The Housing Scene by Lew Sichelman


You should never be afraid to make a low-ball offer on a house. But when you know there will be competing bids, that tactic is off the table.

Instead, you've got to work with your agent to come up with your absolute best offer. Remember, others will be doing the same, so you want your offer to be perfect in every way so that it will stand out above the rest.

First, remember that everything is negotiable. Everything! Try to figure out what is important to the seller and use it to your advantage.

If the seller is proud of the beautiful dining room chandelier, offer to let him take it with him. If he says he hasn't found another place to live yet, or his newly built house won't be ready for three more months, give him that time by offering to delay closing for up to 120 days. Your willingness to give the seller the extra time he needs may just be the deciding factor in whose bid he chooses. Alternatively, you could offer to close quickly, and then rent the place back to him until he can move out.

The more you bow to the seller's side, the better. For example: Don't ask the seller to pay for any of your closing costs, or even the amount that is customary in your market.

A somewhat controversial tactic is to attach a personal letter -- maybe even a family photo -- to the offer. It should be handwritten, not typed, and tell the seller how much you love the house and how well you would take care of it. Some sellers have been swayed by this maneuver, even taking lesser offers because they believe the house they love -- the house they really hate to leave -- will be in good hands.

But on the flip side, if the seller knows how badly the buyer wants her place, she might play hardball and refuse to negotiate. In other words, the letter could backfire and put the buyer at a distinct disadvantage.

Say, for example, the seller accepts an offer with a personal letter attached, and a subsequent home inspection finds several issues that must be addressed. The buyer may be willing to bargain on these items, but the seller might not budge, knowing how much the buyer wants the deal to go through.

A few other tips:

-- Escalate. If you really, really want the place, considering adding an "escalation clause." With this tactic, your offer says that if anyone beats your bid, you will up the ante by a certain amount. So if a competitor offers, say, $250,000, you will automatically go to $250,100.

A hundred bucks may not be enough to save the day; $1,000 may be a better figure. Be careful, though. It is wise to set an upper limit in these clauses. Realize, too, that if your bid goes too high, the property may not appraise for what you're paying.

-- Clean your offer. To catch the seller's eye, make your offer as clean as possible: in other words, no contingencies. Don't, for example, make your offer dependent on the sale of your present residence.

There are two clauses you should keep, though: (1) A clause that makes the deal dependent upon your ability to obtain financing at a certain amount and/or interest rate, and (2) A clause that makes the sale contingent on a satisfactory home inspection. Both of these are your "get out of jail free" cards if you should get cold feet.

If you do decide to give up the financing contingency, at least attach a letter from your lender showing you are cleared for funding, and attach a proof-of-funds statement.

But think twice about dropping the inspection clause. The house may look great to you, but it takes the trained eye of an independent home inspector to determine whether you are buying a pig in a poke. If he finds that the roof must be replaced, or there's a hidden leak in the basement, the inspection clause lets you change your mind and move on to the next house.

You might ask the seller if he had a pre-inspection done before listing the house, and ask to see it to ease any concerns you may have.

-- Beef up your earnest money. Don't just attach a $1,000 check to your offer. Bump it up to $2,500 or $5,000, or maybe even $10,000. This shows you are dead serious. It does make it more difficult for you to shop elsewhere because your cash is tied up in this house. But the money counts toward your down payment anyway, so it's no big deal if this is the place of your dreams.

-- Be their backup. If your bid comes in second, all may not be lost. Ask the seller to hang on to your offer as a backup contract. You never know what's going to happen: The other guy's deal may fall apart, and if it does, yours will rise to the top.

If you are fortunate enough to be a seller on the receiving end of multiple offers, you are not necessarily stuck choosing one offer over another. There's still room for negotiations, and you're in the driver's seat. For instance, you might inform them that you are dealing with more than one offer, and request that all wannabes come forth with their highest and best bids by a set time.

Also, realize that price may not be the determining factor. Terms also are important. If a buyer offers to pay your share of the closing costs, for example, it might seal the deal because the overall amount -- price plus closing costs -- may net you the most money. Or, if the best offer in dollar terms also requires you to replace the roof, you can defer to the next-best bid, which has no such requests.