How to Win in a Competitive Multi-Offer Market
It’s Quarter 4 in the 2016 market, Christmas is right around the corner, so historically, the market “cools” off this time of year. Sure, there are still homes for sale – in fact if you are a condo buyer, that “spring market” isn’t really a factor as much as it is for single family home seekers – so you are just waiting for the right condo to come along. The majority of single family home buyers on the other hand, are targeting moving in and getting settled sometime in late spring or summer. Most likely, they are buying a single “family” home to accommodate a “family”, so the start of a new school year is the driving factor in unpacking your bags. But guess what? The “Spring Market” starts in January! And you know what that means if you are in the hunt – houses will be selling quickly and some cases with multiple offers submitted!
Remember, this is a GOOD thing. You are buying something with value. Real Estate is tangible – you can touch, see, feel it. It’s not an emotionless bond or stock getting moved around from an investment broker’s laptop to her manager, it’s a foundation you can build a life or true investment in. And in our market – the Boston / Metro Boston market, we have the schools, jobs, economy all growing that make it a desirable place to live, driving up the value of our homes.
Ok, so when out hunting in the hot spring market, how do you compete in a multi-offer situation? Is it luck? Does the seller just take the highest bid? What if there are three or more offers at the same price? Well, sometimes it is just the highest price, but in most cases, there are other ways to show the seller (and the seller’s agent) that you are the most valuable buyer that submitted an offer.
Here are my Six Steps to submitting the best offer possible:
- Close When the Seller Wants to Close. One of the first questions I ask a seller’s broker when I step into a home with my buyer clients is: What is the Seller’s Target Closing Date? This is a big factor. If you ask the seller to close earlier than they really want, they might not be ready. They might be envisioning moving into temporary housing, and having to pay for storage. This is stressful for the seller. If you ask the seller to close later than they want, they will be paying for utilities, taxes, and have other expenses to “carry” or they just don’t get that nice check to help them buy their next house. This is also stressful. So, be flexible and close on the day they want!
- Be Prepared. Have everything ready to go – your financials, your pre-approval / pre-qualification letter, your timeframe and team all in order. This includes contacting an inspector with a few dates they can do an inspection – IF you are doing one (see #3), make sure that the inspection can be done quicker rather than later. Call any good inspector in a strong market and ask if they can do one this week = good luck! NO chance. So, schedule one before you even offer! (Sorry inspectors, I know you don’t like to get cancelled on in case the offers don’t go through, but with this strategy, the buyers have a great chance of getting the accepted offer and you the inspection!)
- Easy on the Contingencies. Most home buyers want two things in their offer: Home Inspection and Mortgage Contingency. Both of these I recommend, and try to keep buyers protected as much as possible, so I tell them to keep them in the offer when possible. Home inspections are great for two reasons. Obviously the first is to make sure the house is tip-top or has no major issues. SO – when submitting an offer, tell the sellers / seller’s broker that you are just being cautious and if there are no major “structural or mechanical issues” you are not going to ask for anything from them. Normal wear and tear - you as the buyer will take on. The second reason is first-time homebuyers especially need to know how the house “works”. If you’ve never owned a home or have been in building / contracting of any sort, what goes on behind the walls can be “magic” to you. So, your inspector will show you how the systems work from heating to cooling to electrical, etc etc.. This is important to know. As far as Mortgage Contingencies – keep them in there UNLESS you have a downpayment of 40% or more, then you may be able to risk it if you are competing with “all cash” offers, and that is your only leverage. However, tighten up that contingency date. I personally call my buyer’s mortgage broker and before submitting an offer, make sure we get the quickest and most realistic mortgage contingency date. Another helpful and pro-active conversation I like to have with the seller’s agent besides “I’ve spoken to my best home inspector and we are ready for an inspection this Thursday when our offer is accepted!” is “I’ve spoken to the mortgage broker and they can really tighten up that mortgage contingency date to the 25th, making closing possible right when your sellers want!”
Ok, so that takes care of the two contingencies that are necessary. But what if I want the chandelier or the kitchen island or the washer / dryer? Well, if it’s not offered as part of the home, leave it out. You aren’t buying a chandelier or patio furniture with the house as the afterthought, you are buying the house first and foremost. The more you ask for, the more the seller has to consider, therefore, the more complicated the offer. Keep it simple and focus on the HOUSE. I know a great place to buy a better chandelier and brand new washer / dryer, we can go there right after closing!
- Be Nice. From the moment I walk in as buyer’s agent with my clients to introduce myself and the buyers to the seller’s agent, I’m energetic, respectful and just plain NICE. Why? Well playing “hardball” or having that “poker face” is a strategy that works great if you are the only person with interest. But in a competitive buying situation, you want to make the seller’s agent and the seller feel that this is going to be the easiest, least resistant and enjoyable transaction. Remember, you all have to work together for anywhere from 30 – 60 + days with several interactions along the way, so let them know by how you present yourself, that this will be the easiest road to go down versus the other offers. I call it “playing nice in the sandbox”. I make sure as a buyer’s agent to be clear, concise, friendly and thankful of the seller and seller’s agent’s time and effort.
- Write that Letter. Ok, it may be cliché or not truly unique at this point, but if you are neck and neck with another offer, that “we love the house and can picture ourselves here / this our dream home” letter just might pull those heart strings enough to put you over the goal line. One big tip: We all have Facebook and Linked-in etc, and we can find out a lot about a person in a short amount of time. DO NOT put any personal info that has not already been disclosed by the seller or seller’s agent in the letter. If the seller’s agent disclosed that the sellers are moving to California a few times, then yes, you can say we wish you the best of luck in your move to the West Coast. If you Facebook researched (ah hem… “stalked”) and they mention a move to Santa Barbara to a friend…. You’d be wise to leave that out!
- Be Comfortable With Your Offer. Ok, how high are you willing to go if price is the real factor for the seller? Well, the first step in all of this is: hire the most informed, knowledgeable and pro-active buyer’s agent. They can show you what the true value of the home is, and have you understand the market trends and neighborhood value in the future. Now, no one has a crystal ball, but good buyers agents will let you know if you are going way to high for the area, or reminding you to keep within your realistic budget.
Best of luck with your offers. I can always be reached for more tips, and detailed info about submitting offers and buyer agency in the Boston Metro market!
Paul Santucci, President of True North Realty 617-694-0004