Surviving a Multiple Offer Situation
If you’ve been home shopping for very long, you have probably already experienced this, but if not, you need to be ready. In an extreme Seller’s market like the one we are currently experiencing, nearly every property at every price point is receiving multiple offers.
In my experience, with all things being equal, every one of these ideas could be the difference between getting your offer accepted or not.
1. If it hits the market today, go tour the property today.
You will have to be watching your favorite Real Estate website for new properties. Use a site like mine that update multiple times per day. Others only update once per day, so in essence you could be looking at something that’s already been on the market for a day. It’s not unusual for 5 or more offers to come in the first day or two and the Seller might pick from one of those and not wait for others, especially if the house has already had multiple showings.
Use all the tools at your disposal to eliminate properties and to save time before setting an appointment to tour them. Tools like Google Earth could help you discover railroad tracks, busy roads behind or beside the property, etc. There is no use in looking at the inside if something visible from the outside is a deal killer for you.
2. Before presenting your offer, your agent should call the listing agent and see what the seller’s hot buttons are.
Do they want the highest possible price? A longer or shorter close date? Do the sellers need to remain in the property for a period of time after closing? These are ways to make your offer more appealing to a potential seller. I once saw a seller accept an offer from a buyer because the buyer was willing to close on the property and allow the sellers to remain in the property and pay rent. The sellers stayed for 4 months, and didn’t incur double moving fees! This buyer didn’t offer the best price, but offered the best terms because of a simple conversation with the listing agent.
3. You and your agent need to know how the Seller will be handling multiple offers.
Things you will need to know:
What day and time the will the be seller reviewing offers?,
Will you have a chance to improve your initial offer, or will everyone get one shot?
Some sellers are afraid of alienating buyers who might not want to get in a bidding war, so they take the first or second offer that comes along. Risk tolerance plays a big part in their decision making.
4. You should write a letter to the Seller.
Because of buyer agency, buyers and sellers rarely meet, so it’s important for the sellers to get to know you a little bit. In your letter, tell them your story:
Are you a first home buyer?
Transferring from somewhere else?
Starting a family?
Tell them why you chose their home and brag on it! Lastly, add a picture of you with your family (if applicable) to enhance the human connection.
5. The Lender you choose is important.
I’ve seen instances where there were a couple of really good, almost identical offers. The seller chose one over the other because the Listing agent had prior transactions with the lender the buyer chose. Is your lender someone that the Real Estate community knows has a reputation for closing on time, communicating with the parties to the transaction, returning phones calls and emails, etc?
It’s important that your lender is available on weekends; sometimes you may need to upgrade your pre-approval letter on a Saturday or Sunday, and it’s important for your loan officer to be able to do that for you.
Some listing agents don’t like “big-box” banks, out-of-state, or “internet” lenders and will communicate that distrust to their clients. Like it is in every case, a few bad apples have spoiled the barrel, so these type lenders have developed a bad reputation, whether deserved or not. It helps if your buyer’s agent knows your lender even if the listing agent does not, so at least you have someone who can speak for your lender’s abilities. It also helps if you can have your lender call the listing agent and “talk you up”.
Enforcing that you went the extra mile and got a pre approval instead of just a pre-qualificaion,
Letting the other agent know that it looks like an easy transaction.
Just generally establishing rapport with the listing agent could swing things in your favor.
6. Get a pre-approval instead of just a pre-qualification.
Because you have followed my advice and chosen your lender prior to house shopping, it just makes sense to go ahead and obtain a pre-approval instead of just a pre-qualification.
What’s the difference?
A pre-qualification simply means that the loan officer has pulled and reviewed your credit and verified your income and assets based on what you told them. A pre-approval means that the loan officer has pulled and reviewed your credit report and they have seen documentation related to your income and assets–bank statements, pay stubs, W-2s, etc. It doesn’t take much longer to get the pre-approval, and you are providing documentation that will eventually be needed to submit your formal loan application anyway. It’s better to verify something or solve a problem now before signing a contract and submitting Earnest and Option money. Moreover, if your offer and a competing offer are identical or even being comparable to one another, your pre-approval could be the element that makes your offer more competitive than the other.
Don’t even tour a property without pre-approval!
Murphy’s law will kick in; you’ll find your dream home and be prepared to submit an offer, but the seller won’t consider your offer without a letter from a lender. You spend a day or so getting your loan in place and miss out on the property. Even if you know financing will not be a problem, the seller and the seller’s agent will not know, and will choose an offer from a buyer who has already obtained their approval.
7. Consider paying some of the closing costs that are customarily paid by the seller.
Although there is no written rule, there are certain fees related to a real estate transaction that are traditionally expected to be paid by the seller. Items like the title policy, survey, and home warranty can range from hundreds up to a few thousand dollars depending on the sales price. This could be the difference between the seller choosing your offer or another. If your are willing, or your strategy is to pay over list price to get your offer accepted, be prepared to show the seller and the listing agent that you have the capacity to and are willing to make up any shortage between sales price and appraised value. Writing it into the offer will make it even stronger. Of course you could set a limit on how much of the shortage that you are willing to pay. I’ve seen offers come in that were well over the asking price of the property. Their strategy is to woo the seller with their incredible offer in hopes that the appraisal comes in for much less and the seller has to reduce the price to match the appraisal. It’s a bad strategy, and a smart listing agent will not let their client fall into this trap. However someone with the willingness and capacity to pay over list price will outshine all other offers.
8. Don’t have the “I won’t pay over list price” mindset.
In Real Estate, the listed price of the property is nothing more than what the Seller is willing to sell the property for. Most of the time the sales price is based on market value, as determined by data provided by the listing agent. The seller makes up their own mind from there. There are a couple of strategies at play when pricing a property:
The more traditional “wheeler dealer” strategy:
This is the one everyone on the planet is expecting. Sellers price the property higher than what they are willing to take for it so that they will have room to negotiate, causing some buyers to believe that paying over what the seller is asking is a bad strategy.
The “auction” strategy:
This strategy is becoming more common in today’s Real Estate market. In this scenario, the seller prices the property at a number that they will accept and in some cases, even a bit lower hoping to get several offers in a short period of time. Because buyers recognize an excellent priced property, they feel that paying asking price isn’t enough and submit a higher offer. Just like at an auction where there are multiple bidders on an item the price goes up, not down. If you have the “not over list price” mindset you will be more inclined to offer at or below list price and you will miss the property. Buyers ask me all the time, “what should I offer?” My advice is always to give it your best shot, and use the strategies I have outlined above. If it’s not worth a an extra few thousand bucks then perhaps it’s not the right property for you.
9. Hire an experienced Realtor who knows how to navigate a multiple offer situation.
Every piece of advice in this article is based on personal experiences, so it’s really important to choose an experienced Realtor to represent you. I have been fortunate enough to work in both an extreme buyer’s market and an extreme seller’s market with virtually no balance in between.
How much experience does your Realtor have? Are they easy to get along with? Do they get along with other agents, lenders and title people? Will they do some research before meeting with you to view a property or simply show up and open the door for you? Things like contacting the listing agent before booking a showing to check the status and offer activity will save you tons of time. Will they make sure that the seller will accept the type of loan approval you have? There is no sense looking at a property if you have a VA loan approval and the seller isn’t willing to accept a VA buyer or the property won’t adhere to VA guidelines.
There’s no guaranteed way to have the winning offer, but using these strategies will improve your chances of being the winner tremendously. Best of all, most of them can be done before you even start looking at properties!
Take some time to really think about what your Real Estate goals are. Write down and go over them with your Realtor during your initial buyer’s consultation. A little effort will go a long way toward getting your dream home!
If you haven’t yet hired your buyer’s agent, we would like to formally apply for the job. Use the contact form to give us some basic contact info. We can set up a time to chat about your Real Estate goals.