There are two types of markets, a sellers market when there are more buyers than there are homes for sale and a buyers market when there are more homes for sale than there are buyers. In a seller’s market prices may rise, and the days a home is on the market may shorten to a week or even less than a day. Some homes will sell before they are even registered in the local MLS. That means that sellers are often presented with multiple offers.
As a buyer you will need to understand how multiple offers work and how the buyer benefits. With multiple offers the seller has their pick of offers. As a buyer you have to determine how badly you want this particular home.
Terms & Price
The two things that matter to the seller are terms and price. The seller wants the highest price possible, and the best terms available. With most sellers this leaves room for negotiation. You need to hit the right note with the seller that the other contracts don’t.
There are various terms that can be written in your offer. A typical one is contingent upon you selling your house. If the seller has two offers of yours with the term listed and another without this term and everything else is the same, the seller will go with the second offer, as the terms better fit the seller’s need. It may seem reasonable to you, but these are terms that the seller has no reason to accept. Why would s/he wait for you to sell your home first?
The seller will only accept terms which meet his/her own needs, so keep them to a minimum. Ask your agent to find out from the seller’s agent what terms will be most favorably viewed by the seller.
Not the first offer, still get it in.
Remember the seller is under no obligation to take the first offer that comes in. So if you are second or third you offer may still be the one that interests the seller. The seller is going to look at the offer that best meets their needs. Examples of these are financing and possession dates. The seller may want a delayed possession date or a quick closing, or they may want to exclude items in the home.
Another thing the seller may look at is a qualified buyer versus an unqualified buyer. An unqualified buyer may have the highest price, but is a risk to the seller. If the financing falls through the seller has lost valuable time and possibly other buyers. So get pre-approved to eliminate this possibility.
Don’t falter in the negotiations
Don’t assume that because your seller is negotiating with you that s/he can’t entertain other offers. All it takes is for one party to make a change that the other party doesn’t accept and negotiations are over.
In fact the seller’s agent is under no obligation to let your agent or you know if there are other contracts on the table or not. The seller may be waiting to see your best offer before accepting another offer that may already be on the table. Multiple offers are often used by sellers to improve upon the asking price or terms. The sellers agent may be instructed by the seller to ask the buyers to “submit improved offers.”
This is the time another offer can slip in and take your momentum away.
Answer promptly and with as much generosity as you can muster. Don’t nickel-and-dime the seller with requests for small repairs, or complicate the contract with contingencies. Just ask for a repair allowance and take care of the problems yourself.
Deadlines
Don’t assume that the seller has to respond to your offer by your deadline. Deadlines are only important to the seller if s/he plans to either accept your offer or wants to keep the negotiations going.
By the same token, if the seller counters your offer and gives you a deadline for accepting, and another offer comes in that is more attractive than yours, the seller can withdraw his/her counter offer to you in writing and accept the other offer.
Market Changes
Markets may be hot for a while, but there may come a time when they will cool. The home you are so anxious to get now may level off in value very shortly. Make sure that this is the home you want no matter what the market conditions say. The home’s history may be helpful here. Ask your agent to provide you with the home’s history or a history of comparables in the area. If a home has been sold several times in the last few years, the history can tell you why and how much was gained or lost by the sellers involved.
Also look at the affordability of the home. Are the extra considerations you are offering to stay in the contract really worth it? Do they price the home out of your range? Will you be able to afford the other costs associated with move-in such as furniture and updates?
Know when to call it quits
There may come in a time when it is wise to simply give up and move on to another home. Some sellers, in a multiple offer frenzy, will simply make unreasonable demands. Some will even demand offers beyond those which can be justified by comparables or local lender guidelines. Lenders have a ceiling on what they will lend on homes in a given area and it can be broken down by square foot, age, history, and other factors. If the comparables don’t justify the price, the lender may refuse to take a chance on being the first to raise the loan limits on a certain neighborhood or home. You might as well throw in the towel. Sometimes a lender’s refusal can be the kick in the pants a seller needs, however, and s/he may agree to your price when confronted by the voice of reality.
The best way to position yourself as the buyer whose offer is accepted is to work closely with an agent who can help you step by step from getting pre-qualified for a loan, to helping you find homes in your pre-approved price range, to helping you negotiate the home of your dreams.