Yikes! Multiple Offers!
Low inventory and pent up demand have created a strong seller’s market. Here are 10 tips to move your buyer to the top.
Low inventory and pent up demand have created a strong seller’s market. Listings are shown dozens of times as soon as they come on the market - or even before they come on the market. We’ve seen sales just this week with over a dozen competing offers. You’ll need an arsenal of tips and tools to come out on top.
10 tips to move your buyer to the top.
- Find out the sellers' wants and give it to them: Communication with the listing agent is key. Learn as much as you can about what the seller wants. Closing date is a good example. If the seller is buying and selling at the same time, the close date can be the term that gets you the deal. Other ideas are no closing costs, 30 day close, flexible possession, no appraisal contingency, and no warranty. Whatever the Seller wants and your buyer can handle.
- Offer the highest price: OK. Obvious. But the highest offer may not be the best offer. It could be rejected if there are terms in the deal that make the offer less desirable. The high offer strategy could also come with appraisal issues. Including a conditional clause like “subject to home appraising for purchase price or higher.” May defeat the purpose of trying to beat another buyer, unless your buyer agrees to pay the difference between the appraisal and the purchase price – in addition to the down payment required by a loan.
- Offer a cash deal: Cash is king. If the Seller wants to close fast with no finance contingency, cash can make even a lower offer the one that wins. Waiving your financing contingency is beneficial. However, it is not the same as having cash available. If you NEED to get a mortgage, there is still a risk for the buyer and the seller.
- Use an escalation clause in your offer: An escalation clause can be a fantastic tool for securing a home, if used correctly. Some agents counsel against them because so many buyer and seller agents don’t understand them, don’t use them correctly and end up muddying the waters – and in the process possibly losing the best deal. Next week’s Broker Corner will focus on escalation clauses. For today, the basic idea of an escalation clause is that a buyer agrees to outbid other offers by a certain amount of money up to a specified cap. To be effective, consider the amount of the escalator. An escalator of $1,000 doesn’t weigh heavily. There are a lot of other terms that can be more important that an extra $1,000. Starting with an escalation amount $2,500 should get you noticed. Higher priced properties may require $5,000, $10,000 or more. With a higher escalator amount, you are giving the seller something to think about. If there is going to be a low cap price though, consider whether other favorable terms are the better strategy.
- Write a personal letter: A personal letter to the seller can put you on top with the right seller. If you’ve connected with the listing agent or you’ve noticed commonalities when you viewed the property, you might get some insight into the right letter strategy. Some sellers are emotional about who will be living in their house. We advise not to include a picture. A letter can turn into a fair housing nightmare in a flash.
- Waive your financing contingency: If you have a lender that will agree to a fully-underwritten loan pre-approval, then waiving the financing contingency can be done with minimal risk. It basically becomes a cash deal. Remember 2 things: 1. The buyer’s earnest money is at risk, if the deal doesn’t go through. 2. Pre-approved and pre-qualified are 2 different things. A mortgage pre-qualification means nothing.
- Waive the inspection contingency: Sellers love it, especially if the seller knows some problems will be discovered by the inspector. They also love it because the home inspection is often a second opportunity for a buyer to renegotiate with a seller. Remember there is a risk to waiving the inspection. If the home is newish or it looks well maintained, it might be worth the risk. If the home is older with little updating, maybe not.
- Keep Due Diligence periods short: Every contingency in a real estate contract is a potential roadblock to a seller. By making the time frame quick, you are relieving one hurdle of the seller’s plate quickly. In a recent RMAA sale, the Due Diligence was just 3 days. The agent had lined up inspectors to get in quickly and get the job done. The seller was happy and the buyer got the sale.
- Be the selling agent that the listing agent likes to deal with: The difference between being the agent that wins and all of the others may be the one that the listing agent likes to deal with – the one that answers calls fast, is personable and respectful.
- Be creative: Some strategies will work; some won’t work for your particular situation. It’s a bidding war and you’re in it win it.
If you have any questions, contact the Broker Team for clarification at firstname.lastname@example.org.