Bidding Wars? Whatever Happened To Our Buyers' Market?

Our office email had an interesting thread today.

Blog Buddie Ed Schneider wrote an email note to colleagues about writing an offer on a house in Mount Pleasant in a twelve-way bidding war. Then my colleagues began to chime in, one after another, telling war stories of being in double-digit multiple contract situations over the past week.

In these situations, here are some of the things that people are doing to get the winning offer:

• Having the house pre-inspected so they go in without an inspection contingency
• Crossing out the financing contingency
• Crossing out the appraisal contingency
• including a healthy looking financial information sheet
• Including an obscenely high earnest money check
• Settling at the sellers' convenience
• Including an escalator clause agreeing to top competing offers by at least thousands of dollars with a cap way above the asking price.

Is participating in a bidding war a good idea? To get the house, you have to eliminate every way of getting out of the offer. So if when you wake up in a panic about three days after you are the winner of your dream house wondering what on earth you were thinking, well too bad! It'll cost you a bundle to get out of the deal - like that obscenely high earnest money check you wrote!

Earlier in the decade, if you wanted to buy a house, you often didn't have a choice. But today, there may be options. And when you do participate, you are doing your part to run up the prices in the market where you plan to buy.

When I'm not the listing agent, I hate bidding wars. Over the years, my clients won their share, but I sometimes felt a little queasy as I represented them. More often than not, I tried to work with them to avoid these situations. How?

• Homes that are look fabulous tend to attract multiples. Why not use your imagination and go for the ugly and poorly staged (and reasonably priced) stepsister who, with a face lift and tummy tuck could become quite a beauty.
• Homes that are priced below market tend to attract multiple offers, often pushing the sales price to way above market. It might make sense to look at homes that are priced at or a little above their market value.
• I never ruled out the homes that had been on the market for eons. Often they are a pain to show, have a resident pit bull, or some other issue that isn't related to the price or quality of the property.

In the early years of the decade, it was really hard to avoid bidding wars, and we felt lucky to be writing an offer on a place with only 4 or 5 other buyers. But today, in most price ranges and DC area neighborhoods, there is a lot to choose from.

You need to try to avoid getting caught up in the need to win - and the same thing applies to your agent! Just because 15 other people are going wacko over a house doesn't mean you have to do it, too!