Sunday, February 17, 2008

Back Up Offers

Although many people assume that the market is "soft" at the moment based on what they hear in the media, the fact is that multiple offer situations are still happening in San Francisco. Not as often as they once did, but in desirable neighborhoods and well presented properties, you may very often encounter competition.

Just last week, two of our clients wrote offers on properties and were offered "back up position". Not only were they offered second position, but they were asked to raise their price in order to be there.

The first was a lower floor Tenancy in Common on Guerrero. It had only been on the market for 48 hours before they received their first offer which was over the asking price. They were planning to accept that offer, but were looking for back up offers as well, and our clients were willing to submit an offer in hopes that the first offer fell through. The first place offer did have contingencies, and especially with a Tenancy in Common, there would be a few hurdles during escrow. We would be waiting in the wings should something happen.

We didn't know the first offer was over asking until we submitted ours at asking and they asked us to raise it 5% in order to be in back up position. Being in that position secures your place should the first offer fall through. It means you have already negotiated price and terms, and you have the option to elevate to first position should you choose to do that when the time comes. You can, however, continue to hunt around in the meantime, and you can make an offer and purchase another home if you found something else. You would just then refuse the offer to elevate once it did come your way. The fact is, it does happen. Properties do fall out of escrow, and back up offers do move into first place.

The other back up situation we had last week was a multiple bid situation in Bernal Heights. The property was only on the market for a week and a half. They even moved the offer date forward due to the high level of interest. Our clients submitted a really strong offer, but were second of five. We were, again, offered back up position, but only after raising our price almost 5%. It was higher than our clients wanted to go, and the first offer was very clean so the chances of it falling out of escrow would be very low. Actually, I believe it will close this week.

Believe it or not, it still happens. Those two properties went five and ten percent over the asking price. San Francisco seems to be going strong. Even Zillow reports a 3% appreciation over last year in San Francisco. They report Daly City, South San Francisco, Brisbane, Oakland, and Alameda in the negative. Rates are low, and Bush signing off on the stimulus plan which will temporarily increase the conforming loan limit in high cost areas to $729,750 should help even further. It will bridge the gap between jumbo loan interest rates and conforming rates which has gotten wider in the past six months. As of now this will be in affect until the end of the year. Be sure and take advantage of these lower rates!

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