Bidding wars have been fierce over the last few months in the housing market. One case in point: This past spring, in Chevy Chase, Md., a suburb of Washington, D.C., a home sold for $1 million above its asking price after fielding seven offers from home buyers.
In what’s become a wild housing market, how do you help your home buyers who may be growing tired of overbidding and still losing out?
Buyer’s agents may need to have some frank conversations with their buyers while also protecting themselves against potential liabilities that may later come from buyer’s remorse, said Melanie Gamble, lead associate broker with Keller Williams Capital Properties, who is licensed in Maryland, Virginia, and Washington, D.C.
Gamble spoke on handling the competitive housing market in an all-virtual session, “Navigating Multiple Offers — How to Prevail in Today’s Wild Market,” during the 2021 REALTORS® Conference & Expo.
Listing agents also have a big role to play in taking extra steps to keep communication lines open in the fast-paced market as they reject offers in multiple-bid situations. The future of their reputation may depend on it.
For example, Gamble said, as a listing agent she writes a letter to each buyer’s agent who submits an offer that isn’t accepted. In the letters, she thanks the buyer for submitting a thoughtful, well-crafted offer on the home, but then informs them that they had received a number of offers on the home and that unfortunately theirs was not chosen. She informs the buyer that if anything changes, she will make them aware and then wishes them the best in their home search.
“I want to give the buyer’s agents something to take back to their buyers,” Gamble said. And she wants to avoid the buyer and the buyer’s agent discovering the home “pending” on the MLS—as is happening more and more—because no one ever told them their offer hadn’t been accepted.
Gamble offered more tips for buyer’s agents in helping their clients navigate the competitive housing market.
Watch your liability. In Gamble’s area, they use a form called “potential adverse consequences” that buyers sign when they want to waive a home inspection, appraisal, or submit an offer way above the asking price.
“We have clients sign this form for our risk reduction so that they don’t come back six months down the road and say how could you let me buy this house?” Gamble said. “We can remind them that we did advise them of the risks.”
Also, watch your liability with buyer “love letters,” personal notes from the buyer to the seller to show their desire to purchase that home. The National Association of REALTORS® has been warning about the practice of using such letters as they could possibly break fair housing laws by revealing personal details on race, religion, and more. Gamble advises agents not to write, draft, or deliver such letters on behalf of their clients to protect themselves from liability.
Don’t show houses at the high end of your buyer’s budget. Some agents are showing houses at the top of their buyer’s budget. “Then the buyers get frustrated because they can’t go much over the asking price,” Gamble said. With competitive offers still the norm in many markets, buyers need to be shopping for homes where they can still offer higher than the asking price, if necessary.
Find more ways to negotiate than just money. Sellers aren’t driven just by the highest financial offer. Sometimes they’re looking for other perks. Gamble recommends calling the listing agent to communicate your buyer’s interest and also asking what else the seller may desire in an offer.
Sellers may also be motivated by items like a 30-day rent back, an offer from a buyer that would cover moving expenses or storage costs, or even a donation in their name made to a certain charity, Gamble said.
But before you reach out to the listing agent, check for any notes on the MLS, Gamble said. Listing agents sometimes put items that the seller desires in the notes.
“Buyer’s agents, read the MLS,” Gamble said. “There’s nothing more frustrating as a listing agent than when buyer’s agents call you with questions that if they had just read the MLS they wouldn’t have had to call. When a listing agent takes the time to give instructions, take the time to read them.”
Submit your best offer. Some listing agents don’t accept offers with escalation clauses—and Gamble says she’s one of them. “I advise sellers they should ask for the highest and best offer,” she said, adding that is basically what an escalation clause does anyway.
Buyer’s agents should have their clients carefully consider the top of their budget that they would want to pay for the home. For example, if the home is $200,000 and they lost out to a bid of $210,000, would that bother them? “If yes, then $210,000 should be the offer they submit,” Gamble said.
Try door-knocking when your client loses out. Gamble said that if a buyer loses out in a bidding war and really desires to be in that neighborhood, the agent may want to start knocking on doors.
“This gives you a legitimate reason to go knock on every door in that neighborhood and see if anyone is thinking about selling,” Gamble said. “Tell them you have clients who love this neighborhood, and that you have an interested buyer.”
Also, consider using services like Landvoice, AgentPro247, and ReboGateway that will allow you to farm For Sale By Owner or expired listings to uncover additional possibilities for your clients.
Be upfront with buyers who keep losing. “Make sure your buyers feel like you’re in this with them,” Gamble said. “Show them you care about them.” They may lose several houses in bidding wars, and they will need to feel supported and that they can trust you. That also may mean having an upfront discussion about the reality of their homebuying dreams.
“If your buyer is doing the very best that they can do, but they keep coming up short, like because of money, limited financing options, or they’re limited on where they can live or the type of house that would be suitable for their family,” Gamble said, “you may need to tell them that now may not be the best time for them to buy.”
Your clients may feel the fear of missing out and want to take advantage of the ultra-low mortgage rates. But sometimes, as the professional, agents have to be prepared to say, “I know you want to buy, but maybe it makes more sense to rent for one more year, save money, and wait for more inventory,” Gamble said.
“At the end of the day, they’re trusting you to advise them,” she said. “And they’ll remember that. Even if they do decide to forge ahead.”