Buyers in bidding war? 15 tactics to help them stand out to a seller
In a seller’s market like the one we find ourselves in, our buyer clients will likely find themselves on the losing end of a multiple-offer negotiation — unless we assist them in making their offer stand out from the crowd.
To help them avoid the disappointment of missing out on a home they love, we can use a number of different techniques to make their offer more attractive to the buyer.
In a recent discussion with Brad Nix, co-founder and chief operating officer of Path & Post Real Estate out of Woodstock, Georgia, he identified four things sellers tend to concentrate on, and by addressing one or more of those four things, we can make our buyer’s offer stand out in a crowded field.
The following is a breakdown of the four areas sellers tend to focus on, and how to write offers that are more focused on the sellers’ needs and desires, making them more attractive to the sellers.
Maximizing the sales price is often the seller’s main priority. When maximizing the sales price is the sellers’ focus, don’t hold anything back.
We may only get one shot to compete for the property, so offering the buyer’s highest and best price in the initial offer is often the best option. The following are a couple strategies you can use to make sure your offer stands out to the seller focused on price.
1. Escalation clauses
Escalation clauses are a great way to be as competitive as possible with regard to price. They provide an opportunity for buyers to win in multiple-offer negotiations even if their first offer price is not the highest price received. Brokerages may have different rules about these, so check with your Broker to understand your options.
2. Appraisal gap guarantees
Appraisal gap guarantees assure the seller that if the house appraises for less than the agreed-upon price, the buyer will pay the difference between the two.
This provides the seller some assurance the deal will close even if the home’s appraisal falls short of the contract price. The appraisal gap guarantee can make your buyer’s offer more attractive even if the competing offer has a slightly higher price.
3. Seller’s closing costs
Offer to pay some or all of the seller’s closing costs. Price is one thing, but the bottom line net to the seller is what really matters. Buyers who are willing to pay some or all of the seller’s closing costs can make themselves more competitive by directly impacting the seller’s bottom line.
Sometimes sellers have certain dates they need to close by or after to meet their circumstances. Buyers who can be flexible with their own timelines can stand out from other offers by giving the seller additional control over the closing dates.
4. Closing date window
Provide a window for the closing date, allowing the seller to set a closing date anywhere inside a three to four-week period. Sometimes cash buyers assume that a quick closing is ideal, but the sellers need more time to move out of the home.
Flexible closing dates can remove that pressure for the sellers and make a buyer’s offer more attractive.
5. Post-closing move-out date
Leave room for the seller to be out of the house after closing. We can do this by scheduling the date that the buyer will take possession of the house at some point after closing, or by allowing the seller to lease the house back from the buyer after closing for a short period of time.
If, for example, you can schedule a closing on Friday but arrange to take possession of the house on the following Monday, you’ll leave the seller space to fully vacate the property without the extra pressure of moving and closing on the same day.
Understanding the seller’s needs in regard to timing can help us sweeten our buyer’s offer by addressing the seller’s needs or desires.
Sellers want as few hassles as possible in the closing process, so anytime we can remove the potential challenges involved in selling a home, we can position our buyer’s offer to stand out.
The time and price issues we previously mentioned will overlap here to a certain extent, so if we address those challenges, we may be addressing convenience as well.
6. As-is contract
Increase the seller’s convenience by eliminating the concern of possible repairs called for in the home inspection. Choose an as-is contract with a short cancellation period to help the buyer avoid the likelihood of extensive repairs to the property, but also give the seller some comfort that the transaction will be smooth for them.
The as-is contract assures the seller that our buyer won’t ask for any repairs to the home, which provides flexibility and convenience for the seller.
7. Seller’s own home search
Overcome the biggest objection most sellers have now which is they aren’t sure they can find another home for themselves if they sell theirs. Flip the typical contingency so that instead of protecting the buyer’s ability to sell a house, it protects the seller’s ability to find a new property within a 30 or 60-day period.
This provides the seller the confidence that they won’t be left without a home to live in because of the contract. What we often find is that as soon as the seller’s home goes under contract, they become less picky because they see the likelihood of making money on the sale of their home, so they focus on the must-haves in their own home search instead of only the like-to-haves.
Sometimes the seller wants to have certainty that the closing will happen as the contract reads. Sellers prioritize all-cash buyers because those deals are more likely to close, which makes them more attractive to the seller.
8. Cash offer
Programs like Home Partners of America and Ribbon Home can help us turn our buyer’s offer into a cash offer that will help them win a multiple-offer situation. These programs will cost the buyer a little bit extra, but they provide certainty to the seller that the deal won’t fall apart because of financing.
9. Bridge loans
Bridge loans allow buyers to get a loan on the equity in their existing home which can make them like cash buyers by eliminating the uncertainty of financing.
Offer a guarantee that if the sale doesn’t close on the set closing day then you, as the buyer’s agent, will pay a penalty to the seller. Mary Maloney, the founder and owner of Hometown Realty powered by EXP in San Diego, California, told me she provides a $5,000 guarantee that the home will close on the agreed-upon date.
She can do this because she has a great relationship with her lender, but she also said that even if she misses on one or two transactions, she’d still rather win the deal at a smaller commission than lose the deal completely.
It also provides the opportunity to get a contract for our client we may not have otherwise been able to win. We can adjust the number of this guarantee, of course, according to the home prices in our areas.
11. Approved financing
Have your client’s financing completely approved as soon as possible. If your clients are able to have complete confidence in their financing going through, then explain the risks to the buyer and consider removing the financing contingency.
Removing the financing contingency will give the seller confidence that your buyer will close as the contract states.
Beyond the offer
Everything we do related to our buyer’s offer has the potential to impact the contract, so if we get impatient with the listing agent or respond badly to something, our buyer’s chances decrease. Here are a few ways to build rapport and confidence with the listing agent.
Be patient with the listing agent, understanding that we’ll be on the other side of this kind of transaction at some point, and we’ll want agents to be patient with us.
When we’re on the listing side of a multiple-offer negotiation, we should make a point to personally respond to the agents who submitted offers to build goodwill. Unfortunately, someone in that group is going to get disappointing news, and empathy from us will go a long way toward building relationships and potential future negotiations.
Communicate to the listing agent that you will do everything in your power to create a smooth transaction if your buyer’s offer is chosen. We can help with this by asking a few agents we’ve worked as co-brokers in the past to provide a recommendation about what it was like to work with us, and we can offer to do the same for them.
Say something like this:
I would like to write a quick review of how easy it was to work with you and I’d like for you to do the same for me. This won’t be used for marketing but will only be used agent-to-agent so that when I submit an offer in multiple offer situations, I can provide feedback from other agents who have worked with me to give that listing agent comfort that I will do everything I possibly can to create a smooth transaction.
Once you have these in place, submit them in a separate letter to the listing agent during multiple-offer negotiations.
Ask your buyers to write a letter explaining what they love about the house. This personal touch has the ability to create a bond with the seller and make the offer stand out from the others.
This strategy is not for everyone, but I have seen offers accepted that had lower prices and less advantageous terms by sellers due to their connection with the buyer from the letter.
15. Going the extra mile
Last but not least, go the extra mile when you are the listing agent on a multi-offer property. If we provide as much information and assistance to the other agents as we can, when we find ourselves on the buyer’s side of a multiple-offer negotiation, those agents will remember the effort we made, and it can help our buyer’s offer stand out.
Although the real estate market is red-hot, we can improve our buyers’ odds by presenting a deal that directly helps the sellers. Addressing price, time, convenience and certainty can position our buyers to win the home, and building relationships with the listing agents can do the same.
Jimmy Burgess is the Chief Growth Officer for Berkshire Hathaway HomeServices Beach Properties of Florida in Northwest Florida. Connect with him on Facebook or Instagram.