Silicon Valley real estate’s market madness is back -in case you weren’t looking, this is what we are seeing in places like Cupertino, Palo Alto, Los Altos, and Saratoga – or anywhere in which there are great schools (especially with a shorter commute) or some other reason why a neighborhood is very highly desirable:
- multiple offers, bidding wars and sky high overbids
- non-contingent offers
- buyers willingly paying costs that the seller normally would cover
- pre-emptive offers
If this all sounds vaguely familiar to you, then you were here in the South Bay or San Francisco Peninsula and involved in real estate in 2000 (and to a lesser extent in 2005). Whether you’re a Realtor, lender, or consumer trying to sell or buy a house or townhouse/condo in a great area, you knew it was happening.
One of the elements for this madness is the pre-emptive offer. What is it?
When the real estate market in Santa Clara & San Mateo Counties runs red hot – in the seller’s favor – often the listing agents will direct that there is an offer date or deadline. Most of the time it’s about a week after the property is listed for sale on the MLS. The reason for the wait time, of course, is to provide enough exposure so that all interested parties have a chance to tour the home, review pre-sale inspections and to write up a purchase contract for it. Otherwise, you have a foot race and only the swift have a chance. The lack of multiples will limit the sales price, so savvy Silicon Valley home sellers will usually set an offer date if multiples appear to be likely.
A pre-emptive offer is one in which the home buyer doesn’t wait for the offer deadline, but submits a purchase agreement ahead of time. Sometimes it’s even “sight unseen”! Obviously the latter will be considered shaky since the buyer could easily get a bad case of buyer’s remorse.
Smart listing agents will warn their home sellers about the temptation to accept a pre-emptive offer. That Siren Song can be tempting! But those would-be home buyers are unlikely to disappear if made to wait a week, so in many cases, it’s best to stick to the plan.