The swift activity in the under $500k market has brought back the multiple offers so commonly seen prior to 2007. I had my fair share of them in 2011 with buyers. While some buyers prefer to stay far away from multiple offers knowing that they can often drive their offer price up, others have thrown their hats in the ring and been successful. Since in the end, there is only one buyer, there have been disappointments too. Below are my suggestions to help your offer rise to the top:
If the seller’s agent and seller see your loan letter comes from out of state or from a big bank (with a central call center) it may give them pause and a negative check in your column. Why? Agents know the local lenders and brokers and they know which ones get loans closed. Many big banks don’t assign one specific person to a loan, which can make for problems/delays in a transaction and delayed closings. A trusted, local lender/broker is the go-to person during the transaction and having one on your team will add confidence to your offer.
If you do not need to ask for closing costs – don’t. And this is not the time to worry about furniture or porch swings. You want the house, keep your focus on that. Even though your offer may net out the same as another offer in the pile, I have heard sellers say more than once “I don’t want to pay someone to buy my house.” Paying for closings costs is a mental thing for many sellers. Some sellers could care less and do just look at the net price. But others are emotional and again it can put a negative mark in your column.
Sometimes the price is not the only big concern of the sellers. Timing is often the reason many deals fall apart or don’t come together at all. The sellers may have bought another house already or the family may be separated because of a job. The sellers could want a quick close to move on or a long escrow period because they still need time to find a house. Have your agent find out what sort of timing is important to them and if you can make the closing date favorable to the seller in your offer. It could earn your offer big points.
Have your agent ask questions. Many sellers want buyers to want and appreciate their home. I have had buyers earn big points because they really wanted the chickens and chicken coop. The sellers wanted to leave the chickens in good hands. It inadvertently earned my buyers points to ask for the coop and chickens in their offer. And, don’t assume the sellers want to take things like appliances. They may not want to hassle with moving them or their new house might already have them. Ask.
Many times the winner of a multiple offer situation has the largest down payment. The larger the down payment, the more solid the buyer looks to the seller and the lender and the seller has less concern about the financing falling apart. Sometimes you can’t control this – you may only have 15% to put down when your dream house comes on the market. But, think outside the box for a few minutes and see if perhaps you have a relative who can gift you some money or if you can borrow from your retirement. Better to think about these things before you put in the offer rather than after the fact. In many cases you will see a “winning offer” have 30-50% for the down payment.
Ask your agent whether or not they present their offers in person. Whenever possible I do, and I suggest all agents do, especially in a multiple offer situation. If your agent can sit down with the listing agent and the seller that is ideal. But, above all this offer should not just be faxed in. Your agent should sit down face to face with the listing agent and tell your story. In addition the buyer or buyer’s agent should write an introductory cover letter about the buyers and their offer. A lot of things get said, but it is nice to have a letter for the sellers to sit down, read, and refer back to. See your story in black and white. If you love the garden and the charm of the house, the sellers will likely want to see and hear that.
Don’t think of it as an initial offer that will get countered. If there are five other offers the sellers will choose the best one and accept it, or they will choose one to counter. But, you want yours to be chosen, period. If they counter your offer and you were already at your max, you can counter them back at that original price. Your offer was chosen because it was the best one for the sellers and you may very well get the house at that first price. But, with the other offers out of play you are dealing with the sellers one on one, and that is right where you want to be.
Wait, what? I never recommend buyers waive an inspection, but the sellers may have had a pre-inspection done by the inspector you, the buyer, would have chosen. If the sellers let you see the inspection, it can give you valuable information about the condition of the house and factor in to your offer price. Also, even if you choose to do another inspection, you can cut the inspection period down to say 5 days from the standard 10. Make a call to your inspector to find out if that is doable with their schedule. Sellers love a short inspection contingency period because the inspection is often the largest hurdle in the transaction and all parties breathe a sigh of relief when it is over.
Know that when a seller gets three or four offers on their home, if their agent is savvy, they will make a spread sheet laying out the attributes of each offer. Like I have mentioned above you want as many plus marks in your column as possible.
And yes, you will not always come out on top. It is disappointing. Very. But if your offer is not chosen, see if the sellers will take your offer as a back up. If the first deal falls through, your offer will automatically slide into first position. Many buyers think they might just prefer to watch it and see if it comes back on the market. But if it does come back on the market, you could be right back in another multiple offer situation. With a back-up offer you avoid all of that.
Where there is smoke there is fire. Don’t wait around for someone else to submit an offer before you decide you like the house. Examine the house in regards to how it fits your needs and budget. Don’t wait for someone else to like it to make it look appealing. That will only drive the price up. Take some time to make your decision, but don’t wait too long. If you trust your agent (and I hope you do or you should choose another) and they tell you the home will go in two days, listen to them. They work in the market every day and have a keen sense of the ebb and flow of the market. Buyers have a lot more negotiation power when they are the only offer on the table.
Most of the time when buyers miss out on a house it is because of a factor they could not control like their maximum buying price or the size of their down payment. But many other factors like which lender they choose, the closing date, or writing furniture into the offer – are under their control and those factors could be the tipping point for the offer. Imagine your offer on that spread sheet next to the other offers. Many buyers can think of how their offer will look to the seller, but buyers also want to consider how their offer will look up against other offers. That simple shift in perspective could make all the difference.