The low supply of homes for sale in many resort markets means buyers must be
prepared for bidding wars. Buyers should be strategic in how they present their
offers, to avoid paying too high a premium for their "perfect"
property. Obtaining written confirmation of pre-approval for a mortgage is a
must. Sellers looking over multiple offers will discard
those on which financing is not assured.
In highly competitive markets, where bidding wars are now the norm,
buyers should look in a price range slightly below their maximum in case they
have to bid up. The question is: How
much do you overpay and how quickly will you recoup that premium?
Making that calculation can be difficult. Most agents advises buyers not to overpay by
much if they plan to stay in a property for only a few years. Agents usually
strike a verbal agreement with the seller's broker that their clients will be
given a chance to counter in the event of a competing offer. Many agents now in many markets are formally
inserting that option into their offers in the form of what is known as an escalation
An escalation clause stipulates that a buyer will increase a bid by a set
increment — say, $5,000 — if the seller receives a legitimate higher offer. The
clause sets a cap on how much more the buyer will pay. Buyers should not set
the cap higher than they can comfortably afford if they are relying on a
mortgage lender, because the bank will not lend more than the amount on the
Other ways countering multiple bids is structuring offers with as few
strings attached as possible, depending on the buyer's circumstances. For
example, buyers who have the liquidity to back them up might waive the usual
mortgage contingency, which provides an out if the buyer cannot obtain
financing. They might also provide the seller with proof of their liquid assets
as an extra assurance. Buyers with an
existing home might opt not to make the deal contingent on the sale of that
home — that is, if they can afford the risk of carrying two mortgages if their
home does not sell right away. Similarly,
the buyer's agent should get details on the seller's needs, then try to work
those into the offer. Have they already selected another property? And, do they
need to close quickly or later? "Being
accommodating to the seller can sometimes make a difference,"
Finally, in rare instances, a personal plea, in the form of a letter, might
do the trick. Some sellers are so emotionally invested in their property that a
buyer expressing a similar appreciation can win them over, there are those
eccentrics for whom money is perhaps a little less important.
—By Lisa Prevost, The New York Times