Bidding War

[sostartled]

So, my wife and I are in our first bidding war for a house. I can't even describe this extremely stressful situation; only people who have been there before can empathize. We've found a place outside DC that we LOVE, and have verbal offer in the place. This townhouse is one of a kind; a brick town house in a small community that's close to the metro and other amenities. It's almost 1,000 square feet more than it's nearest competitor in the area. The seller has moved out and has to sell, but he apparently has several verbal offers to consider. Their realtor likes our realtor, so they want to work with us (which I know = there aren't as many offers I said there are). But we're sitting on pins and needles waiting to hear what the deal is.

Has anyone else been in this situation and have any advise / war stories / cautions?

 

[Iron_chet]

Other verbal offers are BS, if it is not in writing then they don't have multiple offers.

Know your walk away point and as hard as it is, leave the emotion out of the process.

 

[SoCalScribe]

Don't overpay too much based on emotion, but feel free to raise your offer a reasonable amount and then stand pat. A few thousand over 30 years won't affect your lifestyle, but more than that might.

 

[spnited]

Verbal offers mean nothing. Have your realtor put your offer in writing, then see if anyone matches or exceeds it with a written offer.

 

[old_tony]

In this housing market, it would be a sin to overpay.

Do. Not. Overpay.

No matter how much you like the place. Make sure your realtor is very real with you on what the property values are for that area.

 

[I'll never tell]

I'm with old tony. I just sold a house recently, and I know the market is flooded.

But I will say this: If you can't find something wrong with the house, make up something. Then tell your real estate agent -- yes, yours -- that's your falling out of love.

If he/she knows you're in love, she's already quit trying and won't try to save you a dime from here on out. I know all this, because my inlaw is an agent and sadly they all work about the same way after they've found you whatever.

If this is your first house, good luck. My mind was blown about two or three times over.

 

[BTExpress]

This townhouse is one of a kind;

No, it's not.

Realize that, and the stress melts away.

 

[imjustagirl]

I'm hoping to buy my first place in the next year or so. I'm addicted to all the house-buying shows, and they always kind of gloss over the bidding wars parts.

"There are seven offers on this house."
"Oh no. I don't want to get into a bidding war."
*commercial*
"We bid $5K over the asking price and got the house!"

So I never know how all this stuff works. Thanks for being willing to share.

 

[Pancamo]

Have your realtor go to the MRIS and show you the last 10 sales in the neighborhood. The last thing you want to do is overpay for a home and have to come to the table with more cash than you budgeted based upon emotion.

 

[sostartled]

he/she knows you're in love, she's already quit trying and won't try to save you a dime from here on out. I know all this, because my inlaw is an agent and sadly they all work about the same way after they've found you whatever.

I hadn't thought about this, but it makes sense. And I can certainly see it happening somewhat. One of my biggest issues with the process is not having direct contact with the seller. Having a middleman representing me is not something I'm used to. I hate having to rely on what the realtor says the seller's agent said, especially on such a huge decision.

Have your realtor go to the MRIS and show you the last 10 sales in the neighborhood. The last thing you want to do is overpay for a home and have to come to the table with more cash than you budgeted based upon emotion.

This is good. We've actually done this and the asking price is less than what other houses have sold for in the area. The appraisal was done after a previous offer was accepted and it's about 3K more than the asking price.

I'm hoping to buy my first place in the next year or so. I'm addicted to all the house-buying shows, and they always kind of gloss over the bidding wars parts.

"There are seven offers on this house."
"Oh no. I don't want to get into a bidding war."
*commercial*
"We bid $5K over the asking price and got the house!"

So I never know how all this stuff works. Thanks for being willing to share.

My wife and I love the HGTV shows. But they also gave me false expectations that it's a given the seller will pay closing costs and you can knock $10K off the price. It could just be the market in DC, where there's a lot of property, but prices have stayed the same. In our deal, we're negotiating a couple thousand here and there.

One of the other things I didn't realize was how little effect interest rate differences have on your monthly payment. Meaning, if we get a 4.75% interest rate, the PI would be $1,000 (for example). You go up to 5.25% and it increases your PI to $1,020.

 

[MileHigh]

Appraisal has nothing to do with it. It's all based on the surrounding neighborhood for similar places.

Again, you gotta take emotion out of it. Sounds like a great place, yes, but do not overpay. You're the buyer in this market. Remember that.

 

[imjustagirl]

One of the other things I didn't realize was how little effect interest rate differences have on your monthly payment. Meaning, if we get a 4.75% interest rate, the PI would be $1,000 (for example). You go up to 5.25% and it increases your PI to $1,020.

Which is great. Except my credit's so bad I can't even get financed right now, hence the "in the next year or so." So...yeah. 4.75 sounds awesome...and not realistic.

 

[playthrough]

Other verbal offers are BS, if it is not in writing then they don't have multiple offers.

Know your walk away point and as hard as it is, leave the emotion out of the process.

Bingo.

Verbal offers mean nothing. Have your realtor put your offer in writing, then see if anyone matches or exceeds it with a written offer.

Double Bingo.

No matter how much you love it, you need to treat it like a business transaction all the way THROUGH inspection. Two months ago we put in a bid on a 90-year-old house that we adored. It inspected horribly (foundation issues, hidden water damage) and we pulled the contract. Ended up buying another house two blocks away that was not our exact dream home, but it inspected very well and was still in the location we wanted.

 

[JackReacher]

You think it's stressful now? Just wait till you have a contract on the place and you shadow the guy doing the inspection. You picture damn near everything going wrong. Usually, it doesn't. But still. That's a nerve-racking 90 minutes or so.

Good luck.

 

[Jersey_Guy]

Just remember: Your agent only wants one thing - his commission. He is not on your side.

 

[sostartled]

I really appreciate the comments. They're spot on, of course. And this process is something you really have to learn by doing (which is something else I've learned!)

We put our official offer on the house this evening. She was optimistic we might hear something tonight, but who knows.

I was really nervous putting the offer in, just because it's a crazy amount of money for me. But I really, truly feel that this is a awesome deal (meaning, the house), and a solid offer. I will, of course, keep you posted.

 

[Baron Scicluna]

You think it's stressful now? Just wait till you have a contract on the place and you shadow the guy doing the inspection. You picture damn near everything going wrong. Usually, it doesn't. But still. That's a nerve-racking 90 minutes or so.

Good luck.

And the thing with the inspector is, if he's a good one, he'll point out EVERY single thing that could be a problem.

When my wife and I bought our house, the inspector pointed out little things such as a one-inch crack in the driveway. Silly stuff, in addition to the big stuff, which we of course appreciated. At the end, we were thinking, "what were we getting ourselves into?" But then the inspector assured us that, while there was so many minor things, the house was actually in very good shape for its age, and those minor things should be expected.

 

[I'll never tell]

You think it's stressful now? Just wait till you have a contract on the place and you shadow the guy doing the inspection. You picture damn near everything going wrong. Usually, it doesn't. But still. That's a nerve-racking 90 minutes or so.

Good luck.

You can get that done before you lay down the contract. And yeah, it's scary as hell.

We bought a foreclosure -- back when the housing market wasn't dung -- and fixed it up. My father and I did the work (he is a part-time carpenter, and I worked summers building houses... well carrying heavy crap), so it was second nature to us. My wife, however, we knew things were wrong, some that would take $15 to fix, but she was freaking out at every single little item. We finally made her go home.

And even then, the inspector isn't fullproof. Nor should you need to do everything he suggests (especially if he has a brother in law that, um, let's say blows in insulation.) But they are very, very helpful.

Even if you're knowledgeable, you might find things, but this man has a three-page checklist. Ours even had his own website - took pictures, uploaded them along with briefs on his findings, suggestions, etc. Once you get to the point you think you know, bring the man in before you make your offer. His findings could impact that offer. His findings could change your mind, and even though you've spent a couple hundred, save you a ton.

 

[The Big Ragu]

One of the other things I didn't realize was how little effect interest rate differences have on your monthly payment. Meaning, if we get a 4.75% interest rate, the PI would be $1,000 (for example). You go up to 5.25% and it increases your PI to $1,020.

Which is great. Except my credit's so bad I can't even get financed right now, hence the "in the next year or so." So...yeah. 4.75 sounds awesome...and not realistic.

To the first point: The difference between 4.75 and 5.25 percent is still 3/4 of a basis point. Those are both low rates, and having to pay that extra 3/4 of a basis point isn't the end of the world. But compounding on interest is a very powerful thing. Doing some simple math... On a 30-year fixed, if you are say, taking a $250,000 loan, over the course of the loan that 3/4 of a basis point amounts to more than $27,500 extra in interest. On a $100,000 loan, it is still $16,500 extra in interest over the full term of the loan. Even 3/4 of a basis point means money out of your pocket.

 

[21]

No one sells a house to someone because the brokers like each other, or because they 'want to work with us,' and no one seriously considers 'verbal offers.' Your broker is either a nitwit or a hack. Don't let yourself get caught up in the rhetoric and bs...the owner has already moved out and has to sell. As others have said, you're the buyer in a bad market, if the property was so amazingly unique it would have sold already. You have the power here, use it to your advantage.