Why You Shouldn’t Be Scared of Bidding Wars

Christian: [0:00] Hello, hello, and welcome to another episode of the Awesome in Seattle podcast. This is Christian Awesome with the Awesome Nossum Group.

Joanna: [0:07] Hi, and I'm Joanna with the Awesome Nossum Group

Varun: [0:10] And hey, I'm Varun, and today we are discussing something that we hear all the time from our buyers. "Hey, I like this house, but I hear that there's gonna be a bidding war, so I don't think I wanna put an offer on it."

Christian: [0:24] Yeah, and honestly, the fear of a bidding war is actually stopping a lot of people from even trying to get the house that they actually want. So we're gonna break that down and help you shift your mindset today. So let's first go over what a bidding war is. A bidding war is basically when multiple buyers want to make an offer on the same house at the same time, so they end up competing with each other. That sometimes, often, will drive up the price because you have multiple people making an offer on the same house. That, that is especially true on homes that are priced well, meaning they're priced maybe slightly under what it should sell for. That's a strategy some sellers do in order to get that bidding war and get the price to go up, and sometimes people end up paying more than the sellers ever thought they would. So in Seattle, this happens quite a bit. It's especially common for multiple offers to, to happen and a bidding war to happen within that first generally six to seven days that a house is on the market. This can feel super intimidating, and you might think, "Why am I gonna overpay? What if I lose? I'll feel disappointed. What if my offer looks silly?" Or maybe you just avoid the situation entirely, telling yourself that you're just gonna wait for a home without competition. The issue is avoiding bidding wars might actually be what's holding you back from getting that great house that you love, that you finally found, that made sense for you, and stopping you from potentially getting that house. So this episode is all about how to help you rethink that fear and show you why a bidding war isn't necessarily something that you need to be scared of.

Joanna: [2:03] Yeah. I mean, one of the biggest things we can think about here is just stop worrying about what others are doing. This, this just reigns true in so many different aspects of our lives, but especially here in the bidding war situations. It doesn't mean if you see a house that you love and you think it's priced very competitively, don't be afraid of it. It doesn't mean you have to go crazy. It doesn't mean you have to go beyond the budget you've already chosen. It is easy to focus on what you think everybody else is gonna do, but I can tell you from experience that as long as you stay true to yourself, true to your budget, you will be so much happier. You can only control what you can control, right? And you don't always have to win in the traditional sense, right? You just make a move that feels most natural and good to you, 'cause it doesn't always mean, especially if you're working with an agent that you really trust and they know how to navigate this type of- situation, it's not always the highest offer that wins anyway, right? You gotta think- Very true … outside of the box a lot of times, and a lot of times it's terms. And that's where having someone that you're working with that understands the market, that understands the different terms of what would be most appealing in different offer situations is super, super important. And it can be anything from a seller's timeline that they prefer, or what if they are okay with you doing an inspection but they just wanna keep the timeline short, but maybe not everybody understands that. Working with people who understand the market, who understand how to talk to other agents is just absolutely essential, 'cause you don't always have to just go with the highest price.

Christian: [3:50] Yeah, and you also need to make sure that your agent has a good reputation within the industry. This-

Joanna: [3:54] Absolutely … Speaker: but we've had numerous occasions where it's because they've worked with us or someone on our team, and they know that we are no drama, that we actually do what we say we're going to do, and then we actually get it done. Um- Mm-hmm … and that has numerous times been like, "Hey, you're not the top offer yet, but we want to work with you. If you do this, your client will win." And then they do win, and it's awesome. Mm-hmm. Yeah. It's so helpful just having that reputation of being in the industry for so long, 20-plus years, we can do that. One of the things that has helped me, and I'm sure both of you in the past, is just calling up and being a kind person who knows how to talk on the phone. Mm-hmm. Which shockingly sounds so simple and almost ridiculous, but it, it makes such a huge difference in a market where everybody's just trying to be fast and competitive and kind of like a snake in the grass sometimes. And when you have someone who's willing to actually speak to you and talk through certain things of your terms of your offer and what would make the most sense for everyone, and you're working together as a team that wants the best for your clients, and of course, you want their clients to be happy as well, everybody- Yeah moving towards the finish line in the most drama-free way, as you brought up, that's gonna make a huge difference.

Varun: [5:21] Yeah. And I can add, add two more things. One is the, I can't underscore the importance of open communication with the agent on the other side. I recently had an example where I was in constant communication with the agent, and I knew how to then structure my offer, uh, so that I was able to win it. Yep. That helped a lot. To have that constant communication with that agent, then they know what I'm doing, I know what they're doing. And sometimes you get some nuggets of information that you were not expecting, which helps you a lot in those situations. And the other thing is, which we talk about a lot during our class, is being pre-underwritten. Good agents help you avoid those missteps. Or being pre-approved versus pre-underwritten is a huge difference. We talk about that all the time in our class. So again, getting you ready to the point where your offer's competitive, you as a buyer are also competitive, makes a huge difference in a, in a multiple offer situation.

Joanna: [6:17] Mm-hmm.

Varun: [6:17] Yeah.

Christian: [6:17] It's so true because a lot of times too, competition is a lot less than what people assume. Like, buyers assume, "Oh, there's gonna be multiple offers. There were 10 people that asked for the seller's inspection report and sewer scope, so there's probably gonna be, like, 10 or 11 or 12 offers." In reality, it's generally, like, maybe 25 to 30% of the people that ask for the report actually make an offer. So if there's 10 people that ask for the offer, maybe there's two or three offers. Or ask for the inspection report, there might be two or three offers. Knowing that that's how that works as a buyer is super helpful. And what's the worst thing that can really happen? You make an offer- And you don't get it.

Joanna: [7:03] Yeah.

Christian: [7:04] Oh well. Like, majority of the time in our market right now, you didn't lose anything, but you gave yourself the opportunity to win the house that you actually like.

Varun: [7:15] Yeah. It doesn't, it doesn't cost you anything other than just doing a little bit of a pre-work, making sure you see the house, it meets all your requirements, and you don't have to go above the price that's comfortable for you. Right? Uh, 800,000 house, you're comfortable going up to 850, great. Don't worry about what someone else is offering. Someone else might be offering 900, but if you have a quick close, maybe that is what the seller wants. So always offer. When you don't offer at all and you're on the sidelines, you're losing out anyways.

Christian: [7:44] Mm-hmm.

Joanna: [7:44] You can always learn lessons-

Varun: [7:47] Yeah … Joanna: throughout, you know. One of the biggest pieces in, in real estate in general, there's always so much to know that we don't all know, 'cause not all of us are real estate agents or brokers, whatnot, or lenders, you know? So it's like, that's why you work with someone who does this for a living, so they can guide you through it. But the important part for the buyer specifically in this scenario is it's always scary to make your first offer too. I notice- Yeah … that's one of the biggest hurdles that my buyers have an issue with. It's like, "Well, I've heard Seattle's scary. I heard it's competitive. I heard it's fast." And it's like, well yeah, it can be those things, but that's why we're working together, because I'm gonna make it not that way for you. And guess what? When you write your first offer, even if we don't get it, you're gonna learn a lot, and it's going to just break all of the barriers down that you've put up for yourself because of what you've read, and it's just, it's gonna help you feel so much more confident. So if you by chance don't get that first house, when you get the house that's meant for you, you're gonna be like, you're gonna feel so good about it, and it- Yeah you're still winning something. And, and I think that's a very important point is like, don't be scared of the bidding wars. Um- Mm-hmm … be- because the other scenario that also plays out is sometimes people back out. The winning offer backs out. If you don't throw your name in the hat, then there is no chance for you to get that offer. My primary example is I bought my current primary that I'm living in, in 2020. I was not the winning offer. I got a call two days later after the house went pending, "Hey, the primary offer backed out. Do you still want it?" Had I not made the offer, I would have never gotten this house. Yeah. And my offer was not the highest price, but it, guess what? I was somewhere in that pecking order where I got the call. So don't be afraid. Make the offer. If in a week you like three houses, all in your price points, make the offer that works for you at each. That way you can at least make sure you have a shot somewhere. Take all the shots you can. You just need one offer to be accepted, but if you don't put in any offers, then you're just waiting on the sidelines.

Christian: [9:59] Yeah. And I wanna reiterate the point too. The majority of the time it costs you nothing to write an offer. Seller is the one that's generally, not always, but generally providing a sewer scope, providing an inspection report. And, uh, if you've come to our Beers and Home Buying class, you know that we do not want you to buy a house without seeing that. So you need to see that. If the seller's already providing it, you have lost zero dollars, 'cause you spent no money. All you have spent is some time, which you're already spending, 'cause you're sifting through the houses every single day online, and we're talking about it actively. We're going out and looking at them actively. You're already doing the hard part. The easy part is for us to write the offer. All that you do at that point is we go over it with you, make sure that we're all on the same page, and then you sign it. That's all you do.

Joanna: [10:49] And that's, that's it. It's really like- It's the time we want to take. We want to write an offer for you. We want you- Sure … to get the house that you want. We don't want you to be scared. That's why we're working with you. We wanna get you out there, get you the place that you've been looking for, and it- it's exciting.

Christian: [11:07] What that tells us, when you're ready to, and seriously thinking about writing an offer, that tells us that you are finally feeling comfortable about everything. And again, our system that we teach, that we teach you in the Beers & Home Buying Class, the system that we use is pretty different than the majority of agents out there. You should definitely come to our Beers & Home Buying Class to learn it, or just schedule a Zoom with us and we'll do a half hour. We'll go over how this works so that the majority of our clients, they don't look at a ton of houses. Like s- often, one of the first times they go out and find a house, they can write an offer and it's like they're gonna get it a lot of times, 'cause they're feel- Yeah … feel so confident and comfortable. They understand the market. They know exactly what they can afford. Not what they sh- can afford, but what they should afford.

Varun: [11:58] Right.

Christian: [11:58] Which are two different things. And it's, you just, as a buyer working with us, you're gonna feel so much more confident because as soon as a property hits the market, you know, is that a deal or is that overpriced? You know. And it's because- And I- … of that we've worked on for 20 years to refine and make better every single day, and it works.

Joanna: [12:20] I do wanna say one quick thing, that with, especially you and Varun sitting here, 'cause you are, you know, you buy homes for investments as well, besides your own personal homes. One thing that I have taken from you guys, as buying more homes than me, is that you have always said you only regret not making the offer.

Christian: [12:44] Yeah.

Joanna: [12:44] That is your regret. You've never regretted offering on a home. No. You've never regretted any of the homes that you've bought. It's always like, "Oh, we should have made an offer on that one."

Christian: [12:54] Yep. Yep.

Joanna: [12:55] And you haven't won all the offers you've made either.

Christian: [12:58] No. No.

Joanna: [12:58] But you didn't regret making it, right? No.

Christian: [13:00] Exactly.

Joanna: [13:01] Yeah.

Varun: [13:01] Yeah. And i- and if the o- offer price of the bidding war goes higher than what I'm comfortable with, I'm happy to walk away. Mm-hmm. Yeah. Because I am, I run my numbers. That's what we do with all of our clients, is we make sure we work within your budgets and we don't push you to stretch yourself. So make the offer that works best for you. A- a- and guess what? Most buyers are thinking the same way you are, and there are situations where a good house, which we expect to get 10 offers on, might end up with one, two, or sometimes none. Mm-hmm. And if you didn't make an offer, you could have gotten a screaming deal on a great house- Yeah and you just missed out on it because you didn't make an offer. Uh, so yeah, just keep the ball rolling and keep making those offers. Yeah. Don't be scared of what other people are thinking.

Christian: [13:46] Yeah. And that's the biggest thing, I think the biggest takeaway you should get from this- Don't try to guess what other buyers are going to do. "Well, I think that one, someone might pay this, so I'm gonna go up to that." No, don't do that. Do whatever is comfortable for you.

Varun: [14:05] Yeah.

Christian: [14:05] If you're comfortable making that offer, 'cause it fits still within all your budget and guidelines and all that stuff, make that offer, because you're gonna be protected. You have, most likely with writing with us, you are going to have an escalation clause. We have a whole podcast, I believe, all about this, where we talk about it. But an escalation clause, in essence, is where it says, "Hey, seller, I'm willing to pay this amount. That's the max I'm willing to pay for your house, but my offer is starting way down here." Let's just do round numbers. So let's say I'm willing to pay a million, you're asking $950,000. I'll pay starting a minimum of 950, which is what you're asking, and if anyone else makes an offer, I'll beat that offer by 5 or $10,000, whatever number you wanna do. And you say, "Hey, I'll beat whatever offer by 5 or 10 grand." Let's say $10,000. So if there's another offer and their max price is 975, even though you told the seller, "Hey, I'm willing to pay a million," you only have to pay 10 grand more than 975. So you're paying 985 That's it. So you saved- Yeah … in one world $15,000 by not paying all the way up to your max, even though you told the seller. Now, you might be thinking, 'cause this is what everybody thinks when I say escalation clause, you might be thinking, "Well, why wouldn't the seller just counter me back?" Or, "Why wouldn't they just say they have another offer at, you know, 990 so that I'll have to pay that million dollar, that price, that max price?" And it's because they have to show us- They

Varun: [15:40] can't … They

Christian: [15:41] can't, exactly. They have to show us the competing offer-

Varun: [15:44] Yeah … Speaker: in order for that escalation clause to kick in. And so we can then call that a- agent and say, "Hey, did you actually make this offer?" We verify that it's legit, and then, "Hey- Yeah … there was a legit offer here. Mine is better, so I win." Yeah. And like you said earlier, too, it's not- Mm-hmm … always the top price. We've had so many situations where we were not the highest offer, but we had the strongest terms. And those terms and contingencies, those are all things that we will talk about. So that's where you gotta come up with a game plan with your agent to really understand what makes the most sense for you. You make that offer. If you get it, great. If you don't get it, that's okay. Yeah. You gave it your best shot that made sense for you, so. Yeah. That… I wanna pivot to one quick thing. Like, uh, there is a myth that I don't wanna waste my agent's time. Yeah. Well, you're not wasting. That is literally our job. If you tell me, "I want to write an offer on three different houses," we will write an offer on three different houses. This is s- literally the part of our job. This is what we should be doing. And our job is to make sure we write the best offer for you so that we can win. And now if you win in any scenario more than one house, then we also make sure there are ways where you can get out of the offer that you like the least and you only retain the house that you like the best, right? So- Mm … don't be worried about, what will I do if I get all three? I'm not buying three houses. You won't be buying three houses. You'll buy one, and there's always clauses in there that- Mm … we write the offer will allow you to back out of those offers without any penalties.

Christian: [17:24] Exactly. Exactly. We will be there on your team. That is our job. Cool. All right. Well, I will also say one last parting thing. In my 20-plus years of doing this, I've never had a client that made an offer on a house and didn't get it l- and then later on bought a different house. I've never had them go, "Man, I, I wish I would've bought that first house and not the one that I actually got." Every single time, the house they end up getting has been like, "Oh my God, I can't even imagine wanting that other house now that I have this one." Like, you always find the one that's meant for you.

Varun: [18:00] Yeah.

Christian: [18:00] And sometimes there's just learning steps along the way, and that's just the process that you have to go through like every other buyer. Cool. All right. Any other tips from you guys before we, uh, take off?

Joanna: [18:12] No. I just say we're here. We're here to help you. We're here to help your friends if you know somebody else who's just been hanging on the sidelines, and we'd love to chat with you, see you at a Beers and Home Buying class, that's for sure.

Christian: [18:24] Yeah. Yeah. beersandhomebuying.com (opens in a new tab), and again, if you have a partner that's been on the fence about doing this, send this to them. If you have- Mm-hmm … coworkers or friends that have been talking about buying a house or whatever and they might get something out of this, please send it to them, because I think this is gonna help a lot of people. We've been meaning to make this podcast for a while.

Joanna: [18:45] Yeah.

Christian: [18:45] I'm glad we finally are because it's something that we see all the time, so.

Joanna: [18:50] Yeah.

Christian: [18:50] If you're ready to start making offers or you just wanna st- talk strategy, we are here to help. Yeah.

Joanna: [18:57] Like and share.

Christian: [18:59] Exactly. All right. So if you wanna come to one of our Beers and Home Buying classes, we talked about that a lot, it's very simple. They're free. They're only an hour. Beersandhomebuying.com (opens in a new tab). We host them all throughout the Pacific Northwest, really in the Seattle metro area, so east side, Seattle, up north, down south. We're kinda all over the place. To see where our next class is, we do at least one a month, other than December, 'cause no one shows up in December. Yeah, that is it. Thank you so much for watching and listening to this episode of the Awesome in Seattle podcast. We'll see you next time. See ya.

Varun: [19:34] See ya.

Joanna: [19:35] Bye.