War Story: Using Options to Buy a House

The clever, under-stated Clay Nielsen was the first to answer Redfin’s call for “war stories,” tales of intrigue and derring-do to give Redfin shoppers an angle on winning deals. This one is *good*.

Here’s Clay story, in his own words:
In May of 2005, my wife and I decided it was time to start looking for a larger house for our growing family. We knew the neighborhood that we wanted to be in, but were having a hard time finding something that was just right. We finally stumbled upon an old “tear down” on a very large lot that would enable us to build a new house that truly fit our needs. We knew that this opportunity would generate competition so, to win our Madison Park house, we submitted an unusual offer at the offer deadline with these terms:

* Our offer would beat any other offer by $5,000 with no cap.
* Ten minutes after the offer deadline, the listing agent had to call us and inform us of the highest offer with escalator received.
* We in turn had to respond within 5 minutes that we would in fact pay $5,000 more their highest offer.
* We cautiously agreed to pay higher offer, which was $175,000 over the original asking price.
* The listing agent then asked us to fax her our offer. We said “no”, that she needed to send us the offer signed by her client so that we did not trigger any further escalators.
* She reluctantly agreed and the house was ours.

The other interested parties were scrambling to figure out how they could reposition their offers to get this prime piece of real estate, but the deal was done.

If you really want to win without committing to a price until you see the price, and without getting into a bidding war or even really a negotiation, you might to try a no-haggle option like this.

For sharing such a great tactic, Clay gets dinner for two at El Gaucho (his choice). Got a great war story? Send it on to glenn (dot) kelman (at) redfin (dot) com — we’ll post it up and send you out for dinner to your favorite restaurant!

  • Peter

    In 1998, I traveled to the Boston-area from California to find housing for my wife and I during grad school. On the school’s intranet I found a post by a graduating student who wanted to sell her condo/townhome a few blocks away from campus. I stopped by the house unannounced, introduced myself and discovered over normal chit chat that the seller was coincidentially moving to our neighborhood in California after graduation, but didn’t yet have housing in the uber-competitive bay area housing market. I asked about buying the Boston condo (it was perfect for us) hoping for an inside-deal, but the seller wisely said that the Boston market was as frothy as California and that she was planning on simply taking the highest price (and she had already engaged an agent) based on offers received the next day. She had had indications that at least 6 offers were forthcoming. My wife (who was back in California and hadn’t seen the place) and I quickly determined we wanted condo, but couldn’t afford a bidding war. Therefore, made an offer and we included a clause that obligated the buyer (us) to provide the seller 4 months free housing at the buyer’s home in California. The risk we took is that the seller could’ve been an axe-murderer (we didn’t know her at all other than my “drop-by” meeting the day before) or merely obnoxious as a four-month roommate. We also risked paying a few extra months of our California mortgage before selling, but that was far less than what we wouldn’ve needed to increase our bid to win the deal solely on price. The seller did in fact get 7 offers, most higher than ours, but we won the bid anyway because the seller was worried about her California housing situation and we solved that for her. And a month later we had a random stranger as a roommate for the entire summer.