In the first two months of 2015, the market in Short Hills, NJ has been back to it’s old tricks! New listings are receiving offers the first day on the market, with multiple offers over the list price, within 24 hours! Our seasoned pros at Towne Realty Group are in multiple offer bidding on a daily basis all over Essex, Morris and Union Counties of NJ.
We have successfully negotiated several sales contracts for homes in our market area, and all of them were multiple offer situations (from $450,000 to $2,000,000).
Follow this advice and get ready to pay a little more than you may have liked. While interest rates are low and prices are bound to go up, you will be fine if you are not planning to move in a year or two.
1. BE NICE. In the cases where I helped the buyer arrive at the winning bid we looked at several different points to help’ ‘win’ the house. There is an old adage that definitely applies here: ‘What goes around, comes around.’ In one of the negotiations the Realtor called me to say that my buyers’ contract (which was one of 6 offers) was almost identical to another offer. The sellers could not decide which to choose and they asked the agent for advice. Thankfully, over the 20+ years we have known each other, we have always had a respectful rivalry in the business and she told them to go with my offer because she could trust me and I would get the job done well. Being nice over the years has paid off and buyers need to remember that not just your offer is being considered; so is your behavior, and your Realtors’ manners, while looking at the house and throughout the entire process of the negotiation.
2. PAY UP. The price is usually the most important thing, right? Wrong! Many sellers will actually accept a lower number if the terms are stronger. I’ve had sellers take as much as $50k less from a cash buyer, just to avoid the stress of the lending approval process. So how do you strengthen your terms? Remember you are not bidding alone, so you have to strategize about what the other buyers might offer, but then you also have to beat them and give a better offer, and here are some tips.
Most sellers will say: “SHOW ME THE MONEY!”
3. REMOVE THE MORTGAGE CONTINGENCY. The strongest term a buyer can offer is a contingency free offer; NO MORTGAGE CONTINGENCY. This term takes all the risk off of the seller and puts in on the buyer. The seller no longer has to worry about the buyer’s job, credit, bank of choice, sale of their own house, or the appraisal. Those items alone have been the ruination of many deals. This is a big risk for a buyer, and most attorneys will advise against this. (It is not my advice for clients to ignore their lawyers.) But, if you are putting a lot of cash down and are in a secure job with a credit score of over 700, this may not be too big a risk after all. Someone is going to give you a loan; you just need to know how much and it is rare not to be able to borrow atleast 50% if you have 30%+ downpayment or a family member to co-sign the loan. Even if you have to take a higher interest rate to do this, you can always refinance later. Remember, this is just to GET THE HOUSE.
It may cost you a little more money, but looking at houses every weekend for months on end, bidding and losing out, or even worse, not having a place to live, moving twice or living with relatives, has a cost too. Some banks like Wells Fargo Home Mortgage, offer a conditional commitment, which is stronger than a pre-approval. You can provide your application, run your credit, verify your income and assets, collect all the necessary paperwork (make sure your tax returns are completed), send it to underwriting and get the approval process completed in advance of finding a home. All you need is a signed contract, an appraisal and your commitment will be half way through the approval process. This really strengthens your offer if you cannot remove the contingency.
4. FLEXIBLE CLOSING DATE. What else works? Find out when the sellers would like to close and offer them a window of a month’s time when they can chose the date of their preference. This can’t be open-ended for ever, but giving them a choice offers them more flexibility and after all, you are competing with other prospects so this can be one of your advantages. You can also offer them one free week or up to a month to stay in the house after closing. Sellers LOVE to get their money and then not have to move the same day. It buys them some time and piece of mind. It costs you the carry without actually having possession of the property, but what is a week or even a month in your lifetime if you secure the house of your dreams?
5. PRE-INSPECT. Always a good idea to pre-inspect before you buy a home. One option is to bring an inspector with you on one of our visits (before you bid) for an informal look around to make sure nothing in the house has a serious defect. At that point, without a written report, you can limit your inspection requirements to only major issues, wood destroying insects and environmental concerns that will need a more thorough investigation. Sellers hate to negotiate a price, and then have the buyers come back to nickel and dime them about little things in the inspection. If you eliminate that from the beginning, they will like your contract better. Also, agree to conduct the inspection quickly. Sellers do not want to be hanging around for weeks waiting for your inspectors. I suggest you offer to complete inspections within 5 days of execution or in NJ – Completion of Attorney Review.
6. WRITE A BIG CHECK. A larger downpayment can also impress a seller. If you write a check for $1,000, $5,000, $10,000 or even more, it is no guarantee that your contract will be accepted, but it is another form of enticement. Put your money where your mouth is.
7. PUT YOUR MONEY IN ESCROW FASTER. The more you put down and the faster you offer to bring in your 10% escrow, the more commitment the sellers will sense. Some contracts allow for the escrow money to come in as late as 14 days after attorney review is over. I suggest you try to get that money delivered within 5-7 days. You can put less than 10% into escrow, but sellers appreciate a bigger deposit. You can get engaged with a 1 carat diamond or a 2 carat diamond and you are still engaged. Most girls will be excited by the larger ring and most sellers like to see a bigger check. (This money is usually refundable if the purchase does not get consummated due to attorney review, inspection issues that cannot be negotiated or problems with the loan if you have a contingency).
8. INCLUDE A PERSONAL LETTER & PHOTO. Due to so many offers coming in on homes and sellers not being willing or able to meet with all the Realtors for individual presentations, a letter of introduction by the buyers or by the selling Realtor is key. Include a family photo to show the sellers how charming and friendly the family looks. It does help when a seller can visualize the nice family that will be moving into the home, but this does not work for Relo. This is a business transaction for many, but the emotions run high and people often wish to sell their home to someone they like too. When the buyers say how much they love the kitchen or the decor or the gardens, the sellers feel flattered and are appreciative that someone recognizes all the work and love they have poured into their home.
Let’s face it. This is a competition and not always fair. Sometimes the listing agent has his or her own buyer and they are willing to reduce the fee to sell the house themselves. In that case, we adjust our fee to be competitive and we accept half of whatever total the fee will be so our buyers are on a level playing field. We make a pledge to our buyers: If you lose a bid with someone from Towne Realty Group, it won’t be because of a reduced commission offered by the listing Broker. There are times when a seller knows the other Realtor or the other buyer and they chose them due to a comfort level of trust and famililarity, that they don’t have with a stranger.
So how do you determine what is a fair price? Your Realtor should provide a thorough market analysis of all homes that are under contract and sold in the neighborhood. Being familiar with the inventory and understanding those selling prices helps you (and the bank) substantiate the current market value. Knowing the rate of absorption, the days on market, the percent of list price to sale price, the number of price reductions and also the number of competing bids, should guide you.
My advice is: Think carefully about how you would feel if I call you and say “You lost the house. The other buyer paid ‘x’.” At what price are you willing to let someone else have what you want?
Karen Bigos – Broker/Owner of Towne Realty Group in Short Hills, NJ
Karen Eastman Bigos , Broker -Sales Associate for 29 years in Millburn & Short Hills, NJ Over 1,000 homes sold!
My company has closed on a BILLION in sales since we opened in 2006.
Need some advice? Call/text me at 201-417-1600 or email@example.com
For help with a getting a Pre-Approved Mortgage Commitment from Wells Fargo Home Mortgages, call our in-house Loan Officer Tom Wragg at 917-796-7621 or email firstname.lastname@example.org