Central Ohio Biding Wars
Buying and selling strategies are changing in red hot pockets of area housing markets
As summer home sales kick into gear, central Ohio shoppers are discovering that in some neighborhoods the old rules of home-buying no longer apply.
Instead, they must learn the meaning of phrases such as “escalation clauses,” “highest-and-best offers,” “no-remedy inspections” and “curbside offers.”
Such tactics, common in red-hot real-estate markets, are increasingly finding their way into central Ohio communities where buyers far outnumber sellers.
Home sales are up 7 percent this year throughout central Ohio, and homes are nabbed the moment they arrive on the market, sometimes sooner.
Even first-in-line buyers who offer full price are learning that no sale is guaranteed in hot markets such as Upper Arlington, Grandview Heights, Worthington and the Clintonville neighborhood.
“When we put a property on the market now, we’ll get multiple bids — that’s automatic,” said Ken Wightman, a Berkshire Hathaway agent who works primarily in the sought-after Victorian Village and Short North areas.
The most common response to such high demand is for the seller to give bidders a deadline to submit a “highest-and-best offer,” from which the seller chooses a winner.
Some agents are so convinced that the practice yields the highest price that they deliberately under-price homes in anticipation of creating what amounts to an auction on the property.
Don Bush, an HER Realtors agent, said he typically under-prices homes sold as “short sales” to attract a bidding war. He recently listed a short-sale condominium on the West Side for $20,000 and, after receiving several bids, sold it for $51,000.
“I joked to my assistant that next time we should just start at $1,” Bush said.
He tries to talk conventional clients into under-pricing their homes, but most aren’t interested.
“Sellers balk,” he said. “They think you should start high and work down, but that doesn’t work. It’s the opposite. ... I can almost guarantee, based on our short-sale experience, that you can get more if you list it low.”
Central Ohio buyers fearful of losing the home of their dreams in a bidding war are responding by adding escalation clauses to their offers.
Under such clauses, buyers agree to pay more than their offered price if the seller receives a higher competing bid (up to a designated limit).
Jeff Ruff, a partner in the Vutech Ruff HER Realtors agency, recommends that all his buyers use escalation clauses to ensure that they land a house they want.
“Virtually every house in Upper Arlington is selling for over its asking price,” Ruff said.
After Michael and Jane De Bonis lost out on some Clintonville homes, they turned to escalation clauses.
“It became clear to us how competitive it was and that you had to act extremely quickly if you were at all interested,” said Mr. De Bonis. “There were a couple of cases where we got new listings and tried to schedule a viewing and found out it was already in contract.”
But even an escalation clause isn’t a guarantee.
A full-price offer plus an escalation clause of up to $10,000 more, for example, failed to win the couple one Clintonville home.
The next time, they offered the full price of $220,000 and again included an escalation clause — this time up to an additional $20,000.
“The escalation clause was sort of scary because you feel like you’re showing your hand a bit,” Michael De Bonis said. “It feels like you’re saying what your maximum offer will be.”
The seller received eight offers, he said, but ended up agreeing to sell to the De Bonises for $230,000, or $10,000 more than the asking price.
Their offer wasn’t the highest offer, but the couple secured the deal through yet another uncommon tactic that’s making its way into central Ohio deals: The De Bonises agreed to buy the house for $230,000 even if it didn’t appraise for that much; if it appraised for less, they would make up the difference.
The appraisal clause prevents buyers and sellers from having to return to the negotiating table when the appraisal falls short of the contract price, which is a problem in a fast-rising market.
In some neighborhoods, homes have become so difficult to find that buyers are making offers sight-unseen in what are called curbside offers. The offers are bona fide but include a big caveat: They are contingent upon the buyer’s satisfaction with the interior of the house.
Another strategy: a “no-remedy inspection” clause, which means the buyer waives the right to ask the seller to make any repairs cited in the inspection. (The buyer can still walk away from the deal after the inspection.)
Carol Bohumolski and her partner relied on such an offer to help them sort through a cornucopia of bids on their Clintonville home in March.
The couple listed the home in anticipation of moving to Texas. They knew they would receive offers but didn’t realize how manic the demand would be until noon on a Monday, when the home landed on the market.
By the end of the first day, four buyers had toured the house and two had made offers for the full asking price of $250,000. The following day, five or six others visited, including some who planned to make offers.
“We had so many offers on the house, it was just total craziness,” Bohumolski said. “It was overwhelming.”
The couple — working with their agent, Sue Lusk-Gleich — called for all bidders to submit their best offers by 6 p.m. Tuesday. That prompted several offers for the asking price and three exceeding the asking price, including bids of $255,000 and $258,000.
“You would think we would take the highest offer, but we took the best one — at $255,000— because the buyer said ‘We’ll take it as it is,’ ” Bohumolski said.
Even though the house was in excellent condition, Bohumolski and her partner worried that an inspection might prompt other buyers to ask them to install a radon mitigation system, paint the porch or perform minor repairs.
“For a few thousand, this eliminated the hassle of doing any repair work,” she said.
Veteran agents acknowledge that demand for homes is extreme now, but they also point out that none of these tricks is new.
“Everything is cyclical,” said Kathy Shiflet, a Coldwell Banker agent who this year is president of the Columbus Realtors trade group.
“The market’s going to level out. This isn’t going to last forever.”
Author: Jeremy Letzelter
July 28th 2016
About Jeremy: I have worked in sales for over 13 years. I have purchased and sold investment properties for the pa...