We’re going to talk about bidding wars, this is a hot topic right now. Depending on which side of the transaction you’re on. It can be great if you’re on the seller side or it can be very, very frustrating if you’re on the buyer side. So how do you get competitive? How do you close these deals?
Let’s just talk about being on the buyer side here. You’re a buyer, what are you going to do to be competitive with your offer? Obviously, you can offer more on the price, but the things to really focus on are timeframes within the contract. How long is your option, period? How long is your financing contingency? These are typical ways for the buyer to back out of the contract to get their earnest money back. So if you have a two-day option period, instead of, say, seven or ten, well, that’s going to make the seller want to go with you. Why? Because on that specific aspect it’s going to be shorter. Right? They’re going to know quickly whether you’re going to move forward or not.
You can mess with the time frames on the option period as far as the number of days. You can also increase the price for the option period. So instead of doing, let’s say, $250 or $500 for an option, you can do $5,000. Interesting concept, right now I actually have a $10,000 option fee for a one-day option! So they really, really want this deal. It was competitive and they didn’t have cash, so they made up for not having cash by having a significant option period. There’s a very small chance that someone’s going to back out of a deal if you have a $10,000 option fee.
There’s option fee, earnest money, timeline to close, price, relationship with the seller that you can focus on to stand out in your offer. People also believe in writing notes as well to stand apart. I don’t think that can hurt depending on if you’re the actual buyer, or if you’re an agent and you know the other agent, that’s helpful too. All these things will always come into play.
The more you understand all the variables: about the players, who they are, what’s important, the better you can manipulate these variables to get the deal. From a broker’s perspective, you want to kind of lay these out to your clients and say, “Hey, here’s all the facts” and leave it to your client to determine how bad they truly want it.
You don’t really want to tell someone to do a $10,000 option fee, because that’s very risky. But if somebody wants it bad enough, then it can make sense. You want to try and get as creative as you possibly can because it is hard out there. And when a property that’s listed already has 20, 30, 40, 50 offers, you really have to dive in and think, “what can I do that’s unique? How can I set myself apart to win this offer?”
Those are things that I think can be very, very valuable. We’re always here to help. We’re always here to dive in detail into any of these concepts. We’re living it. We’re doing it wrong. All sides of the transaction as brokers for buyers, brokers for the sellers, buyers ourselves, sellers ourselves.
TRE really tried to encompass everything that we’ve learned and know, to put it all together, to do the best job we possibly can. We care about this stuff and we want to help you guys.
It’s frustrating, it’s hard challenging, but you’ve got to get in there and you’ve got to be different. You have to think outside of the box. Hopefully, you guys find this valuable. Let me know. Any thoughts? Opinions? Tell me if you think differently. Differently than me. I would love to have a little debate and maybe I’ll learn something.