In the spirit of the upcoming July 4th holiday, I wanted to take the time to put together an article that is rooted in America – the market economy.
Unless you have been under a rock since the Dot-com era of the 90’s, multiple offers in the Bay Area are the “norm.” While the “preemptive” offer is everyone’s go to when trying to successfully knock out the competition, not every agent/seller is willing to entertain it. So why do listing agents/sellers want multiple offers/bidding wars – let’s take a look.
I am sure there are tons of reasons, but for our purposes we are only going to talk about the three that matter:
- The “Cool Kid"
- The “Flirt”
- The “Hot Nerd"
The "Cool Kid” – this is honestly one of the biggest factors when it comes to getting multiple offers. Think about it, if you were to sell your house today, and an agent asked you if you wanted multiple offers, you would likely say “yes.” As a result, many agents and sellers actually try to structure the price of the listing in a manner to get multiple offers. But in reality, the number of offers is completely irrelevant – 99% of sellers want the highest net proceeds from the transaction – not the most offers. But Ryan you might say, multiple offers will get the highest price for the property. That is where I will beg to differ – what typically gets the highest price for a property is the first and second most interested parties. Most of the time, these individuals are active in their search and knew about the property right when it came on the market. They went and toured it in the first few days (if not the first) and knew they wanted to put an offer right after. So when their agent gets back to them and lets them know they have to wait another 2 weeks before offers are due, a bitter taste almost always hits their mouth. Almost instantly, the interest gets subdued and the buyers, if they still want to, strategize on a multiple round approach (potentially starting much lower than they would have). My opinion – always except preemptive offers. Just let them know a certain price that if the offer is below your seller has advised you not to present it. This way, when the buyer wants to offer $5M over asking, you don’t have to explain to your seller how bad you messed up when they decide not to pursue or even consider preemptive offers.
The "Flirt” – this one is pretty easy, but causes the Bay Area to be the crazy market it is. Pricing low intentionally turns the offer process into a dart-throwing match – you have no idea what is going to stick and actually work. Is the seller actually willing to even accept the list price? Or is it just a strategy to garner eyes? Great listing agents know the market and can price a property appropriately to get the interest it needs to sell for what it needs to for the seller to accept. At the end of the day, multiple offers here just means a longer time sifting through pages of offer contracts deciphering the terms and price.
The "Hot Nerd” – everyone’s dream. Here is my benefit of the doubt to those rare scenarios where things just work out for the seller. They are selling a desirable property in a desirable location that people actually want to buy. In these scenarios, the buyers actually want the property and are putting in their offers – but the desirability of the property is able to edge one offer over the other in the end. This is the market, and again the market dictates the price – there was just not any intentional measures taken to achieve it.
One thing I learned a long time ago about real estate that I would like to share is that there is always another property. Now, prices might change and markets might shift, but at the end of the day, there is always another one. Don’t do anything silly – draw your line in the sand and stick to your number. For this reason alone, we almost always advise our clients to put their best foot forward – and call it a day after that. You win some and you lose some – but you never want to lose control when in the middle of the fight.
If you ever have any questions at all, please do not hesitate to reach out. At MinnGo, we realize that real estate is not something our clients think about everyday. Lucky for you, that is what we live and breath.
Until next time.