More Than Money

Kiplinger's Personal Finance Magazine, May, 2000 by Sean O'Neill

HOMES | Sometimes you nave to mix creativity with cash to win a BIDDING WAR.

EVEN RISING interest rates can't extinguish the hot bidding wars for homes in some areas of the country. And sometimes buyers have to offer more than cold hard cash to get the house of their dreams. When sellers can choose among bids that exceed their asking price, it's not surprising that they often lean toward one that offers something extra. To stand out in such circumstances, buyers resort to creative methods--from giving gifts to sending personal letters--to put a human face on their bids.

Mike and Mary Tasker were in a take-no-prisoners mood when they went after a home in Huntington Beach, Cal., last June. Not only did they offer more than the asking price, but they were also preapproved for a mortgage and attached almost no contingencies to their offer. Still, they felt they needed what Mary calls "an added spiff."

At an accidental meeting, the Taskers discovered that the sellers were retirees who wanted to travel. As icing on their offer, Mike and Mary offered two weeks at their time share, which could be exchanged at a number of locations worldwide. When several bids came in around $290,000, the sellers sold to the Taskers--and headed to Hawaii.

To be sure, such gifts work only if they hit a seller's soft spot and back up an already high bid. Seattle real estate agent Michael Herren bemoans a long list of failed extras he has offered on clients' behalf: a $500 Toys `R' Us certificate to sellers with a newborn; a $500 certificate to REI, the sporting-goods chain, to a camping enthusiast; and a penguin-shaped cocktail shaker to a seller who loved--you guessed it--penguins. None of them worked because "rival buyers bid higher," says Herren.

Sometimes buyers can connect personally without giving a gift. Last fall, Joe and Ellen Morrissey bid $200,000 on a two-story colonial in Rowley, Mass. They were Outbid by a developer who planned to convert the property into office space.

To appeal to the owner, the Morrisseys sent a handwritten note that described their interest in preserving the house. As a kicker, they included a photo of their three cute children. Elizabeth Cartledge, who had lived in the house for 62 years and raised her own three children there, was touched. She sold to the Morrisseys.

Reaching a seller's heart is a tactic that often works, according to Dallas broker Erie Rawlins. "It needn't be a big deal," he says. "Send flowers. Let the seller know you care. A little effort can reap big negotiating benefits."

Likewise, Donna Converse, a real estate agent in Goose Creek, S.C., tells her clients that in bidding wars they should "look for common links" with the seller, whether it be the quality of area schools or nearby fishing spots.

James Rossi appealed to a seller's emotions when he bid on a creekside cottage in north Seattle a year ago. Rossi and a rival buyer pushed the bidding to $25,000 above the asking price of $279,000. Then Rossi's rival offered an extra $5,000.

Rossi couldn't match that, but he had something else to offer. He met with the owner, Louis Swan, a landscape architect who had spent 15 years remodeling the cottage and beautifying her garden with roses and rhododendron. Rossi, a fellow gardener, spoke knowledgeably and promised to tend the property by hand.

Swan called her husband and asked, "Should we go for the money, or do the right thing?"

She sold to Rossi.

BORROWING: Low loan rates around the U.S.

Boston                 LENDER

Fixed-rate 30-year     Cambridge Savings
One-year ARM           Eastern Bank
Home-equity line       Rockland Trust Co.
Car loan               Cambridge Savings

Charlotte

Fixed-rate 30-year     First Union
One-year ARM           Central Carolina
Home-equity line       First Union
Car loan               First Charter National

St. Louis

Fixed-rate 30-year     Collinsville Building & Loan
One-year ARM           Equality savings
Home-equity line       Union Planters
Car loan               Equality savings

Denver

Fixed-rate 30-year     Bank One/Colo.
One-year ARM           Liberty Savings
Home-equity line       FirstBank
Car loan               Liberty Savings

Seattle

Fixed-rate 30-year     Continental Savings
One-year ARM           KeyBank
Home-equity line       Washington Mutual
Car loan               Washington Mutual

Boston                 RATE/DESCRIPTION (INDEX PLUS MARGIN)

Fixed-rate 30-year     7.88%/2 pts.
One-year ARM           5.50%/2 pts. (Treasury index + 2.88)
Home-equity line       4.75%/4 mos., $10,000 minimum (prime)
Car loan               8.25%

Charlotte

Fixed-rate 30-year     8.13%/1 pt.
One-year ARM           6.25%/1 pt. (Treasury index + 2.75)
Home-equity line       9.25%/$10,000 minimum (prime + 0.5), $35 fee
Car loan               7.95%/$50 fee

St. Louis

Fixed-rate 30-year     8%
One-year ARM           6.5%/1 pt.(Treasury index + 2.75)
Home-equity line       6.99%/6 mos., $5,000 minimum (prime + 1)
Car loan               7.7% /$25fee

Denver

Fixed-rate 30-year     8.05%/1 pt.
One-year ARM           6.5%/1 pt. (Treasury index + 2.75)
Home-equity line       7.49%/6 mos., $5,000 minimum (prime + 2)
Car loan               8.5%/$100-$120 fee

Seattle

Fixed-rate 30-year     7.5%/3.13 pts.
One-year ARM           6.5%/1 pt. (Treasury index + 2.88)
Home-equity line       5.99%/6 mos. $5,000-minimum(prime = 0.99)
Car loan               8.25%/1% fee

                        TELEPHONE
Boston                    NUMBER

Fixed-rate 30-year     888-418-5626
One-year ARM           800-327-8376
Home-equity line       800-826-6100
Car loan               888-418-5626

Charlotte

Fixed-rate 30-year     800-275-3862
One-year ARM           800-562-6239
Home-equity line       800-275-3862
Car loan               800-845-3262

St. Louis

Fixed-rate 30-year     618-344-3172
One-year ARM           800-467-2110
Home-equity line       800-333-1346
Car loan               800-467-2710

Denver

Fixed-rate 30-year     800-372-2651
One-year ARM           800-530-8586
Home-equity line       800-964-3444
Car loan               800-530-8586

Seattle

Fixed-rate 30-year     800-654-1075
One-year ARM           800-333-9993
Home-equity line       800-756-8000
Car loan               800-756-8000