Bid Your Heart Out

Here's a story from a frothy market that lays out a productive approach to winning the apartment of your dreams in a competitive-bidding situation, without overpaying.

After losing out on a lovely condo on Central Park West, my buyers found another unit they loved. We knew there were already a few offers on the table, so after reviewing recent comps, we devised an offer five percent over the asking price. To help us stand out from the crowd, the buyers also agreed to make their offer non-contingent, meaning they had the cash to close in the unlikely event there was an issue with their mortgage. There were ten offers in total, including ours, with still more coming in after the bell. After a maddening delay, we were notified that we had lost to a higher bidder, but that we were first backup in case the winning bid didn't pan out. I told my buyers not to despair: I had a feeling we hadn't heard the last of this.

I think you know where this story is heading, right? We immediately got back out there and saw several other nice units, although none was as appealing as "the one that got away." But lo and behold, several days later I got the call I was half-expecting, and we got the chance to pick up the deal after the top bidders walked away.

The moral of the story? In a hot market, some buyers will bid well outside their comfort zone just to win the opportunity to make up their minds about whether they really want the place.

My counsel in bull markets is to chart where the market and other factors (interest rates, for example) are heading. If it's a rising market with low inventory, bid as if you were already three months down the road. Broadly speaking, if a unit has multiple offers, it is priced correctly, possibly even underpriced, and it's the belle of the ball. So it makes sense that you're not the only one who's interested, and in a rising market it's better to pay up for the one you really love than to pay even more for something lesser three months later.

To get the number right, you and your agent will need to review not just recent closed sales of comparable apartments but, ideally, units that have just gone into contract. This is the intel that gives you a sense of the up-to-the-minute numbers, and a good agent with the trust of other brokers will be able to get it for you. Then you can weigh the in-contract prices against recent closings to determine the right offer. And making your offer non-contingent on financing, if you have the cash to close in a pinch, is a great way to make an offer that's nearly as good as all-cash while still leaving you the option of a mortgage.

Happy hunting!