Home Owners Win when Buyers Compete

Boxer Black Eye

This is an email I just wrote with some sage advice to my client. There’s a property he wants to put an offer in, but he needs to sell his current home as part of the deal (he’d make an offer contingent upon the sale of his existing home). The really tricky part is that the listing agent informed me that another offer is about to come in. This is a seller’s dream, because home owners win when buyers compete.

Here’s what I wrote to my client:

Client –

Hi there, [Seller’s Agent] and I finished our conversation after you guys left. Here’s some more details:

Other buyers are from [Nearby Expensive City]. They are paying cash. The buyer’s agent told [Seller’s Agent] “don’t get too excited.” Sounds to me like they’re not coming in so close to asking, but probably closer than the $1.xx million they’d offered verbally before.

I told [Seller’s Agent] that if you do make an offer, it will be contingent upon the sale of your house. As we suspected, that isn’t really going to be an issue for these particular sellers.

Does that mean you should put an offer in and see what happens? My feeling is, when buyers compete, sellers win. Since your upper limit is $1.yy, that’s something a cash buyer probably won’t have too much trouble exceeding.

If [Seller’s Agent] uses an offer from you as a lever to push the other buyer up, I can easily see the buyer going over $1.yy, or higher – to whatever number they need to make it work. [Seller’s Agent] won’t have to tell the other buyer you’re at $1.yy…that’s confidential information she can share, or not, so she can actually use the fact there’s another offer in to push the offer up to whatever the seller’s minimum sale price is.

If you were prepared to go higher than $1.yy, it would be an easier decision, as the higher you go, of course, the better your odds. Since that isn’t the case, I’d still recommend holding off to see if their offer comes together, or not – because I think your chances are somewhat (slightly) better just waiting it out.

The hard part is not knowing, it’s a crapshoot, could go either way regardless of who offers what or not. But I have been in lots and lots of multiple offer situations, and in my experience, the most likely outcome is that by being a lower bidder, you create a better deal for the seller and put yourself through the wringer of a bidding war, usually (but not always!) for naught.

And that’s what I know. If you want to talk it over, call me anytime…but tonight I have a board meeting from about 6:00 until 8:00 or so.

It’s a tough call, advising a client not to put an offer in which you know they genuinely like. Unless you’re a buyer who’s really willing to go to the ropes, and be a strong contender for the property, the chances of you walking away with the prize are slim. There’s a much greater likelihood that what you’ll achieve is getting the seller more money, and even increasing the chances that their deal comes together in the first place.

There’s no such thing as a sure bet in real estate, but my advise is to play the odds, don’t try to beat them.

Time to talk to a REALTOR?

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About the Author
Seb Frey helps long-time Bay Area homeowners make their next move easily the next one yet. If you're looking for a minimum of hassle, maximum net cash on sale, and certain results, contact Seb today.