Winning in a Multiple Offer Situation
It is a seller's market right now and that means there are more buyers than sellers. There is a lot of pent up demand and buyers are getting frustrated. Fortunately for anyone looking to buy or refinance in the near future, the timing when it comes to rates couldn't be better.
We hear similar stories from buyer's agents showing our listings and submitting offers on them all the time. Their clients have lost out in multiple offer situations several times over the past few months. They are extremely frustrated and about to give up the search for a home and just rent. While we do feel bad about their situation, a lot of it is their own fault.
When reviewing offers, we see that the offer may be full price, however they want the seller to pay thousands in buyer closing costs, they are using an out-of-town or internet lender, they are asking for a long list of personal property to remain at no charge, they are offering a small amount of earnest money and want to close in 4 weeks but want a 2 week due diligence and a 3+ week financing contingency . And wait, all this is contingent on them selling their house which of course is not even on the market yet.
Not all homes sell in a multiple offer situation and after just a couple of days on the market. However, if priced right for the condition of the home, multiple offers are common. Of course we love houses that are prepped for the market, staged perfectly, freshly painted, new carpet installed and look like a show-home. But guess what, so do other buyers. Houses that are priced right and show great move fast. It is not uncommon to find yourself as one of the many offers a seller is considering.
So how can you win without simply overpaying? Here are a few tips on how to make the seller choose your offer over others.
1. Don't start with a low-ball offer
We can tell ahead of time that the beautiful new listing you love will the a hot property. Every house is unique. Analyze the price in advance. If it is priced advantageously you need to come in strong. If you start off on the wrong foot and come in low, even if you are the first and only offer at the time, you take the chance of another stronger offer to be presented while you wait for an answer.
In a multiple offer scenario the seller is in the driver seat and has several options.
- The seller can accept an offer outright.
- The seller can counter offer back to just one of the offers on the table and disregard the others.
- The seller can reject and is not even obligated to respond.
- The seller can call for "highest & best" and allow all buyers to resubmit their offers with a better price and/or better terms than their original offer within a specified time period.
Not all sellers choose to participate in a bidding war and some will just accept the best offer on the table or decide to counter the best one. In this case you would not even get the opportunity to negotiate, even if you were prepared to pay more or offer better terms.
2. Put down a strong earnest money deposit
This is one of the best ways to make your offer look more attractive without spending any extra money. Offer at least 1% of the purchase price in earnest money and your offer will look more serious. It appears that you have more skin in the game. Very few sellers are willing to take their house off the market for $500 or $1,000. You usually have at least 3 contingencies to protect your earnest money. As long as you don't default on those you will not lose your earnest money.
3. Write a love letter
Make it personal. Submit a handwritten letter along with your offer telling the seller who you are and how much you love their house and how you can see yourself living there. The seller needs to know that it is you and your family moving into the neighborhood, not just numbers on a contract. We have seen sellers become so personally attached to their buyer that during inspection time they are much more willing to address repairs because they really want "their" buyer to get the house.
4. Shorten your contingency time frames
Do you really need a three week due diligence period? Make it as short as possible. A seller is less likely to accept your offer when you are not totally committed and you can terminate the contract unilaterally without even needing a reason. Get your inspection done right away and you won't have any problems. Do you really need a 3 week financing contingency? If you have been pre-qualified by a reputable lender, have made loan application and have submitted all your documents to the lender, tighter time frames won't be an issue. Have your agent find out before you make the offer what the seller would consider to be a desirable closing date, and try to accommodate them. This will go a long way.
5. Use a good lender
We all love the national bank we use for our everyday financial transactions, but mortgages are just a small portion of their business. They are not always set up to close a transaction within the time frame required. When we receive a pre-qualification letter submitted along with an offer that has an 800-number for the lender's contact info we cringe. If we can't talk to your loan officer your offer isn't real. Listing agents vet buyers for their ability to close. We usually like to recommend a lender that is proactive enough to call the listing agent after we submit an offer and verify how easy your loan will be to close. In any situation we are selling your ability to close this transaction.
6. Get pre-approved, not just pre-qualified
There's a world of difference between these two terms. A pre-approval takes the pre-qualification process one-step further. A loan application must be completed, which is required in order to be pre-qualified. The mortgage lender will review the following information: income, debt, assets, confirmed monies available for down payment and closing costs. A seller feels much more comfortable choosing your offer when knowing that you have taken the required steps to secure your financing, as there will be fewer hick-ups down the road. Apply for your mortgage before you even start shopping for your dream home.
The most obvious way to win in a multiple offer situation is to bid over asking price, but that is not all that counts. The best way to win is to present an offer that is going to close and is not going to cause problems for the seller.
Ursula and Associates is a residential real estate team specializing in Towne Lake/ Woodstock, Cherokee and East Cobb Counties and are the number 1 home sellers in zip code 30189.
We represent buyers in all areas. Schedule a free consultation here.
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