10 Strategies to Win a Multiple Offer Situation as a Home Buyer
In today’s market, homes are hard to come by! If you’re searching in certain areas or trying to stay within a specific price point, it’s easy to be discouraged by the lack of inventory. You may have even found yourself on the losing end of a multiple offer situation a time or two.
We’re here to share some tactics that could help you win your next multiple offer situations! These strategies won’t be a fit for every single scenario, but this is a great starting point to separate yourself from the pack.
Consider working with your agent to target off market properties. If you can find a property before it goes to market, the odds of you having to compete go down. We create custom marketing pieces for our buyer clients to try to identify off market properties.
Consider your type of financing. In the land of multiple offers, not only price, but all terms are scrutinized. Often times- write or wrong- conventional financing is viewed in a higher regard than other loan products that may require a lesser down payment or stricter guidelines for things like appraisal, etc. If you have the flexibility to consider switching to conventional, you might explore this. If not, just make sure your other price and terms are in check to try to help offset.
Down Payment. This one piggybacks off of #2. When agents and sellers are reviewing offers, a higher down payment often sends the signal of a more qualified buyer if that’s up against someone with little to no down payment, even though this isn’t always the case. Do you have the ability to put some more money down? If not, consider how you can shine up your offer in other ways.
Possession Dates. Moving is stressful for everyone. If there are similar multiple offers on the table, the deciding factor could be possession date. If you’re able, consider the possibility of allowing the seller some additional time after closing to move. Like anything, this comes with a little risk so make sure you know what you are signing up for and have the proper insurance and documentation in place.
Contingencies. As a home seller, your goal is to remove contingencies as quickly as possible. As a buyer, you need the protection of some of these contingencies including financing, inspections, appraisal, etc. If you’re competing for a home, try to make your contingencies look as desirable to the seller as possible. While it is not realistic- or smart – in most instances to completely remove these contingencies, you can compromise. For instance, do your homework up front and determine the inspector(s) you wish to use. Get a feel for their turnaround times. Call them when you’re making your offer to ask how much leeway they will need. This could mean the difference in offering a 7 day due diligence period vs. a 14 day due diligence period and making your offer just a little more attractive to the seller. You can also consider adding specific terms surrounding each individual contingency. For instance, you could retain your right to conduct inspections, but specify you won’t request any individual repair unless it exceeds a certain dollar amount. On appraisal, you could consider offering an appraisal gap. All of these come with added risk to you, and it’s important you work with your agent to weigh the risks vs. the reward.
Closing Timeframe. Consider how to make the closing time frame most attractive to the sellers. Sometimes as a buyer you have a tight turnaround time and require a certain closing date, but other times, you have some flexibility. For instance, I had a deal recently where the buyers were renting month to month. We knew the sellers were still searching for a place to go, so we allowed the sellers to select our closing date within a 45 day period to allow flexibility on their end. Be sure to include your lender in this conversation to make sure they are on board with the timeline you are proposing.
Escalation Clause. If you know there are multiple offers on the table, but you’re afraid of overpaying, you could consider using an escalation clause. In layman’s terms, this means you offer a certain price, but include a clause that you will pay $1,000 more than the net of any other higher offer the sellers receive up to a certain dollar amount. That means if your original offer is higher than the others, you could get the house for your offer price, but if there is a higher offer, you’re offer will increase incrementally to cover the difference.
**For instance, let’s say you offer $150,000 but include an escalation clause saying you’ll pay $1,000 over any higher offer up to $158,000. If another offer comes in for $155,000, you will win the bid at $156,000. There is certain language you need to include, should you want to use an escalation clause, so be sure to consult with an attorney to get it right.
Local Lender vs. Big Box. As an agent, I can tell you first hand that offers that come along with a pre-approval from a local lender that I can call on their cell phone win hands down vs. pre-approvals from big box companies with 1-800 numbers. It might not always be right, but that is the perception.
Have your lender call the listing agent. So now that we have you working with a local lender, take it one step further and ask your lender to contact the listing agent of the home you are offering on. This can make a HUGE difference to that listing agent who can then voice confidence in you as a buyer to the home seller. This simple phone call could set the stage for a transaction that is going to be easy communication from all sides which is GOLD.
Ask the right questions to the sellers up front. I’ve saved the BEST for last folks. If you take one thing away from this post, let this be it. Make sure your agent is being proactive, and that they are asking the right questions of the sellers up front, before making the offer. Ask the seller what they prefer for a closing time frame, do they need additional time to move, is there anything that you can include or exclude from your offer to make it ideal for the sellers. If you don’t ask, you might miss out on a home simply because you didn’t know how to make your offer look good.
As always, give us a shout for any of your real estate needs.
We can put some of the above tactics to work for you.
Download our buyers guide below.
