How To Strengthen Your Offer In A Multiple-Offer Situation
Winning a home in a multiple offer situation can be tough. These are some tips and tricks to help you negotiate an offer on your dream home in a seller's market:
First step, make sure you have the right agent.
Anyone can go online these days and do a home search on Zillow, Trulia or any number of other home sale websites. While these are passable options for finding and purchasing a home, they don’t provide you with personal attention to your wants and needs, nor can they provide the leverage that a licensed and experienced agent can give in a multi-offer situation. Say for example that you find a house that is everything you’d ever hoped for and then some. Unfortunately, you’re not the only one who decided this house was “the one”. A good real estate agent could be the deciding factor in whether you come home to your dream house, or you keep on dreaming. Your agent not only has an in-depth understanding of the market, they also have access to inside information which could benefit you in a big way.
Get pre-approved (not just pre-qualified) for a mortgage loan
One of the best things you can do to solidify your offer as most desirable to a seller is to come with the most financial back up. “I already know I’m pre-qualified!” you may say. While that is a good estimator for what you can potentially afford to spend on a home, there’s a significant difference between being pre-qualified and being pre-approved. In pre-qualification, a lender looks at your overall financial situation and based on that provides what you could qualify for in a loan amount, however this is NOT a guarantee of financing. A pre-approval on the other hand is the process of verifying your credit and financial status by processing all the necessary documentation, and then determining the amount for which you are able to be approved. Why this is important when it comes to making that offer on a home is that a buyer whose financing is already approved is a far less risky option to a seller than a buyer who could still potentially be declined for financing. If a seller accepts an offer and then the buyer’s financing falls through, that’s not only a disappointment to both parties, but it also means the seller will have to wait that much longer to move forward with their plans. A seller is very likely to be more interested in a pre-approved buyer whose financial situation is a sure thing, rather than taking a chance on an offer that could lead to a broken sale.
Know the market (the right agent will be key in this)
As mentioned already, having the right agent is the best way to be informed on the current market. Why it is important to have a good handle on the market, especially in a multi-offer situation, is that this provides insight into what a good offering price is based not only on the house you are pursuing but also the homes around that property; for example, are homes selling for the list price or is there a trend of above/ below list price sales? What is the average days on market for the area? What is a typical amount for seller paid closing costs or concessions?
Don’t low ball your offer
This seems obvious, but buyers do not always heed this advice. Of course as consumers we’re always looking for the best deal in order to save ourselves the most money, however you need to understand that a seller is almost always going to be inclined to take the highest bid (especially if it’s a sure thing). If you are hoping to draw a seller to your offer when there are other offers on the table, it’s better to offer above list price. Not only does that appeal to the seller financially, it shows them that you are serious enough to offer them a higher incentive. A low-ball offer is not only an unattractive option to a seller, it can even in some cases be seen as an insult to the seller and a wasteful use of their and their agent’s time.
Drop unnecessary contingencies
The ideal goal of negotiation is to produce a win-win result for both parties. As a buyer, your biggest win is to close on the house of your choosing at a price you can afford. For the seller, the best transaction is one that brings in the highest return with little to no incident in the process. If your offer has a contingency, or a condition which must be met for the sale to finalize (for example, the sale of the house you currently own must be finalized first), this will be a turn off to a seller because every contingency is an open-ended question that will take time, effort and money to resolve and which has the potential to cause the deal to fall through. In the case of multiple offers, the seller is going to opt for whichever makes the sale most assured and the transition most expedient for them. This is another area where an agent can be a vital asset, as they can help you determine what contingencies can and should be waived.
Be flexible with the closing date
Working with the seller’s situation (what sort of time frame are they on with moving out of the property; are they in a hurry or do they need more time?) is a good way to communicate that you are not only thinking in terms of your own self-interest. This will go a long way to show them that this is a good choice for both parties. They don’t want to be taken advantage of, nor do they want to feel backed into a corner. Moving a household is no easy task, and sometimes having some wiggle room instead of being locked into a fast-approaching deadline can go a long way in putting a seller at ease.
Pay earnest money
Earnest money, or escrow, is just one more way you can show the seller that you are serious about your offer. Earnest money is like a security deposit – the buyer offers a percentage, typically 1-3%, to the seller which the seller gets to keep upon acceptance of the offer. This way, if the sale for any reason falls through, the seller is at least covered for any expenses incurred and time wasted.
Provide additional financial information
When you apply for a credit card or a loan, certain information is required which shows that you are a viable candidate for approval. You typically have to show proof of your income, a history of credit, status of current assets and debts, and every lender will have certain criteria which you need to meet in order to qualify for their service. Even if you are approved for a mortgage loan however, the seller is likely only going to see the approval letter from the lender. Voluntarily offering your financial information to the seller is just one more way you can prove that you are serious about this investment. You are not required to show them your financials, but doing so could put their mind at ease that this is not a deal which is likely to come back and bite them.
Write a personal letter
Some people are very attached to their home on an emotional level. Sometimes, that sentimentality and emotional tie leads them to choose an offer that appeals to their humanity and not just their bank account. By writing a letter to give the seller an idea of who you are and what the home will mean to you, you’re giving them a chance to find closure with knowing their home, where they’ve built a family and stored up a lifetime of memories, is going to be loved and treasured as much as they feel it deserves to be.
Negotiate with the seller
It’s important to remember that even if the seller accepts your offer, the process isn’t finished until everything is signed over to you. If there are terms which the seller wants to negotiate, unwillingness to budge on the details could lead to a sale going south. Working with them is the best way to ensure that you walk away with the keys to your dream home.
If you are looking to purchase a home now or in the near future, our agents are knowledgeable and committed to helping you find the right home for you! Contact The Nick Peskoe Real Estate Group to get started on the right track.