How real estate agents can manage a bidding war
Bidding wars are likely to define the summer. Coming into 2020, housing inventory was low. Lack of inventory got even worse as COVID-19 spread, with many Sellers choosing to delist their homes. Now, with some parts of the country starting to reopen, more Sellers choosing to relist, a continuing shortage of homes, and historically low mortgage rates, there’s a strong chance of more bidding wars. 2-10 Home Buyers Warranty (2-10 HBW) wants to give you some tips on how to manage a bidding war and how a home warranty can help you and your clients.
Preparing your Sellers for a bidding war
With supply low and demand rising, Sellers may find themselves with the upper hand in any bidding war. As Sellers consider what could likely be many great offers, they’ll need a cool-headed real estate professional to help them determine which offer is best for them. Bidding wars can be both exciting and anxiety inducing. Here are a few ways to keep your Sellers on the level.
Managing your Seller’s expectations
Managing your Seller’s expectations is crucial to success in a bidding war. When Sellers see several offers come in, it can be exciting. If those offers come in higher than their asking price, it can make Sellers ecstatic. The downside of these good feelings is that it can tempt Sellers into making irrational, emotional decisions.
To prevent emotion from guiding the process, clarify what’s important to the Seller before listing or relisting. If you know what drives your Seller, it’s easier to determine what they want and need from the sale of their home. This can help you identify if your client starts to stray from what they need in the heat of the moment. It can also help you leverage your expertise to bring them back on track.
Encourage Sellers to focus on more than just price
Getting the most money for their home is often important to your Sellers. But if they find themselves in the midst of a bidding war, it will be wise for them to consider the terms of the offer beyond just the price.
Consider the story of one Seller. After building and living in their house for over 40 years, this Seller decided to downsize. They put their home on the market and immediately received multiple offers. Most of the offers were at least $10,000 over their asking price. Several Buyers offered well over the asking price in cash.
At the end of the day, the Seller chose neither the highest offer nor the cash offers. Instead, they sold to a Buyer whom the Seller considered the best fit for the house they built and lived in for most of their life. This Buyer offered above asking price. More importantly, they fulfilled a want the Seller had—the desire to sell to someone who would take care of the house as their own and raise a family in it, like they did.
The Buyer’s agent had shared that Buyer’s story with the Seller. This helped the Seller make a decision that made them the happiest. Even though it wasn’t the highest offer, it was the best offer for that Seller. And the Seller still got more than what they asked for!
Other factors to consider include the timeline for closing. The highest offer may not want to close right away, which can cause delays the Seller isn’t interested in. Another factor to think about is whether the Buyer can actually finance the purchase. COVID-19 has upended many budgets, and some Buyers may have some trouble making a down payment.
Determine what the Buyer is asking for
Offers often include more than just money. Incentives and other considerations can affect the quality of an offer. One offer might be high, but the Buyer might also ask for an abundance of concessions at closing. After comparing offers and their implications, you might find that a lower-dollar offer is actually a better offer because the Buyer is asking for less. It’s crucial for you to explain this to your Sellers clearly.
For example, the incentive that Sellers use most to attract Buyers is a home warranty, according to the National Association of Realtors. Home Warranty Service Agreements can help a home sell faster and for more money than homes without one. Buyers obviously value a home warranty, and it can be an effective incentive or additional leverage when your Seller offers one.
Make sure Sellers know the rules
There are many legal rules you need to follow as a Seller’s agent that your clients may not know about. For instance, you’re obligated to withhold certain pieces of private information about potential Buyers. You may need to explain to Sellers that you can’t tell a Buyer the price you’ll take to end a bidding war. Sellers may think that you can divulge any information that you’re privy to, but it’s up to you to manage their expectations.
Managing expectations, knowing your Seller’s desires, and helping your Sellers play by the rules are strong ways to manage a bidding war. Another way to keep the ball firmly in your Seller’s court is to offer Seller coverage from 2-10 HBW. Seller coverage can help keep your Seller’s sale on track by protecting them against unexpected breakdowns.
2-10 HBW offers comprehensive systems and appliances home warranties to help protect your clients from unexpected repair and replacement costs. Contact us to learn more.