Multiple Offers-Competing Home Offers
Househunting is stressful in the best of circumstances. It's especially so in a seller's market when inventory is low, and multiple buyers are competing for the same properties. Multiple offers can happen in any market, though.
Learn how to submit an offer with the potential to win when there are multiple offers on a house.
Multiple Offers in Seller's Markets
Sometimes homebuyers wonder if it's even worth trying to compete against other buyers in a seller's market. It's not unusual for a seller to receive 20 offers when there's very little inventory on the market.
If the home is a good fit, it's a good idea to write an offer anyway. After all, somebody will be the winning offer. Why can't that person be you? You'll need to keep a few things in mind to write a competitive offer, though.
Submit a Large Earnest Money Deposit
Pending home sales sometimes blow up, and many sellers worry that once they commit to an offer, the winning buyers might back out of the transaction or default on the contract. By then, all the other buyers will have disappeared.
Remember that the earnest money deposit is part of your down payment. You'll show the seller that you're serious about closing if you increase it above normal. You're only offering the seller the money now rather than later, and it speaks volumes.
If you're not sure how much to put down as an earnest money deposit, ask your real estate agent. They will know the norms for the area and can make a recommendation.
Show the Seller That You're Qualified
Almost every offer will be accompanied by a lender letter. Ask your lender for a loan preapproval letter to make you stand out from the rest. This is different from a pre-qualification letter. Being preapproved makes you a stronger buyer in the seller's eyes.
Give the Sellers Time to Move
Buyer possession is often a sticking point. It's hard enough to juggle multiple closings when you're selling and buying simultaneously, and it's even more difficult when the seller is doing the same. Offer to cut them some slack by giving them two to three days to move out after closing without expecting compensation.
Shorten or Waive Some Contingencies
You have 10 days for inspections for lead-based paint under federal law unless you waive that right in writing. You always want to get a home inspection but consider tightening that time period.
You might also want to waive the loan approval contingency if your loan is solid. Talk to your agent about comparable sales to decide if you want to waive an appraisal contingency.
Offer to Bridge the Gap Between Appraisal and Sales Price
If you think the home might appraise at a lower price than you're offering, offer to pay the difference in cash. This would relieve a lot of stress on the seller.
Write Your Best Offer
Don't hope for negotiation in a seller's market. Offer your highest price and make it one you can live with if your offer should be rejected. Make the offer attractive and consider going a little above list price.
Ask your agent for a comparative market analysis to determine the pricing range. Sometimes sellers deliberately set a price below comparable sales to generate multiple offers. Paying a little extra doesn't necessarily mean you're paying over market value.
Multiple Offers in Buyer's Markets
The winning offer in a multiple offer situation in a buyer's market is often less than list price, and you may not be dealing with multiple offers at all. Or you might be competing against one buyer instead of 20. This can change your approach significantly.
Sell Your Existing Home First
Don't buy before selling if you're already a homeowner. If you're a first-time homebuyer, you already have an advantage over a buyer who needs to sell first. The seller will gravitate toward the offer without a contingency.
Don't ask the seller to give you personal items, and don't expect the seller to pay your closing costs. Find out which costs are customarily paid for by the seller and offer to pay one or more of them yourself, such as title policies, escrow fees, and transfer fees.
Ask your agent to pursue a friendly relationship with the seller's agent, too. Sometimes sellers reject offers based on what the seller's agent has to say about your agent.
Find Out What's Important to the Seller
Ask your agent to sniff out the hot buttons in the transaction. These could be seller requests or listing agent expectations. Ask what will seal the deal, then give it. Maybe it's fast closing. Maybe it's a longer than usual escrow period.
Share the Love
Most sellers have an emotional attachment to their homes. They want them to fall into the hands of an acceptable buyer. So be that acceptable buyer. Write the seller a brief letter explaining why you love their home so much.
Prepare for a Counter Offer
You can write the best offer in the world, but a competent listing agent is likely to advise the seller to counter all multiple offers, even in a buyer's market.
Sellers don't have to make identical counteroffers in some states. Each can be different. The seller also retains the right to choose or reject accepted multiple counteroffers.
Avoid a Bidding War in Any Market
Yes, you really want the home, and so do numerous others. If you're tempted to increase your price, ask yourself this: Do you just want to win, or do you really want the house that much? Competitive personalities can fall into this trap, and you don't want to dramatically overpay for the property.
Come in with the best possible offer you can reasonably afford.