return of the real estate bidding warsSilicon 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:

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?

What is a pre-emptive offer?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.