It took 10 offers and nearly a year for Danielle Civello to snag her Livermore home in the East Bay’s hyper-competitive homebuying market. By the time she was done, Civello said, she knew almost every trick in the book.
Being willing to go up in price, acting quickly, getting pre-approved for a loan, writing a heartfelt letter and catering to the seller’s needs all contributed to her eventual success in October, she said.
Civello is not alone. Buyers competing over the short supply of homes on the market are using every technique available to get their offers accepted. First-time homebuyers in particular, with their relatively limited budgets, must be on the qui vive to succeed.
“The house we bought — I saw it in the morning, arranged for my husband to see it that evening, and we put in an offer the next morning,” Civello said. “When I saw it, I thought, ‘It’s out of our budget,’ but we loved the house” and decided to up the ante.
The seller was in a hurry to close the sale, so the quick action by Danielle and her husband, Mike, meshed with that goal. However, some sellers might hope to rent the house after selling it, or might only accept offers at a set time. The key is to learn how to accommodate the seller, she said.
Real-estate agents and mortgage lenders said Civello’s tactics are sound.
Price is the predominant consideration
“It’s a combination of things that all add up,” said Tania Balazs, an agent with Marvin Gardens Real Estate, a brokerage that focuses on properties in Berkeley, Albany, Kensington, Richmond and El Cerrito.
Balazs said price is typically the predominant consideration.
“The higher the price you can afford, the higher your chances are of getting (the property),” she said, a point echoed by other agents.
“Unless you have unlimited money, you are not necessarily getting your dream house,” said Deidre Joyner, an agent with Red Oak Realty. “Price is the biggest factor.”
Joyner said a common ploy is for agents to underprice properties in hopes of starting a bidding war. She tells her clients not to focus as much on the listing price but rather to consider how much comparable neighboring properties sold for recently.
Jennifer Lucas, an agent at Pacific Union Orinda, said, “The standard is that you need to come in 20% over the asking price,” though she doesn’t necessarily endorse the tactic.
Getting pre-approved for a loan is another standard tactic.
After looking at 80 properties, Pierre Turpin successfully bid on a house in Berkeley’s Lorin neighborhood near the Ashby BART station, closing the sale three weeks ago.
Turpin agreed that price was the ‘number one’ factor, adding that another critical factor was the ability to get financing.
“I worked with a lender who underwrote me,” said Turpin.
“You want to be pre-approved for a loan,” said Nicole Donn, a mortgage lender and branch manager of U.S. Financial Mortgage Lending in El Sobrante.
“’Pre-qualified’ means I’ve just looked at your paperwork, but haven’t put the loan through,” Donn said. “’Pre-approved’ means we put our computer through to Fannie Mae or Freddie Mac’s and got approval.”
Getting pre-approved is a rigorous process, involving filling out a loan application, submitting to a credit check and showing proof of employment, among other things.
With pre-approval, “the buyer has submitted pay stubs, bank statements, tax returns, and it is almost certain the loan will go through” unless some major crisis occurs, such as the buyer losing his or her job, or the property not appraising for the sale price, Donn said.
“If you are not paying cash, it is essential,” she said. “If you are paying cash, you should have proof of funds” such as a bank statement to get your offer accepted.
Waiving contingencies a common tactic
One of the most common tactics is waiving approval of contingencies, such as the appraisal contingency. Agents said this is a major factor in getting an offer accepted, but cautioned that it’s dangerous.
Balazs noted, “I don’t recommend waiving approval in all circumstances.”
With appraisals, this is because if the property appraises for less than the purchase price, the buyer must have the funds to make a bigger down-payment, she said. In extreme cases the buyer might have to walk away, losing his or her deposit.
“Only do it if the buyer has the financial means to make up the difference,” Balazs said.
Waiving the appraisal, loan and inspection contingencies must be determined on a case-by-case basis, she said. Because buyers are up against heavy competition, they may be willing to waive contingencies to help get their offer accepted, but the consequences could be less than optimal.
Waiving the inspection contingency means that even if defects requiring costly repairs are discovered, the buyer cannot back out or demand a price reduction.
Another approach is to introduce prospective buyers to the seller in innovative ways.
“I do a video submission,” said Lucas at Pacific Union Orinda. “It’s the best way to capture who that buyer is. The seller can take a look at the family, the people who are going to be living there.”
The tactic worked for Lucas’ clients Josh and Elizabeth Brown, whose offer on a Pleasanton home was accepted Easter Sunday.
The two propped up their iPhone, started recording, then settled on the couch with their 17-month-old daughter “and let them (the sellers) know why we loved the house and the neighborhood and how important it was to us to be in a neighborhood that was safe for our daughter,” she said.
The sellers watched the video “and it was the deciding factor,” Elizabeth Brown said.
The house listed for $938,000. “We got it for $950,000,” she said. “We were ecstatic.”
Tactics like video messages, or the more common approach of writing a letter to the seller, are seldom the decisive factor, experts said, though if all other things are equal, they could tip the scales.
“Sellers who lived in the house and would love to see a sweet little family move in” are apt to be swayed, “but if it’s a flipper, they just want the highest price,” Donn said.
Civello said she submits a personal letter with every bid.
“We are human, and as much as we want to believe money is what drives everything, our hearts do, too,” she said. “We said we were looking forward to the day we could have the whole family over for Thanksgiving with our two sons.”
They moved into their new house in October.
“So we did get to have our Thanksgiving,” Civello said.