- The Washington Times - Friday, May 26, 2000

Suppose you have a beautiful garden and you have to sell your house and move on, but you hate to abandon the garden. Year after year, you have watered and weeded, through pestilence and drought, and you love your plants. Now it's time to sell. Your house is in great condition, and you're getting multiple offers from buyers, all of them similar. Which to accept?

One of the offers has a letter attached. The prospective buyers write that they love not only your house, but also your garden, and if you choose them, they promise to take good care of it. Would that influence your decision?

It's the old "letter ploy." Every real estate agent recognizes it. Some use it and sometimes it works. In today's hot market, with prospective home buyers far outnumbering the houses listed for sale, buyers will try anything they or their real estate agent can come up with.

Pat Derwinski of Weichert Realtors in McLean says the letter ploy worked for a young couple she represented. The couple, from Wisconsin, "wanted a great yard," among other things. They found a house in Arlington with "a magnificent back yard with a Japanese garden," Ms. Derwinski recalls, priced between $450,000 and $500,000. Their offer was one of seven, she says, and included a note telling the sellers how much they loved the house and the neighborhood "doggie park" and how they "fell in love with the magnificent Japanese garden." They asked the sellers to show them how to take care of the garden. "I went in without an escalation clause" and got them the house, Ms. Derwinski says.

An escalation clause, which is another common ploy by buyers, offers the seller a given amount of money, $5,000 for example, "above the highest contract offer." In many cases, that would be a more powerful tool than the letter ploy, but the couple were uneasy about using the escalation clause, Ms. Derwinski says. She recommended the letter.

A purchase contract with an escalation clause, she notes, must also contain a ceiling price, specifying, "The contract price shall not exceed" a given amount, $500,000 for example. Ms. Derwinski and other Realtors say that although escalation clauses are common practice, they generally push the price of a house beyond the asking price and possibly higher than an appraisal can justify.

Because a lender will not approve a mortgage that is higher than what the house is worth, the buyer must be prepared to pay the difference in cash. This, in effect, increases the down payment and reduces the size of the mortgage to conform with the appraisal. This has not been a problem, says Rosie Harsch of Long & Foster in Tysons Corner.

"Houses have been appraising" at high enough values, she says, even with escalation clauses pushing up the prices.

As did Ms. Derwinski, Mrs. Harsch recently represented buyers who did not want to use an escalation clause but were willing to make an offer higher than the asking price on a house in Vienna. The house was listed at $299,900 and her buyers offered $318,000. Three other contracts had been offered, but her buyers got the house, partly because of the price they offered, but also for the terms in their contract, Mrs. Harsch says. The terms included no financing contingency and a moving date set at the seller's convenience.

While Mrs. Harsch and other Realtors pointed out that a buyer can get an advantage by being first on the scene when a house is listed, already pre-approved for a mortgage, that doesn't always work in today's market.

What some listing agents are doing when they put a house on the market, Mrs. Harsch says, is to hold an open house on a Sunday and announce that the seller will look at all contracts on Monday or Tuesday at a given time. That works to the advantage of the sellers while creating a logjam outside their house.

Several Realtors, including Patricia Vucich of RE/MAX Capital Properties in Northwest Washington, say they recommend that buyers be on hand when their offer is being presented to the seller so they can negotiate and initial any changes that might win them the contract. Only the listing agent is actually present when the seller is considering the contract offers. To be ready to act, the buyers and their agents have to wait outside.

In representing the seller of a $250,000 house in Takoma Park recently, Miss Vucich had four contract offers to present, and "there were four agents and four sets of buyers sitting in cars outside," she recalls. The seller chose one of the contracts and called in the buyer to exercise an escalation clause and arrange other details. After the buyer agreed to all the terms, the people waiting outside were sent home. If that buyer had balked, a second buyer would have been called inside, Miss Vucich says.

Though not every listing gets multiple offers, houses are selling quickly, and "it will continue to happen," Miss Vucich says.

"I see no evidence" that the number of listings will increase in relation to the number of buyers in the market, she says. When new listings hit the market, "those houses disappear immediately," she adds.

Miss Vucich and other Realtors note there is value in networking when representing a buyer.

Thierry Roche of RE/MAX Premier in Fairfax says that when competing to buy a house, "You've got to try to get into the seller's head" because, with escalation clauses and buyers matching each other's bids, more than money is involved.

"A good buyer's agent will interview the seller's agent … and ask questions" about what it will take to make the winning bid, he says. "Of course, you have to be in there the first day [the house is listed]," he notes.

One thing buyers have done that is "really stupid," Mr. Roche says, is write a contract offer on more than one house at a time. If both contracts are accepted, that buyer could lose his earnest money on the one he fails to honor and also be subject to a lawsuit. Another "stupid" thing buyers have done is include a sunset clause in a purchase offer saying it is good for only 48 hours, for example in the hope of pressuring the seller to accept it quickly. "Sellers laugh in their face," Mr. Roche says.

While Realtors generally agree that the fewer contingencies the better when a buyer is making an offer, they also tell buyers not to forego the home inspection contingency.

"All of us want to make clear what we're doing here," Mrs. Harsch says. Buyers "really need to have a home inspection." The idea is to request just five days or so for the inspection instead of 10 to 14 days as buyers used to seek, Ms. Derwinski says. Sellers do not have to be required to make repairs, she says, "but buyers will know of any deficiencies in the house."

Not that it always influences the seller, but sometimes buyers can demonstrate serious intent by including a larger-than-necessary earnest-money deposit with their contract offer or by offering to make an extra-large down payment, Realtors say.

Miss Vucich says a buyer who recently made a successful offer against three competitors for a house she had listed impressed her and the seller by coming prepared with mortgage loan pre-approvals from not one, but two lenders and providing copies of all her financial statements with the contract offer.

This buyer was far and away better qualified financially than the competing buyers, Miss Vucich says, although in the first minutes of reviewing the multiple contract offers, the seller was distracted momentarily by a highly emotional letter one of the other competitors had submitted. That time, the old letter ploy didn't work.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide