How to compete with multiple offers
Ask Phyllis: a blog series of frequently asked real estate questions. Email us here
Dear Phyllis,
We have been looking at homes for a few months and made an offer. There are six offers on this home, and our Realtor told us we have to increase our offered price. The seller’s Realtor said he can’t disclose how much higher we need to go. I don’t want to lose the home but don’t want to pay more than I have to. Any advice you can provide on how to compete with multiple offers is appreciated. 1st timer
Dear 1st Timer,
We are in an extremely heated seller’s market. As a result, most homes are selling quickly, often in multiple-offer situations, and many sell for over the asking price. In addition, there is a shortage of available homes for sale. Unfortunately, you are also competing with investors, flippers, and cash buyers.
When representing a buyer, I often find that by asking the seller’s Realtor (listing agent) the right questions, I can obtain much-needed background information.
For example, I can learn:
- How many offers are there?
- How many are over the asking price, whether any are cash offers, and whether any are contingent upon the sale of another home.
Next, I need to determine when the seller will review offers and whether they plan to counter all offers or only the strongest ones. In today’s market, most sellers are requesting each buyer’s highest and best offer.
Once I have that information, my client and I review comparable sales (comps). Then, together, we decide how much the home is worth to them. After all, is this the perfect home with the ideal floor plan, or are they simply settling?
After we determine our final offer price, we can discuss additional terms that might encourage the seller to accept our offer. For instance, does the seller prefer a longer escrow period? Alternatively, do they need extra time after closing to move out? In some cases, the seller may want a rent-back agreement.
Furthermore, there are other strategies you can discuss with your Realtor. However, these tactics can have serious ramifications:
1) Waiving your appraisal contingency. Keep in mind that lenders will loan based on the lower of the purchase price or appraised value. An 80% loan to the borrower is based on the lowest value. If you waive your appraisal contingency, you may need to increase your down payment.
2) Waiving your loan contingency (these can be helpful when competing with cash buyers). Obtaining a home loan today is more difficult than ever. If you waive this contingency, you need to discuss it carefully with a reputable lender (one with years of experience).
Best of luck with your purchase!
Related Post: How to determine how much to offer in a multiple offer situation
I also know people who are waiving the inspection contingency. To me it’s crazy to roll the dice on any hidden flaws or damage the home may have.
I can understand if there is a pre-inspection…. still risky but not as much as with no inspection