Preparing for a Bidding War

by Laura Matiz 

These days, it isn’t uncommon for buyers to end up embroiled in a “bidding war” for an apartment. For most, this is an unexpected part of the buying process; a step that shows up just as the transaction seems within their reach. Over the years, I have developed tips to help my buyers manage this difficult step better. 

First, I explain to my buyers that a “bidding war” is usually a misnomer. There isn’t any bidding, nor is it a war. When there are multiple buyers with offers at or above the apartment’s asking price, the listing broker will usually request that all interested buyers submit their "highest and best" offer to expedite the transaction. The seller then, using both the buyers' offer and financial qualifications, chooses the buyer to whom to send a contract of sale.

For condominiums, it is usually all about the highest offer, but in a co-op, the process is more complicated. I break down the “highest and best” situation into two parts for my buyers.  I recommend a competitive offer that is somewhere between 7 and 10% above asking price, but only after trying to eliminate emotional factors from the offer. It is important that my buyers not turn their decision into a competition with unknown rivals. The bid should be placed only if the apartment will be a long-term purchase and the additional funds can be easily financed or covered. On the second part, I come in to make sure that my buyer’s "best" includes an exemplary profile that can make a difference when the seller is taking into account the buyer’s ability to pass the review of the cooperative’s board, some which are quite finicky. I make sure that the listing broker will not disqualify my buyer because of an incomplete or sloppy profile that accompanies the offer. Here are three things I make sure I get from all my buyers:

• A well-written, introductory letter about why the apartment and building are a perfect match for them with plenty of biographical information highlighting their accomplishments and interests. The letter must be confident but not arrogant. It also has to be believable with no exaggerations. For some buyers, this is not an easy task because it requires opening up to people they don’t know and, in the super competitive world of New York City, it seems like great accomplishments are never enough.
• A carefully reviewed financial statement with documentation for any figure that needs backup explanation. After my buyers do this review of their finances, some are grateful about gaining such a thorough understanding of their financial picture.
• A ready-and-able real estate attorney to review and expedite the contract of sale. It shows my buyer is ready to move quickly. 
  

When my buyers get selected, the effort seems worth it and rewarding, and the subsequent board package is so much easier to compile. When they are not selected, obviously, it is disappointing after all that work. But after going through this process with a customer, I find that their next search is a lot simpler. My buyers become more confident and knowledgable about the market and themselves. I also remind my buyers of one of my long-standing axioms: there is always another and better dream home.