How to win a bidding war: New homeowners share their strategies

After a futile, three-year search for a house of their own, apartment dwellers Arthur Grijalva and Michelle Moraveg considered moving back to El Paso — or living out their days renting a studio apartment.

Perhaps, Moraveg thought, they could put their first child in a dresser drawer when they start their family.

Then, after getting outbid again and again, the Texas transplants crafted their winning strategy for buying a Southern California home: Bid higher. Act fast. Streamline their offer.

It worked, and on May 27, they moved into a cozy corner house in a leafy Burbank neighborhood.

To get it, they paid $150,000 over the asking price, waived their right to cancel based on a low appraisal or high home repair costs and closed the deal in two weeks.

“We kept waiting for (the market) to crash, and it never crashed. So we decided to bite the bullet,” Moraveg said. “You just have to accept this is what it takes to live in LA and be a homeowner.”

Grijalva and Moraveg are two of 87,000 “winners” in Southern California’s housing market this year, a market featuring one of the most intense buying frenzies in three decades.

Market watchers say frustrated losers far outnumber the winners, with ultra-low mortgage rates, bulging numbers of millennials on the hunt and a pandemic-driven desire for bigger homes boosting demand.

Bidding wars are common. Desirable, reasonably priced homes are rare.

The number of homes on the market dropped 20%-50% this spring from last year’s levels, figures from several data firms show.

Zillow reported homes in Los Angeles and Orange counties are selling within 10 days. In the Inland Empire, the average time for a sale is eight days.

“It’s a huge challenge for buyers,” said Amy Cimetta, an agent for Vista Sotheby’s International Realty in Manhattan Beach. “Unfortunately, buyers have to remove as many hurdles as possible. Sellers are getting 10-20 offers. The buyers who stand out are paying all cash or removing financial contingencies.”

Interviews with agents, home shoppers and a Zillow home trends expert show it takes more than just cash to win a bidding war, although that’s still the biggest factor.

Home shoppers also need to get pre-approved for financing, become adept at using real estate apps and prepare to act as soon as a home in their price range hits the market.

A lot of buyers are giving up after getting outbid over and over, agents say. Some are refinancing their current homes and remodeling.

Others are waiting to see if prices will drop, said Amanda Pendleton, Zillow’s home trends expert. But unless there’s a new crash, they risk paying even higher prices or higher mortgage rates down the road.

“Your buying power is going to be lower the longer you wait,” she said.

Pendleton noted not all homes have bidding wars. Zillow reports 58% of homes in the L.A. metro area are selling at or below their asking price.

“There are stories of homes being bid up. But the majority are not,” Pendleton said. “So, stick with it.”

“It takes a lot of perseverance,” Cimetta added. ” … When you go the extra mile, that’s what it takes to get the property.”

Here are stories from several homebuyers who did.

A $1 million decision

Arthur Grijalva, 33, a manager with the U.S. Space Force, and Michelle Moraveg, an actor, had 15 minutes to make a $1 million decision: To bid or not to bid on a Burbank house after having just 15 minutes to see it.

In early March, Grijalva and Moraveg were among 74 groups of buyers with appointments to view an 1,800-square-foot house in Burbank with a brick-mantle fireplace, hardwood floors and remodeled kitchen. Out front, the double-door entryway had beveled-glass windows, and a majestic oak tree towered over the corner lot.

The home was listed for $949,999.

The house was cute, “had good energy” and that beautiful tree in the front yard, Grijalva said.

The sellers got a dozen offers in just a few days.

Studying comparable sales, Grijalva calculated the home could be worth $250,000 more than the list price. So he put in a $1.1 million offer or $150,000 over the list price. The couple also waived their inspection since the owners had said they wouldn’t pay for any repairs. And they waived the appraisal contingency because Grijalva was confident the home was worth that much. To be even more competitive, they agreed to complete the transaction in just two weeks. Escrows typically take 30-45 days in a normal market.

The seller had just one other offer for around the same price, but it was “all cash” — meaning the buyer wouldn’t need a mortgage.

Then, Grijalva and Moraveg composed a “love letter,” describing who they were, telling about the family they planned to raise in the home and the careers they hoped to build there.

“We instantly fell in love with the cozy living room overlooking the magnificent tree in the front yard,” the letter said. “We can already envision decorating the grand tree with Christmas and Halloween decorations to get into the holiday spirit.”

They looked forward to setting down roots in Burbank and making the house “our forever home,” they wrote. They included a photo of their two dogs, Otis and Calical.

Writing love letters, popular in sellers’ markets, has fallen into disfavor in the past year because Realtor groups fear it could encourage housing discrimination. But the couple says their letter clinched the deal.

But now they had to get through escrow — and in just two weeks. They battled over the cost of termite repairs and raced to get their financing and inspections done. They estimate the home needs about $20,000 worth of upgrades.

But a low mortgage rate — just 2.25% — helped bridge the costs.

“Just the fact the interest rate was so low made it work so much better,” Grijalva said.

This article is written by Jeff Collins from Orange County Register and was legally licensed via the Tribune Content Agency through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.