Advice for Buyers Bidding on a Home With Multiple Offers
In case you missed the news, markets are starting to pick up, which means more home buyers are likely to get off the sidelines. But, given the lack of good inventory in many real estate markets, there are more buyers than properties.
The result? Multiple offers are making a comeback.
The days of bidding wars, with several offers over the asking price, are probably gone in most markets. But buyers in certain markets are likely to see competing offers under the listing price.
Here are three strategies for buyers to follow when the home they want has received other offers:
1. Don’t over-analyze the other offers or the listing agent
After multiple property viewings and interacting with the seller’s agent, the agent tells you there’s another offer on the property. Your reaction: “Really? Are you kidding me?”
Take the listing agent’s word for it, but only use that as one data point. Don’t spend too much energy trying to figure out what’s really going on with the other offers. If you love the property, keep moving forward, but at your own pace. Make the offer you’re comfortable with, and only when you’re comfortable making it. Don’t feel pressured to make an offer in order to compete, especially if you’re not ready to put in a bid.
2. Focus on your negotiations with the seller
Sometimes, the listing agent will say that the other offer is a better price, has a larger down payment or a quicker close. Who cares? The seller will still be looking at and working with your offer when considering their circumstances. For all you know, the other offer may be a horrible “low ball” offer or from a buyer who isn’t pre-approved for a loan or from an out-of-area agent who is unfamiliar with local customs and protocols. Or the buyer may have made the offer after only seeing the property once.
Even though there are other parties making offers, don’t get distracted by them. Stay focused on your own negotiations with the seller. Remember: You’re not negotiating with another buyer, and trying to do that will drive you nuts.
3. Present yourself and your offer in the best possible light
Most people make a decision about whom to sell their home to based not just on price but on the whole package. Who are the buyers and what is their level of interest in the home? What’s the price they’re offering? How many contingencies are they asking for and what are the timeframes of each? What is the down payment amount and length of escrow?
If you love a home and want to make an offer, start by making yourself known to the listing agent or the seller. Visit the property on multiple occasions. Show your face to the listing agent as much as possible. If the property is on lock box, it’s OK to go back at various times of day and in the evening. You’ll get different perspectives on the home, and the sellers will surely notice your interest.
Consider writing a note of introduction to the seller with your offer or ask that your agent do so. Be sure to present a pre-approval letter with your offer, too. This is a no-brainer in demonstrating to the seller that you’re a qualified buyer and you’ve taken the time to get approved for a mortgage.
If you have an inspections contingency, make the timeframe quick. If you really want to make your offer stand out, pre-schedule the inspection for a couple days out, so there isn’t a lag time waiting for an inspection appointment.
Finally, put your best foot forward with your earnest money deposit. While there are customary ways of approaching earnest money deposits in each real estate market, putting up only a few hundred or only a thousand dollars may give the seller the impression you’re not that serious. If you can put up the full 3 percent, do it. It shows you mean business. Don’t forget this money is refundable should something major come up, and your contingencies protect this deposit. For more information, read “3 Ways to Protect Your Escrow Deposit.”
Ultimately, keep in mind that the sellers are probably embarking on a major life change. They may be selling due to a job transfer, new baby, or the need for more (or less) space. It’s a huge decision for them, and receiving an offer can be as exciting as it is nerve-wracking. So lead with your best offer. Be patient and understanding. See what happens. If you don’t get the property, learn from the experience and move on. Who knows? You may find something even better.