Shrewd bidder need not shrink from competition


August 01, 1993|By ELLEN JAMES MARTIN Ellen James Martin is a columnist for The Sun.

The Rosedale rancher was on the market for more than a year, begging for a buyer. Then, after a civil engineer came in with one bid, another offer -- from a college instructor -- followed -- within hours.

"Suddenly the house seemed like a hot property," recalls Bob Krach, the agent who listed the home. "Knowing someone else wanted it, each bidder thought the house was more desirable."

It's a truism of human nature that the real estate industry has long observed: Competition excites interest. Even in a slow market, a serious bid by one prospective buyer can often stimulate another into action.

"We call it instinct buying," says Mr. Krach, who sells homes through RE/MAX Results Realty in White Marsh.

Like most homes, the Rosedale rancher had its pros and cons. Although located on a noisy artery road, the house sported a club basement, complete with an inlaid-wood dance floor, pool table and wet bar. A more controversial element was its built-in swimming pool -- so large it occupied nearly the entire backyard.

The civil engineer, a married man with no children from Essex, LTC was drawn to the rancher as a good place to entertain. The fact that he and his wife took a stance on the property helped erase the doubts of the college instructor, a bachelor from Overlea, who worried about the noisy street. In the little bidding skirmish that resulted, the Essex couple prevailed.

"It's kind of funny how it happens. When you have one buyer, all of a sudden you have a second and sometimes even a third," says Bob Norrell, who sells homes through the Towson-Hunt Valley office of Prudential Preferred Properties.

To be sure, bidding wars are hardly commonplace in the current Baltimore-area housing market. It's not only that the stock of for-sale homes is plentiful, but also that many trade-up buyers are holding back -- because of the loss of a job within the household or the fear of unemployment. Then, too, those seeking a new home face the hurdle of having to sell a previous home.

Still, some first-time buyers (who have no need to sell) are now bumping heads over the same house, Mr. Norrell says. Detached homes selling for less than $150,000 are the most likely to attract multiple bids, he says.

* If you're a buyer facing competition in the purchase of a home, realty specialists make these suggestions:

* Don't let emotions run your thinking.

There's a reason why houses -- not to mention artwork, cars and other valuables -- are sold at auction. Auctioneers know that the urge to win pushes some people to buy more and pay more than they otherwise would have -- that is, had they shopped in a calmer, more customary setting. On the other hand, some people shrink from a purchase in the face of competition.

"You have to sit back and look at the whole picture. If you like the house, you don't want to be intimidated by another buyer. But at the same time you don't want to be ridiculous and go crazy up on the price, either," says Mr. Krach, the White Marsh agent.

He says beware of agents who make vague references to "other contracts" in an attempt to spur an indecisive buyer to action.

* Garner as much information as you can in shaping a competitive bid.

As a buyer, one thing you'll probably never be able to discover (until the bidding is over) is how much your rival is offering. Obviously, it would be contrary to the interests of the homeowner for a listing agent to disclose the nature of one offer when another bidder is in the wings.

"That's a no-no," says Mr. Norrell, the Prudential agent.

Still, a prospective buyer can learn much about a seller beforeformulating his bid. When does the seller want to move? Is he willing to help with closing costs? What does he need in terms of price to make an offer work for him?

Often the seller's agent will be forthright in answering questions. Or the buyer can learn a good deal via government land records. Often, for example, the buyer (or his agent) can find out when the seller purchased the home, what he paid, the original size of his mortgage and whether he refinanced. Occasionally, the buyer can even discover the seller's current mortgage payoff amount.

Remember, too, that the amount for which a home sells can be more important to a seller than a buyer, Mr. Krach says.

The seller may swallow a lot of your closing costs if you offer him close to his asking price. "That way he can brag to his neighbors about how much he got," Mr. Krach says.

* Don't nickel and dime yourself out of the right house.

Often when there are multiple bids, one bidder will lose out over a relatively small amount of money. (For instance, the college instructor from Overlea was disappointed to lose the Rosedale rancher for a mere $1,500.)

Of course, you don't want to overbid for a property simply because you have a rival. But you can avoid overbidding by gathering data on the recent sales of comparable homes in the neighborhood from the agent you engage. Then you can gain confidence that you won't go too high.

Even if for-sale homes are plentiful, a sharp buyer will pursue a right property with a strong bid, says Barbara Logan, an agent for Coldwell Banker's Bel Air office. That's because homes that attract multiple bids are often the best kept, most desirable properties in a community, she says.

"If you really want the house and know there are two parties interested, give it your best shot. Otherwise you could lose the house -- even in a soft market," Ms. Logan says.

(Ellem James Martin is a columnist for The Sun)

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