Strategies for Multiple Offers
When a listing receives multiple offers the biggest offer is always tempting, but multiple offer scenarios need to be approached carefully by both the seller and the buyer. Sellers should be careful to review all details in every offer as the highest price is not always the sure bet. Same for buyers: make sure your big offer is smartly positioned and avoid some red flags that might scare off the seller.
Here’s a quick checklist:
Closing Cost Padding – The big offer price on page one may look high, but if the seller is asked to pay part of the closing costs that may go against the buyer for two reasons. 1) it reduces the overall net to the seller; and 2) with the inflated price a seller may get concerned about the house appraising and choose a buyer with a similar “net” price who has not padded the price with closing costs.
Financing Terms – Not all terms are equal. In order of preference: cash, more than 20% down, 20% down, 15% and so on. Better terms typically result in a smoother close.
Letters to Sellers – Be careful on this one. Before you provide a heart-felt letter about your beautiful family with two kids make sure you know the sellers’ situation. If they are divorcing, for instance, this letter may not have the effect you hoped for!
Inspections – Most buyers today still include an inspection on a home, but in any deal – particularly one with multiple offers – an offer that waives the inspection can be more enticing to a seller. Despite how common inspections are, even in older homes that might typically warrant an inspection, in a multiple offer situation the phrase “contingent on inspection” can send message of hesitance to the seller. A buyer can cancel during the inspection period for any reason, including “2nd thoughts,” and sellers know this. That said, before you consider removing an inspection to win a house, make sure you are confident in what you are buying, and have some dollars set aside for surprises that may come up. Or better yet, if you can, bring a contractor or an inspector with you to a showing – before you make the offer.
Waive the Radon Test and Do it After Closing – Radon tests are almost always included now during buyers’ inspections. A good listing agent will prepare a seller for the cost to mitigate upfront which can run from anywhere from $1,200-2,000. If a house shows up with radon this is almost always an automatic that goes back to the seller to put in a system. As a buyer, if you are willing to take care of radon testing after the closing, you could put your offer at a significant advantage, with it potentially not costing you anything since there is a chance that the radon levels are fine.
Ask Questions – We make sure to find out any information we can that can give our clients an advantage: What’s the seller’s situation? Is there a closing date that is preferable? Are there any other concerns of the seller? (i.e..they may not want to move the pool table, include it, so the seller doesn’t have one more thing on their list they have to worry about.
When market inventory is low, multiple offers are common. The guidance of an experienced team can be the difference that leads to a successful bid and smooth close. Contact us if you or someone you know might need some guidance.
