Beating out multiple bids
How to make your purchase offer stand out
October 30, 2009
By Bernice Ross
Inman News®
DEAR BERNICE: I can't speak for anywhere else in the country, but there are just no decent houses for sale in our area. We wrote a good offer on one house and discovered there were four other offers on the property. The owner wrote a counteroffer that was higher than the original asking price.
We didn't think we would have to pay more than the asking price to get the property. I've heard of people bidding up properties, but I didn't think it was happening in today's market. If we end up in another multiple-offer competition what can we do to make sure we get the property without overpaying? --Jeanette H.
DEAR JEANETTE: Many places in the country are reporting one to three months of inventory in the first-time-buyer price ranges. This is both good news and bad news. If there is little inventory in your price range that means that your market has probably bottomed and is on its way back up again.
There is no way to accurately gauge when the bottom of a market will occur. You can tell only in retrospect: If you're purchasing right now and there's no inventory in your price range, there's a high probability that you are timing the market almost perfectly. You may have missed the bottom, but you may not have missed it by very much. With today's low interest rates, and if you found the right property that you can afford, it could be an excellent time for you to buy.
Multiple offers can be tricky. Ideally, the listing agent will ask his or her manager to be present to make sure everyone is treated fairly. In the office where I worked, we had to have a manager present whenever there were two or more offers on the property. If the listing agent also had an offer from a buyer (a dual-agency scenario), the manager would assume the representation of the seller.
The listing agent would represent the buyer and would have no access to the other offers. If you were the agent representing the seller, you could not "shop" the current offers against each other. But, in general, the listing agent's goal is to help the seller get the highest possible offer so "shopping your offer" is often acceptable.
Because there is so much variation from state to state, make sure that you are working with a knowledgeable agent who understands what is required under local law. For example, my agent here in Texas told us we could consider only one offer at a time. We couldn't make multiple offers to multiple parties at the same time.
In California, we routinely issued multiple offers that had to be countersigned by the seller before they were finalized. In fact, we once had 52 offers on a single property. Everyone received a counteroffer and was asked to bring back their best offer. Needless to say, the property sold for well over asking price.
As a buyer, there are several things that you can do to maximize the chance that your offer will be accepted. When the market was extremely heated, it was common for desperate buyers to waive all inspection and loan contingencies. This is poor idea unless you have the cash in the bank to pay for the house and you have inspected the house prior to writing the offer.
I remember one of my buyer clients wanted to waive the physical inspection contingency because he was going to tear down this lovely old mansion. We insisted that he do the inspection. For whatever the reason, he changed his mind about the teardown and is still living in the property.
Unless you're buying a bank-owned property or a probate, be sure to include the appropriate inspection contingencies. If you cannot do your inspections after you have signed the agreement, do them before committing yourself to an earnest money deposit that you could lose. It's better to pay for the inspections and be out that money than it is to get stuck with a costly problem.
You can also write a letter to the sellers telling them about yourself and what you love about their home. I've seen sellers take lower offers just because the buyer promised to not do a major remodel on their home. Second, make sure that you are preapproved, not just prequalified with a lender.
A preapproval means that the lender has checked your credit and is prepared to make you a loan in a specific amount. Third, increase your earnest money deposit. Fourth, have your agent speak to the listing agent to determine what matters to the seller. Do they have to close by a certain date? Do they have any other specific requests? Do your best to honor those.
In terms of your offer strategy, you have three options when you suspect there may be multiple offers. First, make an offer just as you would normally. Second, if you really want the house, offer full price or just under asking price. Make your offer as close to the terms the seller wants as possible. Third, if you will be completely devastated for the rest of your life if you don't get the house, then offer over asking price.
Finally, make sure the agent you choose to represent you is a good negotiator. That's the best way to make sure your offer is the one that the seller accepts.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com and find her on Twitter: @bross.
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