Former NSync member Lance Bass wanted to buy the iconic “Brady Bunch” house, but the result of a bidding war is tearin’ up his heart.
Bass said on Instagram FB, -1.55% on Sunday that he was “feeling heartbroken,” after finding out that a corporate buyer outbid him for the property in Studio City, Calif. The agent selling the estate had, according to Bass, previously told him that he had the winning bid. Bass noted it was “way over the asking price” of nearly $1.9 million.
But the next day, he said, the corporate buyer swooped in and topped that bid and, due to unforeseen circumstances, could no longer accept his offer. Bass said his offer had been accepted after the deadline for bids had passed. That winning bidder was the home and garden television network, HGTV. It was a painful reminder that the real-estate agent’s client is the seller, not the buyer.
“While we appreciate Mr. Bass and his interest in the Dilling Street property, tremendous interest in the house required a sealed, best and final bid,” said a spokesman for Douglas Elliman, the real-estate agency selling “The Brady Bunch” property. “Our fiduciary obligation is to the seller, who decided to go with the highest, most qualified bid. We wish Mr. Bass the best of luck in future real-estate endeavors.”
Despite rumors prior to the sale that a buyer would raze the home and build on the 12,500-square-foot lot, David Zaslav, chief executive of Discovery Inc. DISCA, -0.42% HGTV’s parent company, said the network plans to “restore the home to its 1970s glory” and that it will release more details regarding its plans in the coming months. HGTV declined to comment further.
Here’s what buyers need to know about bidding wars and how to improve their chances of scoring their dream home:
The chances of making a winning bid are lower when the buyer is competing against someone making an all-cash offer, as was the case for Bass. All-cash deals represented more than 1 in 4 home sales overall during the second quarter of 2018, according to data from real-estate analytics firm Attom Data Solutions. And that figure increases for homes worth $1 million or more, like “The Brady Bunch” house.
Given how likely it is that a buyer will lose out on a home, it’s important that they go in with realistic expectations. “You can’t expect to win,” said Skylar Olsen, senior economist at real-estate website Zillow Z, -3.87%
If a buyer’s expectations are too high, they run the risk of letting emotions guide their decision-making when placing future bids, Olsen said. And then they run the risk of making an offer they cannot reasonably afford.
Have a maximum price you’re willing to pay
There aren’t just bidding wars for iconic properties. Prospective buyers in hot real-estate markets, including the San Francisco Bay Area, Denver, Seattle and New York City, will often have to bid on homes that are considered affordable in those areas, said Holden Lewis, a mortgage analyst at the personal-finance company NerdWallet.
Don’t get caught up in the excitement of a bidding war, to your own detriment, Lewis said. Before you bid, you should know the maximum price you’re willing to pay for the property and what mortgage you qualify for, and commit to spending no more than that. There are several online calculators you can use.
And in today’s market, figuring out what a consumer can afford means getting pre-approved for a loan. A staggering 82% of buyers get pre-approved before making an offer, according to Zillow, and 77% do so before they have even chosen a property to bid on.
Escalation clauses can be useful
In many cases, bidding wars won’t actually involve back-and-forth negotiations between the seller and different buyers, Olsen said. “Everyone is sitting separately and building their hand, and then everyone just lays their hand down at once,” Olsen said. “You have no idea what other people’s hands are, and you don’t get a chance at a redo.”
Because buyers often won’t get the chance to negotiate actively, they can include escalation clauses in their offer if it is being made on a popular property. In this case, a buyer will make a starting offer, but then specify that if a competing offer is better in some regard they will automatically up their ante.
Escalation clauses can include anything from a higher price to perks such as a faster move-in date. For example, a buyer can make an initial offer of $250,000 on a home, with an escalation clause that permits the offer to increase in $5,000 increments up to a maximum of $300,000 if better offers are made.
Escalation clauses do have risks though. Namely, it can reveal to a seller the maximum price the buyer is willing to pay, which could cause the buyer to lose out on a potential bargain if the seller had previously been willing to settle for a lesser amount.
Offers are about more than just the sale price
“Money talks,” Lewis of NerdWallet said. “But in some markets like New York City, celebrity and connection talk, too.” In some buildings, particularly co-ops, the members of the housing boards may want a neighbor they find prestigious, he said. That could be a boldfaced name, or a buyer who attended an Ivy League college or, more likely, a buyer with a fat bank account. “Sometimes you’re just not going to win,” Lewis said. “That’s something to accept.”
But there are some things you may be able to do to sweeten the deal: Find out what’s important to the seller, Lewis said. Some sellers may feel an emotional connection to the property, fear a major renovation and want a buyer who doesn’t have any plans to raze the property and build anew.
Others might be looking to close quickly and would be attracted to cash buyer; others might want more flexibility on their move-out date, and would favor a buyer who will let them stay longer, or even keep some of their belongings at the property in storage.
“Indicate your willingness to do that if it’s something that might tip things in your favor,” Lewis said. Your buying agent may be able to find out those details for you, or if you’re touring the house, there may be an opportunity to talk to the seller face-to-face.
Buyers can also consider waiving contingencies, such as the home inspection, Hale said. “Waiving these contingencies will make you a more competitive buyer,” Hale said. “But it could put you in a position where you regret that decision further down the road.”
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