles tied up with a personal decision that sometimes mean buyers are willing to pay more than anyone else to get the house.
So, if this is the house you must have, the house your family has to live in, the school district where you want your babies to get their education, the house you want to grow old in, how can you get this house? It depends how you structure your offer.
1) Find Out if the Seller is Seeking Specific Terms
Do they need to move right away or maybe they need several months? Can you use this information to your advantage in the offer? Would letting them select the settlement date or stay for a month post-settlement for free help them? Something simple like this might just be the icing on the cake that gets your offer accepted.
2) Schedule a Home Inspection Prior to Submitting an Offer
When a seller accepts a contract, they sweat it out while the contingency time periods tick away. The main contingency time periods are Inspection, Appraisal and Financing. Unless you are paying cash, you can’t do much about the pesky Appraisal and Financing contingencies except keep them as short as possible. But you can get the home inspection out of the way before you submit a contract. Sure, you will shell out several hundred dollars for the inspection, but it’s one less thing the seller has to worry about and will set you apart from the pack.
3) Write the Sellers a Letter
When the seller of a home stays there for your tour and proudly shows you every single detail of the home down to random moldings they chose, get out your stationary. Some people think a letter is hokey but you can’t go wrong telling someone that you will love and cherish their home. To many people, a home is another member of the family . They will be happy to know how much you will appreciate and care for the family member they love so much but have to leave behind.
4) Escalation Design
No, it’s not 2005. If you have written an offer on a house in D.C. recently and you didn’t win the bid, it’s probably because someone else escalated right past you. If you find out there are other offers, add an escalation clause. Escalations work like eBay — they bid against the other contracts in your absence. The trick, however, is to pick a random number. A lot of people will escalate in nice round numbers because people like nice round numbers. But not you! You hate nice round numbers. If you escalate in increments of $2000 or $3000, everyone else is doing that too and eventually, competing offers will land on the same number. Not good. Make your escalation factor $3850, or $4875, but do not make it anything that ends in 000. Got it? It’s also not going to be a low number like $1250 — not in this market. You need to create a bigger gap so you are as far ahead of the pack as possible, because if it comes right down to it and you are only $1000 ahead of someone else with better terms, you might get bounced. The highest price doesn’t always win.
5) Close Down the Closing Cost Drive Through Lane
Don’t even bother. People became so conditioned to asking for closing help in the down market and that thinking hasn’t changed. Buyers have the right to select a settlement agent but most buyers go with the choice of their agent since the average person doesn’t keep settlement companies on speed dial. Check the websites of several companies — they typically post their closing fees and that can help you identify the most cost-effective company to employ so you can keep a lid on your closing costs.
Good Luck and Happy Bidding!