In our current market there is a terrible shortage of available homes. Therefore when new listings hit the market there's a frenzy of buyers ready willing and able to buy the house. This is extremely good news for sellers and it's extremely frustrating for buyers.
There are many schools of thought on the best way to "win" in a multiple offer situation. The truth is, the seller makes the final decision. It's highly likely they're going to take the advice of the Realtor they've hired into account, but there is no guarantee what's going to attract the seller the most.
Having been involved in the situation on both sides of the table I can attest very few people enjoy it. Even the sellers who should be overjoyed that so many people want to buy their home are stressed by the decision making process. After all, choosing offer "A" and eschewing offer "C" which is practically the same could end up being a horrible decision.
Some real life examples include buyers who ended up cancelling after inspections for specious reasons, or buyers who wind up unqualified at the closing table. Yes, that's actually happened. The gamble is real on both sides of the coin. The buyer is worried they're paying too much after the bidding war, and the seller is weighing financing qualifications against offer price and other terms.
I've had buyers lose a multiple offer situation because another buyer was putting more money down. Or because they wanted to close too early, or too late. Sometimes the seller pushed them aside because they were asking for the refrigerator to stay. You never actually know what is going to be most valuable to the seller when submitting an offer. It's very good practice for your agent to call the listing agent and see if any motivation can be shared.
There are other reasons, 100% beyond your control that a seller may choose another offer too. Let's pretend for a moment that the listing agent has a buyer come up unrepresented to purchase the house. The listing agent is charging the seller X% to sell the house. The listing agent will share that percentage with another agent who brings a buyer. If the listing agent brings a buyer who's unrepresented they'll make more on the transaction. Sometimes they'll offer the seller a discount on that commission since they're not having to share it with another agent.
The math doesn't always work in the above example... There are instances where it will however. Other annoying situations come up when the listing agent gets a better split with their broker if the cooperating agent comes from the same office. It's very important to remember that the seller is paying their agent thousands of dollars to help and advise them through the process. So when the listing agent starts recommending offer "B" the seller may very well listen.
TIPS FOR SUCCESS
As you notice in reading above... there's no surefire strategy that will win the day. There are a few tips though that can help ensure you come out ahead in the bidding war.
- Treat it like an eBay auction. Offer the max you're comfortable with. If the house is listed at $250,000 and you feel it's worth $260,000 and would be OK paying $263,480. Make that your offer. Bid up to the point where you're not crushed if someone gets the house for $1,000 more.
- Don't ask for concessions unless they're 100% necessary. Asking for closing costs to be paid paints you as a less viable buyer. There's also a chance that the appraisal comes back low since part of the above listing sale price is going to closing costs.
- Be flexible with your closing date. Maybe you want in there in 30 days, but can wait 60 days. If you have flexibility here, the seller can maybe take their time figuring out the next step. That may be worth several thousand dollars to them even if you're not the high bidder.
- Stay away from a lot of extra terms and conditions. The cleaner and more straightforward your offer, the more likely it will get accepted.
- Submit a complete offer. Sounds simple doesn't it? Sometimes agents miss vital parts of the contract and this leads to issues for the seller in comparing your offer to others. A complete offer with every blank filled in and submitted along with your pre-approval letter and any other supporting documentation is going to shine over your competition.
- A letter to the seller. This is sometimes corny and usually has no effect on the sellers decision. There are rare occasions however where the buyer presents a beautiful case and pulls on the heartstrings of the seller leading their offer to be chosen. It typically only takes a few minutes to gush in a letter to the seller about why you love their home and how you can see yourself and your family growing there in the years to come.
With our current market I'm not seeing these multiple offer situations die off anytime soon. They've been the norm since last summer and likely will continue through 2016. Arm yourself with the tips above and have the best chance at coming out on top. Please contact me if you have any questions at all or if you think I missed something that can help in a multiple offer situation.