The competition is heating up for homes priced for less than $3 million in Los Angeles County. The number of properties sold at that price point rose by 1.4 percent last year, while the average number of monthly active listings declined by 12.2 percent, according to the California Association of Realtors.
As a result, agents said they typically expect anywhere between four and eight offers for a desirable property, something agent David Kramer of Hilton & Hyland in Beverly Hills refers to as “going to war.”
Winning a high-pressure bid battle can often come down to nuance. Agents on both the buy and sell sides of the deal shared their winning strategies for coming out ahead in the ultracompetitive L.A. home market.
A buyer has to be prepared to make the strongest possible offer. That means being certain it’s the right house for them. Kramer makes sure his clients view a home more than once. “What I find is hesitation often comes from not remembering the house. You see it once, get excited, and write the offer,” he said. Confidence also comes from being informed about comparable sales in the area and what it takes to sweeten a deal in a bidding war, like shortening or waiving contingencies.
2. First impression.
“When your client walks into the open house, this is an interview,” said Michael Nourmand, president of L.A.’s Nourmand & Associates. “The agent is watching your client – what they say, how they appear, if they seem easygoing. Do they really like the house?” In a hot market, Nourmand tells his clients to “be very complimentary about the house because you want to sell to the listing agent that you really want the house and that your buyer is going to close.”
3. Escalation clause.
Some might view it as an unfair tactic, but adding an escalation clause helped one Nourmand buyer win a bidding war for a home that sold for just less than $1 million in Studio City with six offers, he said. “What it means is that I will pay (for example) $5,000 more than the highest written verifiable offer, purchase price not to exceed $1.5 million.” Nourmand suggests calling the listing agent to see if he or she is OK with the escalation clause first.
4. Level the playing field.
Kramer suggests asking the listing agent if any of their own clients are submitting bids. If so, “they’re going to pick that person.” If that’s the case, then ask to bring the selling broker’s manager in. But don’t stop there, he said. “Another thing I ask – Is there anything special that is nonfinancial that will make this seller happy?” Learning about a seller’s specific needs and addressing them means that even if you don’t have the highest offer, the seller might tell you what the highest offer is and give you a chance to match it.
5. Emotional connection.
Agent Dennis Hsii of Playa Vista Premiere saw just how effective this tactic can be when his buyer won a bidding war with 13 others on a $1.1 million Santa Monica home in November. Hsii’s buyer, who took out a loan, beat out five all-cash offers and others worth more money. Hsii said it all came down to an initial meeting with the listing agent, homeowners, and neighbors. Then he hand-delivered the offer in a gift-wrapped package, with a bow on top, that included a personal letter to the seller explaining why the buyer loved the home and how it would be perfect for the family.
1. Price right.
Price the home in a manner that invites multiple offers. That can drive the price of the home up. “Let’s say the magic number for your house is $2 million, and you price at $2.3 million. You’re going to get $1.95 million. If you price it at $1.95, you might get $2.5 million,” said Jeffrey Saad, an agent at Compass in Beverly Hills. “You can make an extra $100,000 just by pricing for multiples versus pricing too high and slowly reducing over a few months.”
2. Highest doesn’t mean best.
An offer that comes in a lot higher than the others could be cause for concern. Carrie Rollings Meynet of Gibson International in Brentwood said she learned that the hard way while selling a $1.5 million condo last year that received eight offers. Her client accepted the highest offer, which was well-above asking price. “Some agents will represent buyers who throw in an unbelievable price point just to secure their position in a multiple,” she said. Then they ask for large concessions. During her inspection, the buyer asked for extremely high credits – or monetary deductions – based on perceived flaws with the unit. The deal fell out of escrow because an agreement couldn’t be reached.
3. Have a backup.
In the case of the condo with multiple offers, Rollings Meynet had secured a backup offer in writing. “As an agent, it’s important to maintain communication with backups, making sure the backup position is still a viable offer,” she said. “If you don’t have a backup, you may have to show the house in open house again.”
4. Plan for a low appraisal.
Banks will typically lend 80 percent of a home’s appraised value, so if a property appraises for less than the purchase price, the buyer will have to come up with more cash. Anticipating a lower appraisal, Saad and his wife, Nadia, also an agent with Compass, chose a buyer with a down payment higher than 20 percent, for a $900,000 condo in Westwood. “The buyer stayed because they had a higher down payment. If we had gone with a lower down payment, the deal wouldn’t have closed,” he said.
5. Evaluate emotional commitment.
“When I see that a buyer is truly emotionally married to that property, they want to stick through the hard stuff during escrow,” said Rollings Meynet. “Like (if) your plumbing is shot in the house – this is overwhelming to the buyer. Is it so overwhelming that they’ll walk?”
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