If you are looking for a new home right now, you are more than aware that the market is hot. Most listings are receiving multiple offers within a week of going on the market. The past few months have been filled with highly competitive offer scenarios for buyers in Washington D.C. As a buyer, you should be prepared to enter a multiple offer scenario and receive a seller’s counter.
If you find yourself in a multiple offer scenario, here are some effective strategies that will give you a competitive edge. We work with buyers every day to succeed in these situations. The goal is to get the home for the least amount of money as possible, and our agents will help guide you with the specifics on how to get this done.
The first step in the process is for the home buyer to understand the strategy. After reviewing this information, you’ll speak with your agent to confirm how you will move forward.
TIPS FOR WINNING A MULTIPLE OFFER SCENARIO
1. Demonstrate a Strong Financial Position. Be approved with a local lender who can get on the phone and back up your qualification. Out of town lenders with weak lender letters will make your offer unnecessarily weak. Local lenders can also settle quickly.
If you are confident in your financing, consider dropping the financing contingency. The financing contingency only protects you if your lender rejects your financing. If you are confident your loan will not get rejected, this contingency can make your offer unnecessarily weak. Ask your loan officer to have underwriting review your file or issue you an approval prior to making an offer.
Increase your Earnest Money Deposit. A large deposit shows the seller you are serious and are financially stable. You risk losing your deposit if you default.
Consider a general home inspection contingency, which would give you the right to inspect and cancel but without the right to negotiate repairs. From the seller’s perspective they won’t be “nickeled and dimed” over minor issues that may come up and you reserve the right to cancel for any reason.
Pre-Inspection: Have an inspection before a seller sets a deadline. Pre-inspections are often pared down versions where you might not get a written report. If time permits, having a full inspection is possible.
The Appraisal Contingency is often the riskiest contingency for a seller, so having a shorter or no contingency is a huge tool in winning multiple offer scenarios. You can have a partial contingency as well. For example, if the sales price is $600,000, you can stipulate the home must appraise for at least $580,000. If the home appraises for anything between $580-600k, you would proceed with the contract and pay the difference.
2. Appeal to the Seller. Work with agents that are negotiating experts (Like Glass House Real Estate!). A great buyer’s agent will develop a relationship with the listing agent and try to get as much information as possible. They will try to find out how many offers the listing agent expects, what is in those offers, what the seller’s ideal settlement scenario is, and anything else that might be helpful in crafting an offer. Once we get this info, we will move forward with trying to accommodate the seller/listing agent’s needs if they are reasonable.
Write a letter to the seller. The best letters to sellers end with a proposition to the seller that includes a counter if you are not the best offer. Include a picture as well if you can.
Escalation Clause: An escalation clause can be a valuable tool. Your offer would say “I will pay “x” (starting offer) price for this home, but if the seller receives another offer that’s higher than mine, I’m willing to pay “y” (escalator factor) more, up to “z”” (Escalator Ceiling).”
An escalation clause contains an escalating factor, which is how much you are willing to pay over the next best offer. and an escalator ceiling, which caps the top price you are willing to pay for the home.
The escalation also contains an option to retain or waive the appraisal contingency. (Note: If your escalation clause is exercised by the seller, they must provide proof the other offer was valid.)
The Bottom Line. Sometimes it just comes down to price, but oftentimes the seller wants to accept a contract from the party who will most likely close without delay and drama. This is a combination of demonstrating you are well qualified and working with an agent with a track record of closing deals.
If you want to learn more about the strategies Glass House agents use to win multiple offer scenarios and how we help our buyers achieve their real estate goals, contact us today.
Khalil El-Ghoul is principal broker for Glass House Real Estate. Reach him at firstname.lastname@example.org or 571-235-4821.
Published at Fri, 06 Nov 2020 18:33:39 +0000