How To Beat Out Other Buyers In A Hot Market

Insider Secrets To Winning The Home Buying Race
by Dennis Kaiser, CRS

We're in a very strong seller's market here in San Diego! The past couple of months have been frustrating to many hopeful home buyers. There's too few homes available, and the good ones are snapped up in a hurry!

A couple of months ago I was in a situation where we made an offer on a home my clients wanted to buy, but someone else got it! I was disappointed and frustrated, and so were they! And after this happened to me several times I was getting downright angry!

So I decided to do something about it. I figured out what it would take to get offers accepted in this crazy seller's market, and put my strategies to the test. The result was that my next 4 offers were accepted, beating out all the other buyers that were bidding on the same homes! Yes!

Here's what I've learned about how to succeed in this kind of market. I call these rules "The Seven Seller's Market Strategies!"

RULE #1 - PRE-APPROVAL

Do you want to get the best house you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. You see, price is only one bargaining chip in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.

In years past, I always recommended that buyers get "prequalified" by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you "prequalified" and issues a certificate that you can show to a seller.

Sellers are now aware that such certificates are WORTHLESS, and here's why! None of the information has been verified! Oftentimes unknown problems surface! Some of the problems I've seen include recorded judgments, child support payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients' bank account long enough, etc.

So the way to make a strong offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan, the only loose end is the appraisal on the property you want to buy. This process takes anywhere from a few days to a few weeks depending on your situation. Now it's like having cash to take to the seller! In a situation where the sellers have several offers to choose from, they will choose the offer from a buyer that's PRE-APPROVED.

RULE #2 - BETTER THAN DAILY SEARCH

When you first start looking, it's possible that there will be nothing available that you like. So then what? Your agent should then begin hunting for you and watching for new listings that match what you're looking for. How often should your agent check? At the bare minimum once and day, and preferably more.

I once saw a new listing first thing in the morning, and called my clients to meet me at the house at 9:00AM. When we got there, we found out an offer was coming in at 9:30! If your agent only checks listings at the end of the day, this one would have been sold already.

That's why we offer our exclusive Preferred Buyer Search program. This is a computer program that alerts me whenever there is a new house on the market that meets your requirements. I'll fax, email, or call you immediately with the information. You'll be there before other buyers even know about it!

RULE #3 - SUPER SPEED

As soon as a listing hits the market, it becomes a race. Who can get there the fastest? In this market, you need to be prepared to drop everything, leave work, or do whatever it takes to go see a property. It sounds extreme, but I'm very serious about this. Time is of the essence. Don't think that you'll take a look at it this weekend. It could be sold by tonight.

And be prepared to make an offer on the spot. That means bring your checkbook and be mentally ready to make a decision. I have a FAX machine in my car to communicate the offer immediately.  Many times I've sewn up an offer for my clients, and then another offer comes in ten minutes later. The race belongs to the swift.

RULE #4 - NO COUNTER OFFER

When we make an offer, we'll make it with the intention that the seller will accept it. We don't want to get a counter if at all possible. If the seller counters us, then there's a very good chance another offer will come in before we can accept the counter.

For this reason, we try to make the offer as palatable as possible so the seller can accept it right away. This means we give the sellers their choice of services, avoid all contingencies, and steer clear of any terms or conditions out of the ordinary. I used to think that by trying to get "a little extra" out of the sellers for my clients, I was doing a good job for them. And in the past, that idea worked. But try that now and you lose the house altogether.

At first I struggled with this, and I felt that by giving the seller everything they were asking for, I wasn't being a very good negotiator for my buyers. But I got over it. Doing a great negotiation and losing the house isn't good service. Telling the truth about what it takes to win in this market is the kind of service you want.

RULE #5 - THE PRICE

Better sit down for this one. The asking price used to be the price the seller hoped to get, and the one that offered closest to that price bought the house. That's no longer true. Now the asking price is the MINIMUM price, the base price to begin making offers. It's the minimum bid if you will, the starting price at the auction. Make no mistake, for a hot property in a hot location, there will be multiple offers, and they will be more than the asking price.

RULE #6 - BEST OFFER

I lost a property for a buyer client of mine by offering less than the asking price. We were the only offer, so why not? As it turned out, by the time we submitted the offer and were able to present it to the seller another offer came in. The seller countered both of us with the same price. We accepted, and so did the other buyer. The sellers accepted the other buyer's offer over ours, even though they were both for the same price. Why, you ask? Because the other buyer's offer was higher than ours originally.

So the next time I was in a multiple offer situation, we made a very strong offer right off the bat. The other offer was lower than ours, but the seller countered us both, and we both accepted. In other words, the other buyer came up to our price. So now the seller was looking at two identical offers. They chose ours. Why? Because our offer was better to begin with.

Now I know that this makes no sense. The bottom line is the same, so why does it matter whose offer was better originally? I have no idea why this works, but it does. So we don't fight it, we use it to our advantage.

RULE #7 - THE BIG PICTURE

Now I know that all this sounds like we're rolling over and playing dead for the seller. We're giving them everything they want, and then more. But we'll have the last laugh. We'll be laughing because we bought a great house in a rising market, beating out the other buyers! Is it really a big deal to pay a couple thousand more when the house will be worth 20 or 30 thousand more next year?

Our market is appreciating at anywhere from 10-20% a year right now. That means that if you don't buy the house and it takes you a month to find another one, the price will be a few thousand higher anyway. So are you really paying too much? It's all in how you frame it in your mind. Don't think you're losing when you pay over the asking price, you're actually winning. Next year you'll look back and say what a genius you were for making such a smart move.