When inventory is low, and potential buyers outnumber sellers, demand far outstrips supply. This situation is called a “seller’s market”, a market in which the seller has the power. This is bad news for buyers generally, but it’s particularly difficult for people trying to move up, those that need to sell their current house before they can buy something new.
Unfortunately, the Bay Area often finds itself in this position. Unfortunate for buyers, that is. Sellers are, of course, thrilled at the prospects of a tight real estate market, as they can nearly name their price.
In a seller’s market, quality homes often get multiple offers, allowing the seller freedom to choose the best offer they can get.
This frequently leads to bidding wars. Contingent offers generally aren’t attractive to sellers due to their inherent uncertainty, and so these offers are often rejected in favor of a more certain sale. So what can you do if you find yourself in this situation? Plenty. But you need to work with the right agent and use the strategies I detail below.
Avoid Contingent Offers Using Bridge Financing
Bridge loans allow you to use the equity in your existing home as a down payment on your new home. If your existing equity allows your bridge loan to pay off your existing mortgage, then you’ll be free to make non-contingent offers. The bridge financing allows you to sell your home after you’ve purchased your new one, instead of the other way around.
Bridge financing can be risky, however. If you don’t sell your home in a reasonable amount of time you could be faced with paying your new mortgage as well as the full payment on your bridge loan, plus interest, which could lead to default. However, bridge financing works well in tight markets because once you’ve purchased your new home and are ready to list your old home for sale, you can be fairly certain that it will sell fast. In this case, the seller’s market works in your favor.
Focus on Off-Market Properties
One great way to avoid a bidding war is to focus on properties that haven’t officially entered the MLS system, and therefore are mostly unknown, except to particularly well-connected agents.
Over the years, my team and I have built an extensive network of agents, past clients, personal contacts, and cultivated opportunities, and these relationships allow us and our clients access to some very choice properties before they’ve been listed officially.
In Silicon Valley, focusing on off-market properties gives you breathing room, and the freedom to make contingent offers without the fear of being immediately outbid by competition.
The Right Agent Can Make All the Difference
If you find the house of your dreams, and it’s on the open market, don’t fret. There are still things you can do.
Make sure that you’re working with an ambitious agent that moves quickly and communicates well with both you and with listing agents. A personable, likable agent that communicates clearly and builds a strong rapport with listing agents can do quite a bit to ingratiate you with sellers. A seller that likes you or that likes your story is more willing to entertain a less than perfect offer.
An agent that’s a strong negotiator, without being overbearing, and one that thinks deeply into real estate market strategy is critical when you’re forced to make contingent offers in a tight market. You’re unfortunately starting from a position of weakness, and so you need a powerful ally in your corner to help make up the difference.
We can be that ally for you. My team has extensive experience in the Bay Area and what it takes to move up in this market. Give us a call today so that we can discuss your situation in greater detail. We look forward to speaking with you!