There’s an excellent chance that you’ve been involved in at least one if not several multiple-offer situations, no matter what real estate market you cover in the United States. We’ve heard story after story of heated markets in towns big and small as people have been on the move in droves.
Attractive interest rates have made buying more enticing, and people are going for that pandemic retreat, whether it’s a new primary or a secondary residence. No matter if you are a first-time homebuyer or tenth, everyone is getting caught up in multiple-offer mania.
With so many buyers having stellar financial credentials, including a plethora of cash, how can you effectively compete and have a strong chance of sealing the deal?
Personally, I have experienced these scenarios as both a listing and selling agent. The market has been so competitive that two weeks before closing on a listing I had this fall in Florida, an agent who had submitted one of the multiple offers on the property contacted me to relay that their buyer still wanted the home so badly that they asked her to check if there was a chance of them buying the buyer with the accepted offer out and paying the existing selling agent their commission to buy the home.
In my 18 years of practicing real estate, I’d never been approached with that scenario. The seller was understandably not comfortable even contemplating that option, and with closing two weeks away, the seller stuck with the original buyer.
I should note that both offers made were cash.
In the case of the above, had the buyers in the second position moved a bit faster with their offer when making it and come in substantially stronger, those buyers might have gotten the home in the first place.
Just like a job interview, you never get a second chance to make a first impression, and submitting an offer in today’s market is very much like that. Assume you won’t get another opportunity to make it better the second go around.
Here are eight things buyers can do to create a winning offer:
1. Do some sleuthing
A seasoned buyer’s agent will do his or her research and look at:
- Listing and rental histories
- Tax records
- Property record sources
The agent will also google the sellers’ names to get a sense of what they are about, how long they’ve owned the property, whether there is a mortgage or if the owners have refinanced.
Other questions to answer:
- Does it look like a home equity line of credit might have been taken out?
- Who owns the property?
- Are there any legal filings indicative of being behind in mortgage payments at any given time, HOA fees, divorce, probate, etc.?
- What are you able to glean from public record searches about the sellers concerning age, areas lived, family, careers, and personal and professional interests?
All of these things may give you some insight into who the sellers are, what their motivations are for selling and where they might be going.
2. Speak to the listing agent
It might seem obvious, but in today’s world that thrives on texting, there is no substitute for you, the buyer’s agent, to speak with the listing agent. See what you can glean about their listing, the sellers, the sellers’ reason for selling, and their desired timing on moving and closing.
Although they might not tell you everything you want to know, whatever information they share (along with the research you uncover) will go a long way toward putting the sellers’ situation in context when crafting a successful offer.
3. Make your first offer your best offer
Writing a strong offer means you have to go in with your best foot forward upfront. In today’s uber-competitive market, you might not get another chance. Even if there are no offers in play when yours is submitted, you must assume that they will be coming. Things can change in nanoseconds.
Although many agents might have told the listing agent they would be submitting an offer, until that listing agent physically has other offers in tow, the answer might be “no.” At 10 a.m., the story may be vastly different than 5 p.m. that day.
I recently submitted an offer going into it with the knowledge that four or five were submitted or in process. The next day, I was presented with a multiple-offer notice and told there were a total of 10 in-hand already and more potentially on the way.
There isn’t time to let the seller come back to you with what they want in these situations, which means you have to pull out all the stops on the first go-around.
Now is not the time to hold back on price, escrow deposit strength, documentation showing financial strength of ability to purchase, flexibility with the closing date, or any other terms that could affect whether the seller chooses your offer or another one.
4. How to determine price, terms and closing date
Every property and market is different, so the number of offers on one home versus another might vary depending on price point and available inventory. The highest price is not always a guarantee of a winning offer.
Sellers might accept an all-cash asking price offer over a higher offer that needs financing.
Some sellers are leery of offers that come in well over asking. They wonder if the buyer will be demanding or challenging or want to renegotiate the price after inspections, regardless of whether repairs of any kind are truly warranted.
Based on the seller’s scenario and your knowledge of the market on the property’s location, you will need to work with your buyers to develop a solid offer while balancing what is realistically possible with your buyers’ financial situation and comfort level.
Just like everything in life, there will always be someone richer, taller, prettier, more talented and so forth. So coach your buyers upfront that there are limits, and you can only do the best you can do given the parameters with which you have to work.
Many buyers have limited budgets. Even buyers with unlimited funds might only want to spend a certain amount on a property they like because no property is perfect, and they believe they could find another one they might like better.
If there are homes in the immediate area under contract, contact the listing agent to see if you can get some intel about how many offers were received and the nature of the winning bid. This information might help determine how to write your offer. Every situation is different, and what worked for one seller might not for another.
If escalatory addendums are common in your market, they can be a useful tool. They help manage how high buyers are willing to go with their initial offer price rather than blindly going over the asking price by an arbitrary amount needlessly.
Multiple-offer situations can always be complicated, and the rules are — there are no rules. Whether you use an escalatory addendum or buyers go over the asking price in their initial offer, that information can be used to drive the price higher with all parties. You have to assume anything is possible, and numerous scenarios can ensue as the agent and seller determine how to handle offers.
Regarding offers going over the asking price, a common issue with offers subject to financing is the appraisal.
In increasingly heated markets, there’s pressure on buyers to waive appraisal contingencies. Sellers want assurance that if buyers agree to do so, they have proof of funds showing that they can truly pay for any price differences resulting from an appraisal coming in less than the contract sales price.
You might be able to negotiate a happy medium between the buyers and sellers by having the buyer agree to pay a certain amount over the appraised value should the property not appraise upfront.
Suppose buyers can pay cash but are electing to obtain financing to take advantage of low interest rates and conserve their cash on hand. In that case, they should consider waiving their financing contingency. That assures the sellers that they can move forward, no matter what.
Another concession buyers can make for a more substantial offer is waiving or significantly reducing the inspection and due diligence contingency time frames.
It’s a considerable risk into the unknown for obvious reasons. What you don’t know usually can and will come back to bite you. Depending on how fast-moving the market is and whether sellers in your area are requesting this contingency be waived regularly, it might be worth asking the listing agent if you could bring in an inspector to conduct a preliminary inspection or assessment of the home’s main components before making an offer.
The listing agent and seller do not have to grant this request. You could also have your trusted title agent run a preliminary title report and obtain any association documents for initial review upfront.
The closing date can also be a passionate contention point between the buyers and sellers, depending on their plans. Depending on when the sellers want to close, buyers might need to give notice to their landlord or work out arrangements to stay in their property if their home is under contract.
Find out what’s important to a seller as far as a closing date is concerned, and if buyers can be flexible about meeting the seller’s needs, that is often a huge tipping point in favor of that buyer’s offer.
Sellers are increasingly asking for additional time to stay in their homes past closing and often at a more favorable cost to them than buyers. Also, consider this when crafting an offer. A seller might want a lease-back price that is less than what the buyer’s actual mortgage payment will be or might want to stay at no cost, minus paying for utilities and maintenance while remaining in the home.
5. Keep it simple
In a competitive market, don’t overcomplicate your offer with umpteen conditions and requests. Make your offer strong, straightforward and easy to understand.
Sellers are looking for certainty, so find ways to give them precisely that. Now is not the time to ask the seller for 10 tradeoffs in exchange for a full-price or over-asking-price offer.
6. Be detailed and thorough
There is nothing worse than submitting a sloppy and incomplete offer. Although time is always of the essence in offer situations today, that’s no excuse for misspelled names, addresses, legal descriptions, and unchecked boxes or unfilled in blanks.
For example, if you’re requesting a home warranty, be specific. State the maximum dollar amount you don’t want it to exceed, and specify the items you want it to cover, like pool equipment, a leaky roof, or additional refrigerators.
Do not make the listing agent or sellers guess what you meant. Make sure you send over an organized and complete offer package to the listing agent with the buyers’ preapproval letter and proof of funds, if needed, along with all required addendums that accompany the purchase agreement.
You should also include an introductory note to accompany the offer outlining all of the attachments being included and providing explanations on anything that might be needed rather than just sending attachments.
Buyers’ proof of funds should be easy to read so that the listing agent and seller can clearly see that the funds in the account are sufficient to match the submitted offer. Treat this as if the buyer is applying for a job, and make sure every i is dotted and t is crossed.
If the offer is too sloppy or incomplete to piece together, the listing agent and seller may simply focus on other offers that are. Do not assume the listing agent will correct your offer or ask you what information you want filled in the missing blanks. They may simply put in terms that are most favorable to the seller if they choose to work with your offer at all. It may also send a signal to the listing agent and seller that perhaps you and the buyer don’t have their act together, and they may see dealing with this as more trouble than what it is worth.
7. Tell the buyers’ story, and give context
Although the National Association of Realtors discourages buyer “love letters,” it’s essential to provide some context to the extent legally and ethically possible while not addressing any areas that could open potential fair housing violations.
If the buyers appreciate certain features about the home, be sure to relay that sincerely. For example, if the buyers are highly organized and appreciate all of the home’s storage options, tell the sellers. Or if the buyers love the huge yard because they enjoy having an outdoor space for recreation, gardening, etc., and they’ll do their best to keep the seller’s gorgeous rose garden for years to come, share that with the sellers too.
8. Be responsive, professional and easy to work with
Although you can’t write this in the offer documents themselves, communicate to the listing agent that you are responsive and easy to work with, and make sure your actions match your words.
Now is not the time to incessantly call or text the listing agent to ask the status of your offer or when you can expect a response. Self-imposed deadlines that you or the buyers want to place on the sellers are exactly that.
Your offer is likely not the only one, and there are probably many buyers out there vying for the same property or in the same price range.
If you put too much pressure on the other agent, he or she might simply shut down and stop responding. Your actions as an agent representing the buyer could affect whether your buyers’ offer wins. Be professional, patient and responsive. If you are asked a question or requested to provide additional information on something, be sure to respond promptly with what is needed.
At the end of the day, if you and the buyers have done the very best to present a strong and compelling offer that is thorough, complete and well organized, then rest assured you have given an A-plus effort — and that is all anyone can ask for.
Explain to your buyers that just as in life, you don’t win them all. There are typically numerous people who are well-qualified and even overqualified vying for a highly coveted position in a job interview. Sometimes it goes to one of them, but other times it might go to someone with a less obvious skill set or perspective.
The same might happen in a multiple-offer situation. With guidance from the listing agent on how to handle the process, it’s ultimately up to the sellers. It often results in a decision based on a combination of emotion, practicality and business acumen.
However, with a buttoned-up approach, even if buyers don’t have success in the first go-around, eventually, they will score a winning offer on a property that will happily and gladly be accepted by a seller when the timing is right.