Reader Question: We tried to buy four homes in 2019. We missed on all of them. We live in one of the cities that always makes the news about multiple offers and a hot market. We were not happy with our agent, but it may just be a case of us looking for someone to blame. We have seen the articles about how to win these bidding wars, but we are uncomfortable with the concept. We plan on trying again in early spring and wonder if you have any advice on avoiding a bidding war?
Monty’s Answer: Some real estate prognosticators see fewer bidding wars in 2020. Whether or not these wars heat up, there may be a few tactical steps to take and avoid bidding wars. Also, there was little information about your agent and what she/he did or did not do. For an example, if the agent never advised you to have a pre-approval letter, you have the wrong agent. On the other hand, fails may be on you if you ignored the agent’s advice.
Here are some suggestions:
- Ask your current agent and two more agents these questions at https://build.dearmonty.com//agent-inteview/.
- There is an advanced pre-approval letter some of the more savvy lenders offer that you want to obtain. It is not just a pre-approval letter but a pre-underwritten letter. The difference is the lender does the entire borrower investigation as though there was a transaction. Some mortgage companies that offer this type of pre-approval also provide a guarantee that your loan will be approved when you find your home. The only two conditions are that your circumstances do not change, and the house has to appraise. This is a much stronger letter to provide a home seller.
- In most markets, dynamics can be quite different in the same neighborhoods based on the price range a property occupies. Ask to see properties with extended time-on-market. The activity above or below the overheated range may be balanced or even leaning toward the buyer. Also, consider the median price in your chosen areas. There could be a suitable home right under your nose for a little more or less money. Good agents know this.
- Different markets close by can have very different markets. Are there neighborhoods you have overlooked? Sometimes specific improvements or geographical barriers create a community that is close but goes unnoticed. Rivers, lakes, airports, major highways, industrial parks, and state lines are examples of such occurrences.
- Ask your agent for a list of all the homes in the area that expired unsold. You may be surprised to learn listings expire in hot markets too. Your agent may not want to work these properties. You may not have the time or inclination, but if you do, go through the list, check the tax records for the owners’ names, and send them a letter. Because you did the work your agent may be willing to reduce their fee if you generate a seller who is getting ready to try again. You will have the inside track.