In a strong sellers market, where prices are going up, and there are more buyers than houses for sale, Multiple offers are the norm. It can be discouraging for buyers when every new house that hits the market gets 3 or 4 offers right away, and even sometimes 6 or more offers! The more offers, the more competition, and likely higher the property sales price will be above list.
With so much competition you need to make your offer as strong as possible to give yourself the best chance to win. When trying to buy a house that has multiple offers, there is no prize for second place (although you may get formal backup position #1), so make your offer count!
Here are a few things you can do improve your offer’s chances of winning in a multiple offers situation:
1.) Offer the highest price.
Duhhh! In multiple offers the #1 most important factor for sellers is price. It doesn’t matter if you have everything else in your favor- you will lose if your price is too low. Ask yourself: at what price would I not be disappointed if I didn’t get the property? Then, if you do lose, you won’t feel bad about it and kicking yourself afterwards thinking you should have offered more.
Let’s reverse the tables and assume you are the seller and you have received these six ‘best and final’ offers on your house that is listed for $749,000:
Offer 1- $751,000 20% down
Offer 2- $650,000- all cash 15 day close
Offer 3- $735,000 10% down
Offer 4-$785,000 30% down
Offer 5- $766,500 5% down
Which of these offers would you choose?
2.) Write a cover letter to accompany your offer!
Many buyers don’t bother to do this! If you want the property badly, make yourself standout and take the time to write a thoughtful coverletter to seller and tell them why they should sell their home to you.
3.) Put as much money down as you can.
Sellers want to pick the strongest buyer they can. The larger the downpayment the more likely the deal will close. Buyers with more money in the bank are stronger. In rapidly appreciating markets appraisals commonly fall short of the contract price, as the market could take several must to readjust to new price levels. Sellers want to get the price that they were offered. If the appraisal does come short, the fact that you have extra cash to cover the difference, helps them rest at ease.
Incomplete offers aren’t considered, they are thrown in the trash. If you don’t have all your ducks in a row yet, do it right away, because when the market is moving fast it doesn’t wait for you to talk with a lender and get preapproved or obtain a copy of your most recent bank statement.
5.) Find out if the seller wants any special terms and include them on your offer
Being flexible with any terms the sellers want (or dictates…) can push the bar in your favor. A lot of sellers in an rising market, will be moving- and they will be facing the same challenge of finding a new property as you do. Giving a seller a leaseback provides them time to purchase a replacement property. Usual seller leasebacks are 30-60 days, and terms are a small security deposit and monthly lease payments equal to your holding cost (mortgage, taxes, and insurance).
6.) Choose an ODD number to write for you best and final offer
There is nothing more frustrating than losing a property because another buyer with more experience in multiple offers chose to write an odd number offer price ever so slightly above yours! (I once had a client who lost multiples a few years back with a $1,700,000 offer to a $1,710,000 offer…neither of us were happy campers). Let’s say your best and final is $450,000- I’d recommend making it $453,632 or something. Or maybe $451,105. Make it an odd number that is slightly more than an even number to give yourself the best chance of being the highest.
7.) When the counter offers are sent out, wait until near the end of deadline to respond
When you ask the listing agent what the property is going to sell for- they don’t know, because it depends on what the buyers are going to do. When you wait for some of the responses to come in before submitting yours, you give yourself a chance to try and can some info from the listing agent where you need to be at. I might tell the listing agent what offer we are going to make verbally and ask them if this is going to get the property, and gauge their reaction. If you have a relationship with the listing agent, they may give you some hints.
8.) Have your agent Present your offer in person
This goes a long way with real estate agents that come from the old school. Twenty to thirty years ago, before emails, cell phones, and fax machines, driving to the listing agents office and presenting your offer in person was the way everyone did it. When you go the extra mile, the listing agent will notice and know you are serious and want to close.
9.) Shorten your Inspection Contingency
The purchase agreement has a 17 day inspection contingency by default. In fast markets listing agents are usually countering buyers inspection contingencies down to 7-10 inspection periods. This can put a lot of pressure on your buyer’s agent to get all the inspections done. 7 Days is the minimum time required to do inspections, and 10 is a lot better. You can voluntarily cut down your inspection time from 17 days to strengthen your offer. Maybe to 14 or 12 days, or 10 if you want to be aggressive. 17 days is more time than you need so shaving a few days off won’t hurt you if you stay on your toes.
9.) Waive Contingency
If you are a cash buyer, you have no problem waiving the loan contingency. For everybody else who is financing, this is not an option.
The most common contingency to be waived by buyers in multiple offers is the Appraisal contingency. In strong seller’s markets, properties sell for more than their asking price, and sell for higher prices than the most recent comps. This can create problems with getting an appraisal at value. Sellers don’t want to accept an offer that is ‘only as good as the paper it is printed on’. By waiving the appraisal contingency, the buyer eliminates any doubt about the final sales price and cannot renegotiating the sales price if the appraisal falls short. But, if you do this, be ready to pick up the tab!
In fast markets, sometimes the Listing Agent will provide buyers with a pre-sale inspection report paid for by the seller. The reason sellers do a presale inspection is to find any serious problems with their property before they list it. The seller then has the opportunity to fix those problems or disclose them, instead of dealing with them in escrow. The purpose of a presale inspection is to do an “as is” sale. The seller will demand a very short inspection contingency 10-7 days.
If you know me, like a broken drum, I always recommend to get an inspection. I would strongly advise buyer’s against waiving the inspection contingency. The only time I would consider it, is with an off market property that you have no choice, or with a property you intend to complete rehab or tear down. The seller is trying to avoid granting any repair credits to the buyers. For liability purposes most listing agents and sellers do not want to force buyers to waive their inspection contingency- so you really don’t need to give this up. So hold on to it!
Keep in mind that having less or no contingencies as a buyer can be risky, because if you don’t close, you will lose your earnest money deposit– so be careful you understand what you are doing before you start waiving these contingencies right and left.
10.) ($Dollars +) above Next Highest Offer Clause
This is a trendy new thing buyers are doing to win multiple offers. Instead of offering a price, buyers will respond in their multiple offer counter offer with a sentence “buyer offers $5,000 above next highest offer”. Now some agents feel like this is a dirty trick, because the buyer isn’t putting a price down. For buyers it can be a little scary too because you don’t even know what price you are offering. A lot of agents don’t like it, because you aren’t really sure if the buyer is willing to pay what they are offering because the don’t know what they are offering. I am just sharing because some people are doing it. I am not a fan
11.) Ask for the “Take it Off the Market Price”
In multiple offer markets, listing agents are holding the house open for one or two weeks, and setting an offer deadline at the end, and collecting offers that come in, but not presenting them until the deadline, at which point they counter offer. Some buyers get really frustrated having to wait two weeks, then get countered, and have to wait another week, just to lose the property they want. This strategy will not get you the best price, however, in some situations I have seen it successfully take a property off the market before it’s offer deadline. You need an agent on the listing side who is receptive to it, some agents will refuse to present offers (even though they are suppose to) until the deadline no matter what price they are. However, as an agent myself, I can’t resist showing a seller a really good offer when I get it. Like the Godfather movies, you have to write the seller “an offer they can’t refuse”. If you are successful you can head the property off at the pass, and take it off the market before weeks go by.