In a sellers’ market buyers will frequently find themselves in competition with other buyers to purchase a home. Obviously this is great news if you are the seller, but it can leave the prospective buyer in a fear-driven flummox.In these circumstances, a property’s asking price and its selling price can vastly differ, where the actual selling price can be well above and beyond the original listed price.
Often in this scenario, homeowners strategize with their real estate agent to under-price a property in order to generate a lot of interest and ultimately create a bidding war. The seller chooses to consider offers on a certain date, in a timeframe that works for them. This allows the property owner, in conjunction with their agent, to hold open houses on the weekend so that many prospective buyers can see the home at once, and then they deal with the offers several days later.
This positioning of a property to garner multiple offers creates anxiety and can make a buyer feel less in control. Logic tends to go by the wayside in multi-offer situations. As a buyer, you need to be prepared, by doing all of your homework upfront with a strong understanding that you may not get the property in the long run.
The seller will obviously want to get the best price they can for their property, but the offer they choose or not choose could also have to do with subjects and conditions that go along with it.
Competing with Multiple Offers: Five Key Tips
If offers are withheld until a certain date, here are a few things you as a buyer can do to feel in control of the situation and will assist you in your bid:
1. Make sure your home financing is secure.
2. Make sure the property title is in order. If you know in advance there aren’t any easements or rights-of-way that exist, it’s one less “subject” you have to include on your offer. Fewer subjects make more appealing offers to sellers.
3. If you can, do an advance home inspection. The buyer could consider your offer more readily, if it doesn’t include a “subject to inspection” clause.
4. Work with your agent and to assess the competition. Are you competing against one family or a dozen? This will help you gain perspective on the situation.
5. Establish the price you are willing to pay and just how much you want the home, so you make an offer you feel confident about. Then if you lose the home by a mere $1000 you won’t agonize over it afterwards.
If all else fails you might want to consider a bully offer, where you present your offer via your agent before the indicated date. The hope when doing this is that the seller will consider your offer without seeing any other offers that may come forward on that date.
If you decide to make a bully offer, we suggest that you make an enticing offer with few, if any conditions. Know that bully offers are risky as you may end up paying an unnecessary premium for the property — what if it ends up that you never had competition in the first place? You’ll never know. You can also risk alienating the seller, as they may not be impressed by your aggressive approach and direct you to submit your offer on the day they originally chose.
Finally make sure you get everything in writing. Don’t engage in oral agreements. Write everything into the contract. Your offer to purchase a home becomes a binding contract when the seller signs and you need all of your terms and conditions within in.
Happy House Hunting!
By Sarah Daniels