- The Washington Times - Thursday, May 13, 2004

You’ve done your homework and legwork. After long days of driving from house to house and sleepless nights of contemplating your next move, you’ve finally found the perfect home in the perfect neighborhood. It seems to have been made just for you.

There’s just one problem: Ten other prospective buyers happen to feel the same way you do about the house.

Industry insiders have a term for the competition between buyers. They call them bidding wars, and they are becoming common in this region where the demand for houses far exceeds the available supply.

Pat Vucich of RE/MAX Realty Services in Bethesda has been in the real estate industry for 25 years. She says she has never seen such a low inventory of homes on the market.

One of her clients recently wanted a home that had 13 bids on it.

“Even when rates were 17, 18 percent, I was still selling houses,” Ms. Vucich says, “but now, I can’t sell a product that doesn’t exist.”

“The current market is making it extremely difficult for purchasers,” says Mike Patrick of Fort Washington’s RE/MAX Colonial Homes. “In some areas, it is almost a certainty that there will be multiple offers on the property.”

Once a simple process, presenting the contract to the seller now requires extra attention. Every detail can make a difference in whether you’ll get the home of your dreams — or any home.

If, as the saying goes, all’s fair in love and war, how can a buyer be prepared to survive and win a bidding war?

There is no magic bullet for coming out on top in a bidding war. Realtors suggest, however, that there are some strategies that can help a buyer’s offer emerge from the pack.

Sellers, inundated with offers, first weed out those who haven’t been approved for financing in favor of candidates who have a preapproval letter in hand.

Realtors say preapproval — not to be confused with prequalification — is a must in this kind of market. Buyers should attach a preapproval letter from their lender to the offer.

“Make sure that all your financial ducks are in a row,” Ms. Vucich says.

However, some Realtors believe it takes more than a preapproval letter to get your offer noticed.

“A preapproved loan won’t cut it in this market,” Mr. Patrick says. “A substantial earnest money deposit should be made with the offer. Some buyers may elect to make the deposit nonrefundable to show the seriousness of their offer.”

One of the biggest mistakes prospective home buyers make is being too conservative with their bid, Realtors say. Often, they find out that they missed getting the home by just a couple of thousand dollars.

Ms. Vucich says she’s aware that she’s dealing with the clients’ money, so she tries to first make sure they are well-informed.

“I show the comparables, market conditions and rate appreciations, then I try to nudge them along reasonably,” she says. “The agent is only as aggressive as the buyer.”

More buyers lately are deciding to use an escalation clause, a tool used to make sure another buyer won’t outbid them.

An escalation clause states that you will increase any offer by a certain amount, such as $500 or $1,000, up to a set ceiling, such as $10,000 over the asking price.

Steve Poole of Long & Foster in Rockville suggests that in addition to using an escalation clause, buyers should offer more than the asking price upfront.

However, buyers should be aware that lenders won’t lend more than the home’s appraised value. They should be prepared to make up the difference by increasing the down payment.

Although upping the stakes can get a seller’s attention, the offer a seller accepts might not always be the highest.

Realtors say it’s equally important to be flexible and willing to accommodate the seller. This can be worth the sacrifice. A seller can agree to close one month earlier or later to meet the seller’s desires.

Charles Search of Jobin Realty in Alexandria says, “Sellers not only look at the price but at the terms of the contract.”

He recommends that buyers consider the contract terms, make a suitable judgment on the price and then act.

“Accept a settlement date and offer a rent-back that meets the sellers wishes,” says Mr. Poole, who agrees that the seller will generally work with the most accommodating buyer.

Eliminating as many contingencies as possible, such as the sale of your own home, will also give a buyer an edge.

One sticky point is whether to waive the home inspection. Most Realtors advise against this dangerous compromise.

“It is becoming more common for purchasers to forgo the home inspection,” Mr. Patrick says. “While this may increase an offer’s chance of acceptance, it’s not something I would recommend to a buyer client. I personally consider it risky to spend hundreds of thousands of dollars on a property without the benefit of a professional home inspection.”

Although Mr. Poole agrees that it is risky to waive the home inspection, he says, “Desperate times require desperate measures.” Many buyers are waiving the right to a home inspection, he says, as well as waiving the appraisal and financing contingencies.

“If the lender has completed a thorough loan approval and the buyers have a large amount of cash and leeway on the type of loan, then waiving the financing can be less risky,” Mr. Poole says. “Most offers that are winning are for buyers that have lots of cash and are willing to waive contingencies.”

Mr. Patrick says he explains the pros and cons of the home inspection to the client and lets them decide.

Time is of the essence in today’s real estate market.

Buyers and their agents should also be available to act quickly, if necessary. If possible, the clients should be with the agent or available by phone with a fax machine to modify the offer or sign off on a counteroffer immediately, Mr. Poole says.

Some even suggest personalizing the offer by writing the homeowners a letter detailing why they want the house.

“Be patient,” Mr. Poole says, “and realize that not everyone can win when there are 20 offers.”

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