I received a call last night from a client. I had helped him acquire a house about 8 years ago. At risk of sounding immodest, I negotiated a very good discount on a exceptional house which included 5 underground parking spaces. In fact my client, who is a very successful financier was so impressed that he said I should work for him.
Obviously I declined but he has recommended me ever since. In this case, he was calling me because he has found a house he wants to buy in Surrey (I specialise in prime central London so have not been involved in the search) and he wants me to handle the process for him. The problem is that he is in a bidding war and has done exactly the opposite of what I recommend you to do.
The Property Bidding War
There are three parties involved and the highest offer is 13% above the asking price. The level of offer is not an issue as my client thinks the guide price was too low. It is probably now about fair value, but clearly if he wants to secure the property he will need to offer something similar and possibly more.
He is being pressurised by the the agent to increase his offer and he called me for advice. As it happens there are two different agencies handling the sale. The highest offer is through the other agency, so the agent my client is dealing with is clearly keen for us to increase the bid to secure his commission. My client is a cash buyer so theoretically is in a string position, but there is a fly in the ointment.
WARNING: I am about to be very boring!
I know that I repeat this often but it is because it is so important: BE PREPARED.
In this instance, my client may be a cash buyer but he cannot move quickly. When we spoke last night it became evident that he had done none of the preparation I recommend. Amongst a number of things, most importantly he has not:
- Instructed a solicitor
- Spoken to a tax advisor- he may want to use a trust to buy the house (for his children rather than any suspicious Stamp Duty Mitigation Scheme)
Admittedly he is busy earning millions, but nevertheless 30 minutes is all this takes. Now he is in a situation where he is in New York and very busy. However, he now may lose the property which he has taken two years to find, because he has not carried out some basic preparation.
Fortunately for him he has me and my team (and yes that was a dreadfully unsubtle and totally immodest plug!). I have advised him how to slow down the bidding without seeming to stall or look as though he is having second thoughts about the property. Meanwhile, I have introduced a firm of solicitors who have a track record of handling complicated transactions and can also advise on the tax aspect of the transaction.
We have also put two processes into action so that he will in fact be ahead of the competition when it comes to being able to move swiftly and efficiently. This may help him acquire the property despite not putting forward the highest offer. Whatever happens, it will give him a much higher probability of securing the home.
However, he has been extremely lucky. We have been able to slow down the bidding process and the tax aspect should not be too complicated. He will also be able to provide at short notice all the regulatory documents required by the solicitors for their money-laundering and identification checks. Nevertheless he will pay higher fees due to the rushed nature of what is required.
Do not think that you will be able to get away with such a last minute scramble? Yes, you might, but why take the risk of finding your ideal home only to lose it because you have not spent a small amount of time doing the necessary preparation. It can make all the difference. I know because I have bought properties for clients despite not putting forward the highest offer, because the agents know my clients are prepared while the competition (other buyers) were less likely to be able to act as swiftly. Yes my reputation for ensuring efficient transactions helps but this reputation is built in making sure that my clients are prepared.
Have i repeated this enough? No? Do your preparation. I guarantee you it will save you time, money and stress.