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The Sneaky Way We Won a Bidding War (and Beat 3 All-Cash Offers)

February 4, 2020


Here’s one of my favorite stories to tell as a real estate agent, about a young family who achieved what many assume is impossible. Saddled with a mortgage and other baggage, they were nonetheless able to win a bidding war—against three all-cash offers no less—and get the house they wanted.

All-cash offers are typically preferred by home sellers since they’re pretty close to a sure thing. Without the need for a lender to approve a mortgage, the deal is all but guaranteed to go through.

As an agent in a competitive real estate market like San Francisco, I notice that everyone thinks people are buying homes with all cash. This isn’t always true, but nonetheless, this myth tends to scare off buyers who need financing from even trying to compete.

However, I can tell you from personal experience: It is entirely possible to beat an all-cash offer, even if you have a mortgage and other strikes against you. How? Allow me to explain.

Why all-cash offers in real estate rule

My clients—a married couple employed by two prominent tech companies in Silicon Valley—were looking to buy a condo. Upon meeting them, it was immediately clear that they had done a ton of research on the home-buying process and therefore were confident in their ability to purchase.

But in my mind, they were overconfident. They’d never purchased a home before, much less in a competitive market such as theirs. Nonetheless, it was obvious that they wanted to call the shots, so I positioned myself as an adviser rather than a team leader.

Our first offer was for a $1,299,000 condo in San Francisco’s Mission Bay neighborhood. We submitted an offer of $1,150,000 along with a pre-qualification letter from their bank.

It was swiftly rejected.

After this initial attempt, we regrouped. I suggested that we go through the mortgage pre-approval process, and then take it a step further: to have their financial position analyzed and fully underwritten. That way, we could more easily compete with the all-cash offers that were likely rolling in.

Unfortunately, impatience persisted on their end, as another condo in the same building had a rapidly approaching offer date. The listing agent met with my clients during a tour, and pressed them to get their offer ready as soon as possible. We replicated our previous offer, and were promptly rejected, again.

My clients were beginning to think I couldn’t get the job done for them, and I had that sinking feeling in my stomach that I was about to be fired. The signs were all over their faces. Still, they reluctantly agreed to get pre-approved. We finally stood a fighting chance.

Our third offer was a Hail Mary for a beautiful loft that caught my clients’ eyes and hearts. Although it was slightly out of their price range, my once intensely calculated and controlled clients turned into emotional buyers. They loved the place. When we couldn’t come up with the asking price the sellers were looking for, they were devastated.

At that point, my role changed from adviser to counselor. I knew a level of raw emotion would break barriers and allow for trust to be built. I consoled the couple and ultimately showed them my true position: I was on their side in every way. That level of respect ultimately led them to heed my advice and take the extra time to get their financing underwritten.

The underwriting process took two weeks. Once it was done, we submitted our fourth offer, this time on a two-bed, two-bath condo. We learned there were three cash offers already on the table, and that we weren’t the highest bid—another buyer was offering $20,000 more.
To strengthen our position, we used an (occasionally) effective tactic of writing a “love letter” to the homeowners. I felt we had an emotional story to tell, especially considering they had a baby on the way.

It turns out that the sellers had raised their first child in the same condominium. They connected with us, and wanted another family to have the same experience they had in the home. Empathy, rather than logic, kicked in. Against all odds, we won the place.

How to beat an all-cash offer

So how, exactly, did we beat three all-cash offers—including one for more money?

It’s important for buyers to understand the difference between a pre-qualification, pre-approval, and a fully underwritten pre-approval. In order to beat an all-cash offer, you have to put the time in upfront and be as watertight as possible with your financier’s backing from the moment negotiations begin.

What is pre-qualification?

Pre-qualification is the most surface-level document your lender can give you. It acknowledges that the bank has received all of your self-provided information either verbally or through an online loan application. The problem with a pre-qualification is that the bank hasn’t been provided with any official documents to verify income or assets.

A listing agent (representing the homeowners selling their property) is well aware of the looseness associated with a pre-qualification letter and would likely advise his or her clients that the guarantee of cash makes more sense.

What is pre-approval?

This is the next tier of assuredness. The difference between a pre-approval and a pre-qualification is that, with a pre-approval, income and asset documents have been provided and reviewed by a lender. Most buyers using financing submit an offer with a pre-approval in hand, as most listing agents require one to even consider an offer.

The pre-approval still has holes, however. A review of financial documents is only as good as the person reviewing them. Sadly, many lenders either don’t know how to review these documents in detail, or they do a cursory review.

The reason listing agents prefer cash is because lenders are the biggest variable in the transaction. So it’s crucial you choose the right one.

Most buyers’ hesitation in getting pre-approved, or even pre-qualified, is that they don’t want to have an inquiry on their credit report that could affect their credit score. However, a mortgage inquiry doesn’t have the same impact on your credit score as a credit card or auto loan.

In fact, in most cases the scores aren’t affected at all. You can have multiple mortgage inquiries within a 30-day period and not take a score hit. The system is built this way.

I always advise people to interview at least two lenders from different banks, since a loan is so much more than the interest rate and points. The lender you work with digs through some very personal information. Having a high level of trust and respect for the individual doing that is paramount.

The holy grail of financing guarantees

A fully underwritten mortgage pre-approval is the third and highest tier of security in a financed offer. If a bank has gone through the process of underwriting the loan, it basically means the loan amount is guaranteed, based on income, assets, and credit.

Consequently, these buyers have the green light to purchase the home they desire.

A fully underwritten pre-approval also allows you to close much faster, since 90% of the work has already been completed by the bank. A savvy buyer’s agent will position this type of financing exactly the same as a cash offer; since the money is guaranteed, the playing field is leveled.

The underwriting process takes time upfront—anywhere from a few days to a few weeks, depending on the complexity of a buyer’s financial position. But it gives a buyer an incredibly strong negotiating position, especially in a hypercompetitive market.

The post The Sneaky Way We Won a Bidding War (and Beat 3 All-Cash Offers) appeared first on Real Estate News & Insights |®.

Lessons From Listings Photos: Cosmetic Changes Transform This Edgy S.F. Victorian

October 16, 2019

It doesn’t matter how perfect your home is—if your listing photos don’t stand out, potential buyers won’t come by to take a look. In our series “Lessons From Listing Photos,” we dissect the smart updates sellers have made to their homes, and how their listing pics highlight the home’s best assets.

Not every home needs a major renovation to make a profit, and this gothic San Francisco Victorian property proves just that. It was built in 1908, and its architectural charm was still very much apparent when it was purchased in 2016. Just a few simple cosmetic changes made all the difference, though—helping the sellers to rake in a profit of $650,000 when they unloaded it just three years later.

So how did the sellers make such a tidy profit without knocking down any walls? We went to our experts to find out exactly what changes made the biggest impact—and how you can apply the lessons learned to your own space.

Bedroom (before)

lessons from listing photos
The bedroom before was basic.

Bedroom (after)

Now the bedroom is edgy and fun.

Before renovations, the bedroom was nice, but very basic. This space was calling for more.

“The bedroom before just felt … blah. And now has a total cool vibe with a deep denim blue on the walls and a trendy neon lit skeleton art piece,” says Nisha MacNeil, design manager at Kerr Construction & Design. “The designer mixed decades, with ’20s mirrored furniture, traditional bedding, and a midcentury chair and rug.”

The biggest change in this room is definitely the paint color, and the designers approve.

“This room didn’t need a ton of work,” says designer Katie Stix, partner and design director at Anderson Design Studio. “The blue wall color was a very simple way to make a huge difference. Painting a darker color below the molding lowered the room, making it feel more grounded instead of a huge white expanse. You can appreciate the beautiful molding more with the contrasting colors.”

Great room (before)

great room_before
Before, this space was trying to be too much.

Great room (after)

great room_after
Simplifying this space made it much more functional.

The freshly painted navy blue fireplace anchors the room, and other small pops of color vastly improve the look of the space.

“The all-white look is just fading out, in my opinion,” says Tiffany Fasone, owner and CEO of Voila Design Home. “The new arrangement and furniture choices add more life to the room. The midcentury modern dining table and chairs also make the beautiful floors stand out more.”

Stix reminds us that sometimes, just changing furniture can totally change a room.

“The dark dining chairs define that space,” she says. “And simply removing the lounge chairs across from the sofa make it feel like two separate spaces instead of a sea of chairs.”

“This space has far more impact now with its contrasting elements, versus the very monochromatic scheme it had before,” adds MacNeil.

Kitchen (before)

kitchen_before (1)
The previous kitchen was bright, but boring.

Kitchen (after)

kitchen_after (1)
The new kitchen is a much more fun place to cook.

Some of the changes that happened in this kitchen go against the usual rules.

“Removing storage is usually a big no-no. And going from bright and airy to dark and industrial is rarely heard of,” says Paul Trudel-Payne, founder and creative designer of Casa Consult+Design. But rules are made to be broken, right? Trudel-Payne wholehearted supports the changes made in the kitchen.

“Metal counters, dark base cabinetry, open shelving storage throughout, and even the small sconces about the sink play up the new effortlessly chic lifestyle they have created,” Trudel-Payne says. “It showcases a home with true originality.”

Thankfully, the original layout of the kitchen was sound, so all the sellers had to do was put in their personal touches.

“The designer simply removed the upper cabinets in favor of oak floating shelves and a new marble backsplash,” says MacNeil. “This instantly lightens and updates the space. Then by painting the lowers a deep blue and adding new hardware, the space is instantly refreshed!”

“I love the change from white to navy cabinets,” adds Fasone. “It adds more depth and dimension to the room.”

Parlor (before)

This space started out as a boring bedroom.

Parlor (after)

It has found new life as a popping parlor.

As you can see, what started as a bedroom is now a parlor. Located on the first floor, this room is actually adjacent to another sitting room, meaning that all the bedrooms are now upstairs.

“Transforming a space from a bedroom to parlor is so rock ‘n’ roll—and I love it!” says Trudel-Payne. “The space is filled with dynamic patterns and bold colors we rarely see in listing photos. And I would bet it’s this exact stark contrast to the norm that attracted large amounts of interest with buyers.”

As for the other impressive design choices, Stix notes the art and the fiddle-leaf fig, which add life and color to the room and help people visualize a homey environment.

Sitting area (before)

sitting area_before
This small room didn’t serve a lot of purpose.

Sitting area (after)

sitting area_after
After the renovation, it’s a perfect place to rest.

This little room just off of the kitchen used to serve as a formal breakfast area, but our experts agree that transforming it into a comfortable seating area was the right move. We love the idea of curling up on the couch to read the news and enjoy a cup of coffee.

“Adding the small corner sofa and ottoman make the room feel more cozy,” says Fasone. “Previously, it just felt like a pass-through area.”

Trudel-Payne agrees that this new sitting area matches the chill, effortlessly chic aesthetic in the house.

“This home is a great example of how simple updates can drastically change a space,” says MacNeil. “There are no structural changes in any of these spaces, but it shows the impact a coat of paint and good design choices in furniture and accessories can have.”

The post Lessons From Listings Photos: Cosmetic Changes Transform This Edgy S.F. Victorian appeared first on Real Estate News & Insights |®.