I've been in many competitive bid situations and have learned that it is NOT always the highest price offer that gets accepted. I've saved client's money by getting lower offers accepted, when together we've navigated the offer and negotiation process better than our rivals (other buyers and their agents). In this post I'll share some of my "secrets".
Secret #1 is sales 101. It's figuring out what else is important to the Seller, and to the Seller's Agent, besides price. If price is all they care about, then the highest price would get accepted every time, and surprisingly, that is OFTEN not the case. So what could be more important than price? Here are a few:
1. Time - maybe they need extra time, or are in a hurry. Standard Close of Escrow in San Francisco is 30 days, but any number of VERY important reasons to the Seller might require a 2 week, or a 2 to 3 month Close. Hint - ask! Ask why they are selling, when they need to move, and when they need to Close Escrow.
2. Their move - related to time is whether or not it would be best for them if they could stay in the home after Close of Escrow to coordinate their move. I've won in many competitive bid situations simply by offering to allow the Seller to stay for 30 days rent free. "Oh no" you say, "that means I'll be paying two mortgages, or rent and a mortgage." Yes you will, so reduce your purchase price the equivalent amount - it's a monetary wash, and surprisingly the "free" rent feels better to Seller's then the slightly lower offer price even though it's the same monetary result.
3. Trust - this is the ultimate secret in ANY sales situation. You must develop trust, credibility and rapport, especially when you don't know each other. "Why" you might be asking. Well, what if you have the highest offer, but the Sellers and their agent do not believe you'll follow through on the Offer. If you cancel the contract later on, their home goes back on the market, and now it has a stigma of "something must be wrong with it". This will cost the Seller both time AND money.
Let's stop here because this is the one secret that has benefited my clients the most, and where other buyers and their agents are probably making their biggest mistakes.
The Ultimate Secret:
I tell my clients to introduce themselves to the Open House agent (who is hopefully the Listing Agent) whenever they find a home they really like. They need to impress upon him or her that they really love the home, and get themselves remembered. If I'm not with them, they MUST call me immediately so that I can do the same thing. With thousands of Real Estate Agents in town it's impossible to know all of them, so if it's an agent I don't know, I've got to introduce myself early on too.
The mistake other agent's make is in telling their Buyers to refraim from looking too interested, or from giving out their names or contact information. They think either they'll "give away their interest" thereby costing them money (the opposite is true, and I'll explain why and how) or that an unscrupulous Listing Agent will try to "steal" their Buyer. Whatever the reason, it's a bad mistake. I'd rather have my clients spend an hour there chatting away, expressing enormous interest in the home, introducing their child or dog, or finding something in common with the listing agent. This gets my Buyers "known" and is the first part of developing Trust. I then do the same thing by visiting the home at the Broker's Tour, calling the Listing Agent with "smart quetions", establising interest and trust. My clients and I will then set up a private showing appointment to go back again, and continue expressing our interest up to the time we write the offer.
What happens is that the Listing Agent begins to root for us. He/she tells the Seller all about our interest and the Seller starts hoping and rooting that we'll write an offer. We'll write a "strong" offer (not necessarily strong in price, but in other things that are important to the Seller - because I asked what else was important), and I'll present the offer in person rather than fax it, and so on. There are many little things I do to develop trust and credibility, but you get the gist. And in so many cases, our competition will be un-known because the Listing Agent doesn't remember them ever seeing the home, and the offer will be sent via fax with terms that simply don't work for the Sellers. In some cases the price will be $10,000 or $20,000 or even higher, but everything else about the offer feels bad.
So how on earth can the Seller accept this higher offer from an "unknown"? It's tough, if not impossible. Yes they might counter us higher, but we've earned the right to say "no" and get away with it because we've done everything else right. The other buyers haven't, so they can ONLY win on price. We can win on so many other levels.... so there it is... the secret to getting lower offers accepted... it is not only possible, I've done it a bunch of times.