Skimming through the Sunday LA Times over a cup of coffee yesterday (and another article earlier in the week) I laughed to myself about “what goes around comes around”.

The earlier article explained how desperate buyers today, competing against multiple offers on “their” property, are writing letters to the sellers of the home which they submit along with their offer.

They plead (must include photos of kids and dog) their case about why they would be the best choice for the sellers – and from my experience, sometimes IT WORKS!

When a seller is merely looking at names and numbers on a piece of paper, it’s hard to see the real people behind those names and numbers. So sometimes that connection, via a “love letter” from the buyer to the seller, seals the deal.

The LA Times Sunday article mentioned 3 other tactics:

• Contingency free offers
• Escalation clauses and
• Low ball listings

Contingency free means a buyer gives up certain protections. A big one today is appraisals. Normally, a buyer will have a contingency that the home must appraise at a certain point (the lender will only lend to that amount). If the appraisal is higher, the buyer can choose to walk. Because appraisers look backwards in time to closed deals and today’s market is looking forward, the appraisal is usually much lower than the offered price. Thus the buyer must be prepared (and be able to show proof of funds with their offer) that they can cover the higher offered price with additional cash.

I saw my first escalation clause around 2005 I think. We listed a home  in a very competitive market like today, got multiple offers, but one offer didn’t list an offer price. Instead, it merely stated the buyer would pay $1,000 more than the highest, verifiable offer received. Wow – I’d never seen that before! But we accepted that offer and closed on it. Now those offers are coming back and can be a powerful tool if used correctly.

Leslie recently used the low ball listing strategy. It was a short sale and she priced the lovely home at the very low end of the value range. That Sunday open house saw a stampede of people and spirited bidding. The home closed escrow almost $50k higher than the listed price and not one offer came in at listed price – they were all higher.

So when working with buyers today, we say don’t look at the listed price! It may be irrelevant! It is crucial buyers know real values and “don’t guess” at what they’ll offer for a home – they’ll just waste everyone’s time. But once they’re in the game (after a few failed offers), they’ll know exactly what a home is worth and will be ready to fight for it.