How to win a bidding war… in Cambridge or Somerville
The Wall Street Journal ran a story a couple days ago called, “The Strangely Effective (and Easy) Way to Win a Bidding War,” where the writer, Leigh Kamping-Carder, put percentage values on how much various tactics increased a person’s odds of winning a home in a competitive situation. Here’s what she came up with, and my commentary:
Cash offers pretty much doubled the odds that a buyer would get the house (LGC: well, yes, I agree with that)
Waiving a mortgage contingency improved the odds by 57.9% (LGC: also a very strong move because it is taking the risk of your financing falling through off the seller, though not all buyers are in a position to do this)
Writing a letter to the sellers improved the odds by 52.2% (LGC: mmmm… don’t think so / not here)
So here’s the thing… whenever anyone tries to make ANY sweeping claims about real estate on a national level, the accuracy goes out the window. Every market is different. I mean, do you really think that you, as a buyer here in Cambridgeville, are dealing with the same situations as a buyer in DesMoine? Heck, you’re not even dealing with the same real estate culture as a buyer in Boston!
The WSJ article even references one big market difference when comparing Austin and San Francisco with Seattle, all of which you might assume would be similar and close to ours, since we’re all hyper-competitive tech hubs. But in Seattle, apparently 71% of the offers analyzed used escalation clauses (saying the buyer offers, for example, $10k over the next highest bidder), whereas none of the offers they looked at in Austin and SF did. (For those of you wondering, escalation clauses are SOMETIMES used here, but many listing agents advise sellers not to entertain them, so buyers are often asked to remove the clause and resubmit.)
There were some good points made in the story, though, that do apply here:
Waiving a home inspection contingency doesn’t offer a real competitive advantage because the practice has basically become table stakes — definitely true here. And to clarify what I’m saying, waiving it won’t necessarily win you the home, but keeping that contingency often knocks you right out of the game.
Fear of loss is often a bigger factor for a seller than potential gain — so sellers will often choose a less risky offer (one with the fewest or no contingencies) rather than going for the highest price if that offer contains contingencies/risk.
But getting back to the letters.
It’s not that I am opposed to them, and sometimes they do actually help a buyer’s cause — for example, if the property in question has been a beloved family home for many years. In these cases, I will advise my clients to write a letter. It may not make a difference if someone else comes in 10% higher on price, but all other things being equal (or close), it might be enough to tip the scales. In general though, I try to keep my clients focused on making the most quantitatively strong offer they can, where even if they don’t get the house, they will feel good knowing they did their very best.
You can read the full text of the WSJ article online if you subscribe (or access via Apple News if you don’t), and you can read more about how I help my seller clients evaluate offers in a post I wrote back in 2014 — The Offer Review Process: An Insider’s View.
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