Bidding Strategy?

[stepitup]

I'm a first time home buyer and am getting ready to place an offer.

In what seems odd to me, my agent seems reluctant to offer advice for bidding and seems to be dodging the question (part of me wonders if its an internal conflict over the commission piece).

Anyways, I've looked around at comps and such but am wondering if anyone has any general bidding advice. It's more of a sellers market where I am at the moment, but the place I'm bidding on isn't officially listed at the moment so I'm probably the only offer they'll be considering until they're planned listing in 3 weeks.

[stepitup]

A related question. If I submit a pre-approval letter from a mortgage company with my loan, does that obligate me to use that company, or is their still an opportunity to shop before the deal is closed?

[tralfamadorian]

Instead of asking your agent- what should I do?  Ask them- what is normal in this market right now for the type of houses I am interested in.  What is the average sell price/ listing price ratio on sold properties?  What are the average days on market?  Are bidding wars common?  For the particular house you like- what is the market value of this property according to comps?  For the past several comparable houses that have sold to your goal house- what was the bidding process like?  How many bidders?  Time frame?  Are escalation clauses common?  Are cover letters included with offers common?

If your agent knows your market, they should have or be able to procure this information for you relatively easily. 

Also since you are a first time buyer, be aware that the majority of the time buyers and sellers will expect to meet in the middle between the initial offer and listing price.  For example if the seller say they want $275k and you make an initial offer of $260k, it would be considered typical in a balanced market with equal negotiators to end up at $267.5k. 

[tralfamadorian]

A related question. If I submit a pre-approval letter from a mortgage company with my loan, does that obligate me to use that company, or is their still an opportunity to shop before the deal is closed?

No, you are not obligated to use the financing in your pre-approval. 

[Another Reader]

Instead of asking your agent- what should I do?  Ask them- what is normal in this market right now for the type of houses I am interested in.  What is the average sell price/ listing price ratio on sold properties?  What are the average days on market?  Are bidding wars common?  For the particular house you like- what is the market value of this property according to comps?  For the past several comparable houses that have sold to your goal house- what was the bidding process like?  How many bidders?  Time frame?  Are escalation clauses common?  Are cover letters included with offers common?

If your agent knows your market, they should have or be able to procure this information for you relatively easily. 

Also since you are a first time buyer, be aware that the majority of the time buyers and sellers will expect to meet in the middle between the initial offer and listing price.  For example if the seller say they want $275k and you make an initial offer of $260k, it would be considered typical in a balanced market with equal negotiators to end up at $267.5k.

If they cannot or will not get you this information, you have the wrong agent.

[sequoia]

In what seems odd to me, my agent seems reluctant to offer advice for bidding and seems to be dodging the question (part of me wonders if its an internal conflict over the commission piece).

I hate people who is dodging questions, especially in business transaction. The agent should be helping you or you should get a new agent.

[August26th]

You can always shop around for your mortgage. You are never obligated to use a particular lender, even if said lender has provided a preapproval letter.

I live and work in a highly competitive market where bidding wars are commonplace. The best lenders will pick up the phone after your offer has been submitted, and give a few reasons to the listing agent as to why you are well qualified and a strong buyer. I have found that this personal touch goes a long way. Some lenders from "big banks" may not be willing to do this, but nimble mortgage bankers should absolutely be willing to do this at any time of day.

Best wishes!

[Finallyunderstand]

You mentioned the home you're interested in is off-market.  Does that mean it is FSBO and the seller isn't paying a commission to your agent?  If so, and if you also aren't paying a commission, then your agents reluctance is certainly justified in not working for free.

If none of the above is true, then yes, find an agent who is more helpful. 

Regarding pre-approval.  You can use whomever you would like.  An up-to-date pre-approval submitted with an offer does not lock you in to having to use that lender.  Keep in mind that switching lenders after an accepted offer could delay the process so make sure to keep things moving along quickly especially if your contract terms dictate timelines for how soon you need to submit your documents to a lender, obtain loan approval, close, etc. 

[alexpkeaton]

Since the listing hasn't gone live yet, the sellers and their agent are probably looking for strong offers to make it worth their while to not make the listing public (assuming it's not FSBO, as another poster mentioned). If the property is exactly what you're looking for and you think it'll attract other offers, you might shoot yourself in the foot by lowballing and opening the property up to other bids.

But if you're willing to walk away and just want to get a good deal, or if you think the property is overpriced, come in with a weak bid which they may reject. If the property sits on the market for a while maybe they'll reconsider.

But this is why I suspect your agent would be shy about giving specific advice. Only you can decide on the trade-offs above. What's the property worth to you? Getting more market info like other posters suggested is good, and your agent should be able to answer your questions, but I don't think he can tell you what you "should" do.