Why are multiple offers are such a hot topic right now?
Multiple offers arise when inventory is low and demand is high, which is what we are experiencing right now, particularly for single-family homes in the $350,00-$500,000 range.
Top strategies for standing out from other offers
Have all financing pre-approved and a letter from the lender stating this. Be careful what you disclose in this letter though, the sellers just need to know that you can buy this home - they don’t need to know your total buying power.
One way to stand out is to include a letter or photo to personalize the offer and connect with the seller. Deidre tries to find bits and pieces when viewing the home or through conversations with the sellers. In one situation Deidre was shopping with a young couple who were first-time home buyers. In conversation with the listing agent of the home they wanted to put an offer on, Deidre found out that this was a family home, and the homeowners had raised two children there, so the buyers were able to connect over the two children that they wanted to have and raise in the home. The seller even left a personal letter at the property on inspection day, so it was a great way to humanize the contract and bring those two parties together in a win-win situation. In another recent instance, Tonya just happened to find out through conversations with the listing agent that the seller was a corrections officer, and so it made sense to disclose that her client was in the military. Whether or not that set them apart, they did end up winning. This does require the buyer’s agent to be engaged and calm to be able to hear what is going on and to discern those bits of information. Taking a photo of your family in front of the home can be another great option. There was even a story to come out of the states recently; where the market is even more competitive, of an agent having a video professionally produced of their client talking about what they loved about the house. The buyers ended up winning in this situation even though their offer wasn’t the highest price.
Write a Clean Offer
Writing a clean offer can help to show that you are serious about the home. Don’t ask for the furnace and ducts to be cleaned, don’t ask for added things like tv & wall mount to be included, just keep it simple. Rember the best offer may not be the one with the highest price, your agent can ask what details are the most important to the seller such as possession date, deposits etc and you may choose to include those details in your offer.
How your agent interacts with the listing agent can also have an impact on the offer; in either a positive or negative way. While poor communication can happen on either end, poor communication from a buyer’s agent can make it hard for the listing agent to know how serious the buyer is or how capable they are of bringing the transaction through to the end. On the other hand, good communication and strong relationships can work in your favour. Deidre will often ask listing agents to call her to deal with the details of her client’s offer for it to contend.
Factors that can impact a sellers decision on which offer to accept
Price - The total offer, as well as the deposit amount, can be huge determining factors. In a balanced market, you will often see deposits of $5K - $10K for single-family homes selling in the $300K - $500K range. Right now we are seeing deposits much higher than that, $20K, $30K and even $40K to stand out. Possession Date - This could be that the sellers are looking for a short possession timeline to move forward and close the transaction, or they could be looking for a longer possession timeline so that they have time to find their next home. Ideally, your agent will be able to talk to the listing agent to find out the seller's preferences and you can then tailor your offer to match. Sentiment - For a lot of sellers, there is at least some level of sentiment attached to the home they are selling. Whether it was their first home or the home they raised their family in, buyers may be able to connect with this sentiment and make their offer stand out. Conditions - most sellers will prefer offers with the fewest conditions that can be removed quickly. Financing and inspection are common conditions, including additional conditions likely would not be well received in a multiple offer situation.
What if you don’t want to compete?
Not everyone wants to compete and that’s okay. Tonya’s approach to this is to talk about scenarios with her clients right off the get-go, inform them on the current market and find out if they are prepared to put in a really strong offer that the seller can’t refuse. Looking at homes that have been on the market for a while can be a way to avoid competing with other buyers. However, don't feel like you have a lot of time just because a listing has been active for a few weeks, if you've found a great listing it's likely other buyers have as well. Hard, short deadlines on the contracts are useful in these situations, so writing a strong, respectable offer with a short time frame can help you avoid competing against other buyers.
First offer vs second offer - which is better?
You may feel that being the first offer means that you can start low, but that's often not the best course of action, particularly in a seller's market. Right now, if the property shows well and is priced well it will likely sell quickly. So when you go in first and low and negotiations lag, when offer #2 inevitably comes in, knowing there is already an offer in play, their offer will look a lot better than yours, and you may not have an opportunity to re-negotiate. There is also the potential that the seller becomes offended by the first offer and opts to work with the second, fresh offer. Every situation is unique; an experienced agent can explain all of your options and their benefits and risks.
After a seller has accepted an offer, they may be willing to consider a backup offer, that would become the primary offer if the first buyers don't remove their conditions. The most important thing to understand is that if your backup offer becomes the primary offer you are contractually obligated to follow through with that offer, so if another home comes on the market that you're interested in, you may not be able to offer on that home. Again, every situation is unique and it is in your best interest to have expert advice.
Sale of a Buyers Home Condition
So you want to buy, but you need to sell your current home, what are your options? While we don’t want to say that something is absolutely not possible, placing an offer with the sale of the buyer’s home condition does pose significant challenges. There are alternatives you might want to consider, including:
- List your current home and make an offer once you have an offer on your home
- Consider options for a guaranteed sale
- Alternative financing options such as bridge financing
Our best recommendation is to have a conversation with your agent to fully understand the process, and what options might be best for you.
Buyers should have conversations about their risk threshold with their agent so they can make educated decisions. If you have a home to sell, are you going to sell your existing home before you buy a new home? If not, can you hold two homes? What would that look like? What is most important to you - certainty that you have a place to live, the convenience of not having to move multiple times, or minimizing expenses? The role of your agent is to present you with your options so that you can decide what is within your risk threshold and make the decision best for you.
An escalation clause basically means the buyer will increase their offer to $X above the highest offer. This is a risky proposition for both parties. The buyers don’t know the amount of the highest offer and could end up agreeing to a much higher purchase price than they intended. You can avoid this by building in a cap, but that just tells the listing agent what you are willing to pay (you might as well just make that your offer). The risk for sellers is that the buyers end up unable to afford the property, which increases the chances of the offer not going through. The sellers then lose their edge of having just come onto the market and receiving multiple offers. It’s hard to get that level of interest again.
Deidre’s tips for buyers - humanize your offer as much as possible! Write a clean offer -leave the extras out of it. Give enough info to paint a positive picture, but not too much info. Tonya - Electronic signing can allow for quick response times which can have a huge impact in multiple offer situations. She also asks her clients to be on call when negotiating in a multiple offer situation. Sara - If you’re not going to compete just back out. Otherwise, you are just driving up the price of the home which will drive the market up and impact the price of the next home you find. Sheldon - make sure your agent is a good communicator and has good relationships with other agents out there. Find an agent you trust!Posted by Liv Real Estate on