Over my 41 years in this business, I’ve seen a few major cycles to the real estate market.  The one we’re in now appears to have some legs to it that will make home prices continue to appreciate for a few more months and maybe longer.  While this is an opinion, it is an opinion based on the undeniable numbers of supply and demand. 

For example, we’re seeing the Market Action Index (you can sign up to get the index for your own area here, just scroll down below the “best tips” video you will see on this page) in Palos Verdes Estates more than double the threshold for a “Seller’s Market”. 

What that means is that for well priced listings, or those listings that are intentionally underpriced for the blossoming of multiple offers, is that multiple offers will continue.  That begs this question…

What are the Strategies to Win the Offer Bidding War for Palos Verdes Homes?

Lender Issues:

If you’re not a cash buyer, get your offer to mimic as close as possible, the benefits to a seller of accepting a cash buyer.  Sellers tend to favor cash buyers for the simple reason that there are fewer contingencies to the transaction.  Since there’s no loan, there’s no financing contingency and there’s no appraisal contingency.  There are two ways, one riskier than the other, to mimic these benefits.

1. Find a lender (I know of one that will do this, so use the “contact us” button at the top of the page to ask me) that will fully and completely underwrite your loan and state that in a loan commitment preapproval letter.  I’m not talking about the run of the mill “preapprovals” that when looked at closely, have so many outs for the lender to not approve your loan, the letter they write is worthless.  No, what I’m talking about is a “you’re done, you’re approved, you’ve got the loan” approval from the lender’s underwriter so that you can remove the loan contingency at the time of presenting your offer. 
2. The other method is riskier and that’s to simply have so much confidence in your ability to get the loan approved, that you take the risk of removing the loan contingency.  This means of course that if you can’t get the loan for whatever reason, the earnest money deposit you made when your offer is accepted, is forfeitable. 

Appraisal Issues:

The other step to mimic a cash offer is to remove your appraisal contingency.  Please allow me to manage your expectations here. In a market that has been appreciating like that of Palos Verdes homes, because appraisers are looking backward in time at “competitive sales” that would, were they for sale now, sell for more than what they did even just 3 months ago, a large percentage of appraisals are falling short of the purchase price negotiated between buyer and seller.  With multiple offers, do you really think it’s realistic to expect the Seller to drop their price that they had agreed to when opening escrow?  Of course not.  And if you insist, you’ll get kicked to the curb and they will go to the next buyer in line who is just hoping that you will fail in your attempt to buy the house.  Removing the appraisal contingency means that you will add cash to the deal to cover the gap between the appraised value and the purchase price you agreed to pay the Seller.  In anticipation of that, make sure you are able to document “proof of funds” when presenting your offer to the seller.  Savvy agents are aware of these low appraisals and will look at your bank statements (more on this in a moment) to make sure that not only do you have enough cash for closing costs and the down payment, but also an additional 5-10% of purchase price to cover a “short appraisal”. 

Inspection Issues:

The other big contingency in transactions these days is the inspection contingency.  I would never recommend removing the inspection contingency.  However it is true, especially on fixer uppers for which the buyer is planning on gutting the house for renovation and for whom it doesn’t matter what a home inspection says as the buyer is going to be massively remodeling anyway, many buyers, to make their offer attractive, ARE removing inspection contingencies.  Mind you, they are still conducting inspections, they’re just not making them a contingency of the transaction.  As I said though, I would never recommend removing this contingency.  I would recommend shortening the “boiler plate” period of time written in the standard Residential Purchase Agreement of 17 days down to 5-7 days.  After all, if there’s good news, let’s know fast and if there’s bad news, let’s know faster. 

Bona Fides Issues:

I mentioned above “proof of funds”.  Look, the whole point here in getting your offer accepted in a multiple offer situation, is to make the seller perceive  you’re the safest, most reliable, easiest to work with buyer of the bunch of buyers offering.  I discussed the preapproval part, and in addition to that, in order to create “peace of mind” in the seller, is proving your bona fides.  Make copies of sufficient bank statements (redacting your account  number of course) showing you have the cash equal to the purchase price plus closing costs (if you’re buying for cash) or equal to the down payment plus closing costs plus cushion for a low appraisal.  This might seem invasive of your privacy however, bluntly, tough.  You have to do this.  Your offer won’t see the light of day unless you’re willing to document your ability to close the deal.

Price Issues:

What of price?  Many Palos Verdes homes are selling over list price.  At the time of this writing, of the 241 houses sold in the last 90 days, the selling price was an average of 1.72% over list price.  Let me break this down for you better.  You can see from the chart below, that most of the sales are in the $1,850,000 – $3,700,000 price range.  And for this price range, Palos Verdes homes are selling for an average of 4% over list price.  You should seriously consider offer significantly over list price for well priced or intentionally under priced homes.  I’m sure you will want to resist this advice, that’s natural.  I would resist too – we all want to negotiate the best deal possible for ourselves.  However, if you’re like most people, you will have to lose two or three times to other buyers before you realize, that’s the way it is in today’s market.  As the ancient Greeks said, “hey, don’t kill the messenger”. 

Escalation Clause Issues:

A discussion on offer strategies wouldn’t be complete if we didn’t discuss “escalation clauses”.  This is a technique that doesn’t often work, but we have to talk about it.  An escalation clause is worded something like “Buyer will pay a price $10,000 higher than the highest price offer up to a limit of $x,xxx,xxx”.  Here’s why, when I’m working for a seller, I don’t like escalation clauses and encourage my seller to counter them out of a transaction.  Let’s say we’ve intentionally underpriced a home at $1,950,000 that we know has a market value of around $2,150,000.  Let’s further assume that we get 7 offers from $2,000,000 – $2,100,000 and an eighth offer at $2,000,000 with a $10,000 escalation and a limit price of $2,110,000.  What if the buyer with the escalation clause was willing to pay $2,150,000?  What if one of the other buyers after getting a counter, is willing to pay over $2,150,000?  As a seller, accepting an escalation clause may limit the price you could have achieved for your home.  And what if more than one buyer uses an escalation clause?  Then how do you figure who has the highest price offer?  It’s almost like trying divide a number by zero; it’s impossible.  Or what if the seller wants to take a lower priced offer because the terms (elimination of contingencies) are more attractive to the Seller?  Escalation clauses can be very, very messy and cause legal issues which could be totally avoided.  Rather, just plan, as a buyer, to come in at or close to your last, best and final offer price and terms.  Make it easy for the Seller to say “yes”!

Is there a way to avoid multiple offers by getting to potential sellers of Palos Verdes homes before their properties are active on the Multiple Listing Service?

Yes, there are a couple of different ways.  But before we get into this, I found a really funny video to keep things light, that you’ll appreciate. Just scroll down to the bottom of this page.  If you don’t see the humor in this, I probably am not the broker for you. 

Coming Soon Listings:

“Pocket Listings” are pretty much outlawed now by virtue of the “Clear Cooperation Policy” instituted by the National Association of Realtors.  In my opinion, this is a good thing as many agents were greedy and trying to get the commission from both sides of the deal.  They would try to “hide” their listing from other agents and attract therefore their own buyers to sell the property to.  This new policy prohibits this and their are financial penalties for agents that break this rule.  An agent can list a “coming soon” listing and what this means is that the property goes on the Multiple Listing Service however showings are not allowed.  BUT you can make an offer on such a property; perhaps your offer will be good enough to persuade the seller to forego changing the status of the “coming soon” listing to “active” which would then allow all other buyers to see the home.

How can you view Coming Soon listings online?  Many public portals such do not display coming soon listings.  Mine does.  And the added benefit to using my site over other sites that do display coming soon listings is that I don’t share or sell your information with anyone at any time.  Your search is private.  Other sites are predatory and sell your information to multiple agents and advertisers on their portals.  At the bottom of this page, are all the coming soon listings of not only Palos Verdes homes, but also Redondo Beach, Hermosa Beach, Manhattan Beach, South and West Torrance and Coastal San Pedro homes. The list below will update automatically each time you visit this site, so you should probably save this link.  Or, use the “contact us” button above and you can request of me to create a customized “coming soon” link for you to use specific to your own personalized search criteria.

Trade Secrets Method

There are two other really good methods to get to these potential sellers even before they list their homes for sale and these two strategies I’ve been using for my clients with great success.  No, I’m not going to divulge trade secrets here; however, you’re welcome to contact me.  Again, use the “contact us” button at the top of this page to schedule a time for us to talk about this.