Let the bidding begin

House hunters need to act fast and be flexible to have their contract offers stand out in this seller's market. Veterans say to leave out contingencies, try to meet the seller's needs.

June 19, 2005|By Nancy Jones-Bonbrest | Nancy Jones-Bonbrest,SPECIAL TO THE SUN

Ben Nacev knows how hard it can be to buy a house.

After two unsuccessful attempts this year, he finally came up a winner when the seller of a Govans house accepted his contract.

"It's pretty crazy," said Nacev, who settled on the $114,000 property June 7. "But I would say, don't get too wrapped up in it. Realize when you go into it, you may have to go through two or three rounds."

Nacev's experience is one that's become common at a time when high demand and historically low interest rates continue to fuel a fast-paced seller's market. Houses that are priced right are commanding multiple contracts, touching off bruising bidding wars.

And with no sign of a slowdown in sight, that's likely to continue. Existing-home sales hit a record high in April, registering 5.7 percent higher than in April 2004, according to the National Association of Realtors. The Pending Home Sales Index, a leading indicator for the housing market, has risen to the highest level on record, according to statistics released by the association this month.

Eric Black, a buyer's agent with the Pat Hiban Real Estate Group in Ellicott City, said most houses now get multiple bids unless they've been sitting on the market for a while.

Black said he's seen homes go for more than $50,000 over the asking price, with no home inspection and no financing contingency in the contract.

"A couple of years ago it surprised me what people were willing to do," said Black. "At this point I've seen it all."

For Nacev, the experience underscored the importance of not getting overly invested emotionally.

The first house he bid on had one other contract offer. Both had escalation clauses, but the other buyer was willing to forgo a home inspection on the 115-year-old Waverly house, something Nacev would not agree to.

The second time around, there were several bids on the table, including his, with a 150 percent escalation clause for the house, again located in Waverly. The sellers ended up pulling it off the market.

After losing out on two attempts, Nacev said this time he and his agent plotted his strategy. After finding out no other contracts had been submitted, Nacev offered the full asking price - and was accepted.

"It's not worth it to make too much of a gut decision," he said.

Savvy real estate agents say knowing how to submit a standout contract - and keeping your cool - are key to walking away with the prize.

"I tell the buyers you have to put yourself in the seller's shoes," Black said. "The contracts that win offer the seller the most money and have the least number of contingencies."

After Darryl and Tamara Brown lost out on their first bid to buy a house last fall, they decided to do things differently the next time around.

So when a house they liked came on the market, they followed Black's advice to make their offer as appealing as possible. They did not make their offer contingent on selling their current home. They offered $5,000 above the asking price. They agreed to a clause that excused the sellers from having to fix anything under $5,000 that came up in the home inspection.

The Browns submitted their winning bid on the five-bedroom, 3 1/2 -bath Colonial in Catonsville in mid-April. Two days after the couple's offer was accepted, they put their own house on the market and crossed their fingers for a quick sale.

They had a contract in the first weekend.

"No one wants someone to have a contract that says it's contingent on the sale of your home," said Darryl Brown. "I think the key is, when you are ready to buy a home, you have to have your home ready to sell. We were told by the sellers at settlement, the reason they choose our contract was the others had contingencies in them."

Fundamentals

In these days of multiple contracts and frenzied buying, sticking to the basics may be your best strategy in offering the winning bid, said Jeff Lyons, general manager of RealEstate.com.

He said sellers are evaluating three things: the offer price, a sense of certainty the offer will go through and a willingness on the buyer's part that any special needs, such as a timely settlement date, will be met.

"The key is to focus on the fundamentals," said Lyons. "You want to offer a competitive price and convince the seller the financing is in order. Also, you want to do anything you can do to reduce contingencies."

Increasing the earnest money deposit is also a quick way to grab the sellers' attention, Lyons said.

Melvin Knight, a real estate agent with Coldwell Banker Residential Brokerage in Roland Park, said there are a number of things that can make a contract stand out.

"When working for the buyer, I want them to get the best deal and the best protection," said Knight, who was Nacev's real estate agent.

"Sometimes that can happen in a way that's more palatable for the seller."

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