Even though we are in a slower time of year, houses are still selling. All year I have been seeing a shortage of good listings in the market. Right now there are 15% fewer available homes on the market than last year at this same time. This means that if a serious buyer is out looking for a nice home the cupboards are fairly empty. Right now there are many leftover homes on the market. I define leftover homes as those listings that haven’t sold for a specific reason whether it be price, location or condition. This shortage leads to heavy activity on those homes that come on the market ready to sell. Those homes are well priced, in good condition and in a location that doesn’t raise a red flag. This leads to multiple buyers being interested in the same house at the same time. Here is some advice for handling multiple offers from the buyer and seller perspective.
From The Buyers Perspective:
- Check to see if you have competition. Your agent will call the listing agent to announce your intention to write an offer. Make sure you know if you are competing with another buyer. At the same time have the agent ask for the sellers preferred closing date and for any items that will be excluded from the offer. All of the information below assumes that there is another offer.
- Make your decisions quickly. Getting your offer in a day ahead may make a big difference. Ask for a quick acceptance deadline.
- Do your homework: Check comparable sales and decide the maximum price you will be willing to pay. Also, think about how you would feel if you would lose this house over a couple of thousand of dollars.
- Do a thorough walk-through: When you see a house you are interested in, take your time. Check on the condition of the house, what would you need to do to make it yours. Are the systems (furnace, roof, windows) in good condition?
- Prepare a clean offer: Don’t ask for Sellers to pay for appraisal, cleaning, HOA transfer fees etc. When the seller is considering two similar offers, $50 can make a big difference and send a signal that the buyers asking for all of the small stuff will be tougher to work with down the road on inspections etc.
- Have your financing in place and make sure to include a letter from a lender along with the offer. I prefer to see a local lender who can jump in and make the closing work in a difficult situation rather than somebody who is working a toll free line.
- A nice touch is to write a personal letter to the seller explaining who you are and why you love their house. The seller has an emotional attachment to the house and wants to sell to someone who will take care of their house.
Consider an escalation clause. When the house is a good value and you know there is competition one effective method is to write in an escalation clause. This clause in the contract automatically raises the bid price if another offer beats theirs financially. For instance it could read “the offer price shall be automatically raised to a price $1,000 above any other bonefide offer, the purchase price shall not exceed $xxx,xxx”. This is where the buyer has to know how much they are willing to pay; is it full price or $5,000 over?
From The Sellers Perspective:
- If you are attracting more than one offer it shows that you have taken care of your home and priced it correctly.
- You want to make sure that all interested parties have a chance to submit an offer. Have your agent communicate to each agent who has shown the property recently to gauge interest.
- When reviewing offers look at these main points: net price to you after all closing costs, dates and terms and buyers ability to pay and close.
- Try to read between the lines and get a feel for motivation. A buyer who has been transferred and is living in temporary housing is a stronger candidate than an investor who will not be living in the house.
- Try to tie up some of the loose ends now. Use a counterproposal to change dates and terms. You will never again be in a better negotiating position.
- Choose what feels right and be open with your agent .
- Remember, you have a right to choose what offer you accept but you do not have the right to discriminate against a buyer. Choose an offer based upon what is presented in the contract.
From The Agents Perspective:
- I make sure the communication lines are open. I get a dialog going with the other agents. If all parties feel informed about the process and situation there will be no hard feelings. If a second offer comes in after the first, it is customary to call the first agent and give them a chance to change their offer.
- If you are in an agency position with your client they will lean heavily on an agents advice. Give them good information and let them choose from the possibilities.
- Every situation is different but remember the buyers agent is charged with helping the buyer get the house and the sellers agent or listing agent is charged with getting the best price and terms for their client.
Of course every situation is different so these tips are just guidelines. The most important thing is to have a good agent walking you through the process. Personally, as a listing agent I am there to get the best price and terms for the seller but I try to keep everyone equally informed throughout the process and let the offers themselves lead the sellers decision. In the end I know I did a good job if the seller is happy and everyone else is satisfied that it was a square deal handled ethically.