Basics for Handling Multiple Offers When Buying a House
In some real estate markets, it’s not uncommon for the sellers of a home to receive multiple offers. Or even in some slower markets, a home’s price or condition may be so exceptional that there are several purchasers clamoring for the chance to own the property. When this scenario presents itself, a different strategy may be required. Here are a few tips and tricks for how to best handle a multiple-offer situation.
As an agent working on behalf of a buyer, I find a multiple-offer scenario to be one of most challenging. In these situations, my goal often can conflict with the buyer’s goal. I want the purchaser to get the lowest possible price BUT the buyer wants to win the house at whatever cost necessary. So the first thing to keep in mind as we compete with other offers is keep our emotions in check. It’s best to keep a level head and compare the subject property to all other comparable homes in a similar price point. Carefully evaluate your priorities and the goals you created when you began your house hunt; make sure there don’t have to be any major concessions.
If you still want to move forward, the next best thing you can do is get your financing together. The sellers will consider the whole offer package and for obvious reasons, the financing component will carry the most weight. It’s not just the purchase price but also the loan type, the down payment amount, the deposit amount, the lender, and the pre-approval letter that will “sell” the seller when considering multiple competitive offers. Of the financed offers, a conventional loan with 20 percent down payment may be favored over a 3.5 percent down FHA loan. If you can put down a large down payment, you should write that amount into the contract or clearly note it on a pre-approval letter. Some sellers may perceive a local lender as easier to work with than an out of town lender, and that could strengthen your offer further. Also, some pre-approval letters show additional details of the buyer’s pre-qualifications. A generic letter may not carry as much weight as one that clearly shows that the purchaser’s credit history, submission of pay stubs, verification of employment, etc.
Apart from the financial piece, another important variable is when the transaction can/will close. Some sellers want to close right away, and others may want a little flexibility. Ask ahead of time what the seller’s intentions are, and if they have a specific settlement date in mind. If they already have the next house lined up, if it’s a vacant property and they don’t want to make the next mortgage payment, or if it’s an estate being sold, they likely will want to close ASAP; however, if the sellers have no idea where they will move, or if they’re relocating at a certain time or for various other reasons, they may want some time to coordinate the next steps. In competing with other offers, it’s important to find out the sellers’ preference.
A clean and simple offer is a favorable offer. A clean offer is one that doesn’t have any additional terms or addendums added along the way. A contingent contract will most certainly not compete well with anything that is non-contingent. Meaning, if you need to sell your home in order to buy the next home or you need your current home to successfully close, your offer may seem less favorable. Additionally, if you plan to ask for closing cost assistance, a home warranty, the refrigerator, washer, dryer, the Bose surround sound, etc, the seller may choose another offer with less “asks.” Be sure to find out whether any appliances will convey and try to stick with only those appliances.
One of the last and riskiest strategies to help ensure you win the home relates to property inspection. Most all purchase agreements are contingent upon a property inspection. It is absolutely to the buyer’s benefit to have the property inspected by a professional and it’s also to the buyer’s benefit to make the contract contingent upon these inspections; however, in a multiple offer scenario, a buyer may want to either waive that contingency or make it for informational purposes only. An inspection that is for “information purposes only,” simply means that the buyer can either “take it,” or “leave it,” there will be no further opportunity to negotiate for the seller to make any repairs. Any removal of potential roadblocks to the sale are extremely important to the seller and will make your offer stand out amongst the crowd.
In summary, if you are in a multiple offer scenario, start by asking yourself “is this home worth it?” Don’t let your emotions carry you away and make sure that you are certain about the purchase. Make a strong financial offer; purchase price, down payment, earnest money deposit, and a solid pre-approval letter. Gather information on the front end for what closing date is desired and if there are any items being offered by the seller (personal property and/or home warranties). Keep the offer clean and simple. And if needed, consider removing the inspection contingencies. Those are just a few simple tricks. Be sure to consult with your realtor for other helpful ideas.