For Buyers Competing Against Other Buyers

OK. Let me preface this buy saying that not too long ago, I was caught in the miserable predicament of a 'bidding war' over a home that I had absolutely fallen in love with.

This was up in Boston, not down here in Florida. Houses up there have so much character and charisma and history built into them that sometimes, the thought of losing it over a few thousand dollars that, after amortization, doesn't affect your monthly nut THAT significantly.

Long story short there, a gentleman had just sold a very popular restaurant in the North End, right off of Hanover Street, and he was up against a ticking 1031-Exchange clock.

Sure enough, after selling an iconic Bostonian eatery, he had more cash on hand than I did and made an offer the seller couldn't refuse (while accompanied by Luca Brazi).

Just kidding about the Luca part, but even in 2005 when anyone could raise a loan amount by a hundred thousand dollars and feel confident the deal would go, it wasn't something I was going to do. The two fireplaces, fenced in yard, location location location and overall coolness of the house almost got me to bite, but cooler heads (Thanks, Sis) prevailed.

At the time, that was going to have been my first home purchase. I remember the adrenaline rush supercharging through my body after I had seen the inside for the first time, the initial phone call I made to my beloved father where I screamed 'I LOVE IT!!!', and I remember practicing how I would tell the ladies out and about in the city that I had just purchased a new home in Boston Proper.

Alas, it was not meant to be. I went back to my apartment and laid in candle lit darkness for about 48 hours before my best friend James had a 'Wedding Crashers' style intervention and remind me, aloofly, "it's just a house J".

But it wasn't. It's the equivalent, to this day, of the 'one who got away'.

Six weeks later I was outbid on a second home I had a love affair with, and began to think I'd never buy a home unless it was something absolutely nobody else wanted.

So what was the purpose of those boring few hundred words above? So I can segue into the fascinating article I read earlier tonight and referenced in the title of this entry.

"How to Best the Other Home Buyers" http://www.smartmoney.com/personal-finance/real-estate/how-to-best-the-other-home-buyers/?cid=sm_pfspend_rss&mod=smartmoney

And let me preface my actual point by saying I think my agent, who was a referral from a friend, was in cahoots with the listing agent on the first home. I won't defame him in a public forum, but he made zero attempt to get the price reduced, even in the face of some egregious lack of maintenance to crucial parts of the home. Suffice to say, I "fired him" and hired a nice little Jewish lady named Marcia Silverstein who, when it came to talking turkey, wasn't too nice. As a member of the tribe however, I loved having her on my side.

Anyway, the article linked above touches on some excellent methods regarding how a buyer can separate themselves from their competition (other buyers).

I'm only going to address two of them - the two I know work the best. Unfortunately for me, I don't know they work the best from personal experience, only professional experience.

Arrange a Phone Call From the Lender to the Listing Agent and/or the Owner

Nothing is more soothing to a jittery seller who may or may not being moving out the same day they sign than confirmation from the highest authority involved in the transaction, the head underwriter of the buyer's application. A simple 'Yes Mrs. Jones, Mr. Smith and his wife are approved and in my opinion, they will be able to sign and take title several days before your deadline' will make everyone involved feel great. The seller - barring a short sale - is seeing dollar signs and believe me, so is the listing agent!

Almost every single morsel of stress, skepticism, pessimism and fear will all but evaporate. I spent seven years as a wholesale broker and all of you would agree, that phone call from the head UW will put the listing agent, generally the most hysterical party involved, at ease. Well.........at as much ease as a listing agent can find themselves.

Set a Limit

I chose these two because they go hand in hand with one another. If you're the seller of a home, particularly a home with equity and a mortgage with a low balance or no mortgage at all, you're probably not going to try to squeeze another $6,500 out of the transaction.*

Sure some people do, but I'm enjoying writing this so I don't want to even think about them right now.

A motivated seller wants to field an offer from the most qualified borrower out there. That, my friends, is called leverage. If you're income and reserves are substantial enough - you may very well be approached with a P&S the same day you express interest.

It happened to me TWICE. I had superior credit, a 401K worth about a year of PITI, and a fantastic salaried job with, how did we say it, 'an excellent prospect of continued employment'. Both sellers jumped at the chance to sell me their beloved homes, but both times I ran into an actual cash buyer with 100K, cash on hand. Even with an approve/eligible and a full mortgage commitment, it's tough for any seller to turn that down. I don't blame them.

However, don't ever find yourself in the middle of a bidding-war crossfire. As the article by SmartMoney points out, you never know who's bidding what, and that is where the Realtors make their money. A $225K offer can become a $250K offer which can become a $275K offer all because of the mystery cash buyer ready to snap up your home the second you ask to sleep on it.

Meanwhile, the agents split five thousand dollars you didn't have to pony up in the first place. Call their bluff and dare them to act!

Mortgage applications are up this quarter, rates are down. That means one thing and one thing only: BUYER'S MARKET. In 2010 the buyer is King. Act accordingly.