In 2023, we had 527 single family home sales in Greenwich CT. Of those sales, 271 or 52% went for full list or over list price. Most of these, and others that sold for under list price, were multiple bid situations. That was certainly the case for my brother, Russ, and I, the majority of our contracts our clients signed, both on the sellers’ and the buyers’ side, were for over list. There was just too much demand for the small amount of inventory that we had.
OK, if you want to get technical, the Julian Curtiss district had the highest average sales price at $8.2 million. However, if you take out the sale of Copper Beach Farm for $138 million, the average sales price for the Julian Curtiss district falls all the way down to a second place of $4.5 million. Both the Parkway district (north and south of the Merritt Parkway) and Julian Curtiss (downtown Greenwich, Milbrook and our 3 gated Long Island communities) did very well in 2023, but we just didn’t have as many bidding wars over $4 million as we had under $4 million.
Being the Winning Bidder in a Multiple Bid Situation
So how does a buyer get an advantage in a competitive bidding situation in a tight market? The short answer is to be better prepared than your competition and move faster than they do.
Build a Team Early
Everyone knows to get a good Realtor when they buy a house, but if you want to be the winning bidder in this market either have more money than the other bidders, and be ready to spend it or have really good Realtor. The idea of having more money helps, but remember this is Greenwich, where someone always has more money than you do. So when you get involved in multiple bids make sure you have the best team you can put together.
If you are going to need financing, talk to a mortgage broker or banker early, even before you start looking. Meet with them and build a relationship. Very few financings are pro forma today and you’ll want a banker who will go to bat for you to move the process along.
Most buyers don’t think about a real estate attorney until after their offer has been accepted. Be prepared and find your attorney early. Let him or her know your level of experience and that you’ll probably need a quick turn around on the buyers’ contract rider.
Building inspectors can also be a big help, because speed is crucial. In a competitive bidding situation, you may only have a day or two to inspect the property. The only thing worse than coming in second in a bidding war is winning the bidding war only to get a house with problems.
If you are selling your own house and you need the funds from that house to close, consult a tax attorney or accountant now to see just how much the taxman taketh and ways to minimize that take.
On top of the traditional long term capital gains tax, if you’ve owned your house for more than a decade you are likely to find there is an additional 3.8% Medicare tax on gains. The rules are complex, but if you have a significant gain in your present house, you may face a bigger tax bite than you thought, so get that out of the way well before you put in your first offer.
If you are going all cash, talk to your investment advisor, stockbroker or banker and see just how fast you can marshal a 10% downpayment. Sometimes, when there are just two or three bidders, the winner can come down to who can write a check, or now days, wire the funds faster. A day or two can make a difference and I’ve seen it come down to hours.
A month or so, before you make your bid have your mortgage broker or banker pull your credit and check for any problems. Also, the beginning of the process is the time to fix your credit score rather than when your entire loan hangs on getting your credit score a few points higher. Fix the problems, that are fixable with your credit.
Next, get not only pre-qualified, but pre-approved and not just pre-approved, but underwritten pre-approved. Underwritten pre-approved means that the bank has done everything necessary to approve your loan for a house except the appraisal on the house. A pre-approval letter and shorter mortgage contingency goes a long way when bidding against someone who only has a pre-qual letter. Being underwritten pre-approved also diminishes the advantage that another all-cash bidder has.
If there is some way you can do an all cash purchase great. An all cash offer in a competitive bid situation can move you to the top of the list and often reduce your purchase price by $10,000 to $20,000 for deals under $1,000,000 and by as much as $50,000 or more for deals under $2,000,000. Consult with your team before you do this.
You may want to make an all cash offer even if you are going to finance the house later. Letting the bank pay for part of the purchase price frees up your cash for other things. Buying a house is one of the few things where a bank will give you loan to value ratios of 80% and even 90%.
If you do want to do post-purchase refinancing check with your advisors. Post-purchase can be tricky and may affect your taxes, so check this option out first. The time to do that is before you saddle up and go looking for your dream house.
Also, a high price is good, but if you want to be in your new house in two weeks and the sellers can’t find a new place and arrange a move for two months, your higher, all cash offer, may be DOA. You want to match your non-cash terms to your seller’s needs. Money doesn’t always talk when dealing with someone’s home. You want to make the best offer, which isn’t necessarily the highest offer. This is one place where a very good agent can save a buyer a nice piece of change.
Third, be available. If you are a couple and one of you can’t always take phone calls, what about email or texts? Whenever possible whoever is most available should be able to make decisions for both. Discuss various options in advance so you are both comfortable with this.
Also putting in a bid and going on vacation on a trip is a not optimal. Often, an hour or two or even minutes can make the difference in whether you get the house. Making decisions and responding in minutes gives you a big advantage over the competition that can’t get back to the seller until tomorrow. Scuba diving or a round of golf on vacation could cost you the house you want. You can vacation after you sign the contract.
Fourth, be flexible and reasonable. Don’t let a minor deal point or an item worth a few hundred dollars become an ego issue. Work with your team to come up with other options, particularly when the other side is being unreasonable. Don’t yell and scream. The seller has lived in your house-to-be for years and knows all your new neighbors. You want to arrive in their good graces.
Fifth, be human. Let the seller know why you like their place and what it will mean to you and your family to live there. Also try to connect with each person you deal with; don’t become just another case number.
Lastly, have fun. How often will you get to do this? With a good team you’ve got people to talk with. Even if you lose out the first time around you will have gained valuable experience. You will get a house and often a better house at a better price.
Mark Pruner is a sales executive on the Greenwich Streets Team at Compass Connecticut, he can be reached at 203-817-2871 or at mark.pruner@compass.com.
