I recently read an article about how to win a bidding war. It was written for real estate agents, but as I looked it over, I couldn’t help thinking that the tips would be a better strategy for losing – not winning – a bid on a Denver home. The author’s idea was very simple: no matter how much the home is on the market for, you should always offer $50,000 over that price.
Here’s the theory in action:
If the house is listed for $200,000, an agent and buyer would offer $250,000. The seller, thinking that this is the best deal, would accept the offer. So far so good, right? Wrong. There is a clause in purchasing contracts that gives a buyer an out if the home does not appraise. The author is making an assumption the seller would lower the price if the home does not appraise. Most sellers who accept a bid that much over the market price are already spending money in their head. A lot can be done with an extra $50,000, so it’s no wonder the offer would be accepted.
Multiple Offer Situation
What happens if the seller receives multiple offers, and instead of lowering to the appraisal value, they reject your offer and take someone else’s? It’s easy for the seller to use one of those backup offers while your client is left paying the bills for the home inspection and appraisal (anywhere from $800 to $1,000 total). Is it worth losing the money and the house just because you offered too much? Even worse, the house might actually appraise at that +$50,000 price, and then your buyer will be forced to pay thousands of dollars more than they had planned.
Protect Your Client First
In the end, I believe risky bidding tactics like this only turn into stress for your client. This market is extremely fast-moving, and it’s more important than ever to use common sense. Do you want to potentially put your clients through the wringer, or would you rather protect their interests? I have been very successful with winning bidding wars over the last couple of years in Denver, and I don’t use risky tactics.
To find out how I successfully helped my clients win their dream home, checkout my blog:
Common sense and respect have served me well when it comes to protecting my client’s money and wellbeing, and I know they’ll continue serving me well for the foreseeable future.
PS: I would love to hear from you! Please share your thoughts in the comments section.
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