Stacking the Cards In Your Favor: How to Win When There Are Multiple Offers
– Multiple offers are back in spades in Long Beach, Lakewood, Signal Hill and surrounding communities. As inventory has declined and demand has soared, multiple offers have become more and more common.
Recently almost every buyer we’ve written an offer with has run into a multiple counter offer situation. And even homes that have been sitting for months are suddenly generating multiple offers.
So what can a buyer do to get an offer accepted when there are multiple offers?
1. Become familiar with comparable sales and expect to pay market value.
Yes, there are still “deals” out there but in many neighborhoods of Long Beach, CA and surrounding communties, the average sales price is more than 100 percent of list price. It’s becoming more common to see homes selling for above the asking price. That can be because the seller priced the home below market value to create a bidding war — or simply because intense buyer interest drove the price above what other homes have been selling for. We’re in an “appreciating market” and prices are going up. You may need to structure your offer accordingly.
2. Get pre-approved (NOT prequalified) with a reputable direct lender, preferably one who is local.
Pre-approval will require submitting your bank statements, tax returns, and paycheck stubs, but it’s far more powerful to have that than a simple pre-qualification. Most sellers will not even look at your offer without a pre-approval. Also, know that you may have to get cross-qualified or cross-approved with another lender (of the seller’s choice or listing agent’s choice) before your offer is considered seriously. Keep your paperwork handy in case you need to do this. Don’t take it personally if you’re asked to do this. The seller and listing agent don’t know you or your lender and they want a second opinion from someone they know and trust. This is one way they can determine the relative strength of offers that are similar. If you are working with a local lender who has a strong reputation and relationships with local Realtors this may lessen the chances that you’ll be asked to cross-qualify.
3. Don’t ask for a credit for closing costs unless you really need to.
You may be competing against other buyers who don’t need that credit and all other things being equal, the sellers would probably prefer that offer if the bottom line is the same as yours. Take an example of a $450,000 sales price. Buyers who need a $12,000 credit for closing costs are effectively offering the sellers $438,000. And even if they offer $462,000 to compensate for the closing cost credit, the net to the seller would be less than for a straight $450,000 offer because the seller will pay slightly higher commission, tax stamps, escrow and title fees. Plus, the property would now need to appraise at a higher value. If you need a credit for closing costs, consider seeing if your lender can structure your loan with a lender credit or explore whether there’s a family member who may be able to “gift” you funds.
4. Bump up the earnest money if you can.
When you make your offer, you’ll be offering an “earnest money” or “good faith deposit.” If it’s too low, the seller may not consider that it shows much “good faith.” Sellers like to see that buyers have “skin in the game.” Good faith deposits are typically 1 to 3 percent of the sales price.
5. Time is of the essence.
If you like a home, act quickly. Other buyers may be interested as well. If you feel comfortable shortening your contingency periods, do so. Sellers like to know that there’s a shorter period of uncertainty before you’re committed to moving forward.
6. Find out what’s important to the sellers.
Yes, price is important. Most sellers want to get the highest price. But buyers often lose out to offers that are at the same price as theirs because of other terms. Have your agent explore what is important to the sellers. What timing are they looking for? Do they need to rent back the home temporarily after escrow closes? What appliances do they plan to include or exclude? Will they agree to provide termite clearance or a home warranty? The closer your offer is to something the seller can accept, the better it will be received.
7. Consider writing a love letter.
This isn’t always appropriate, but it can sometimes make the difference. Again, have your agent explore with the listing agent whether the sellers are emotionally attached to the home, whether it matters to them “who” buys the home — not just “how much” they will get. If you do write a letter, it should be from the heart. Tell a little about yourself and why you like the home.
8. Work with a local, reputable agent who has connections within the community.
If you find that your agent is abrasive or poor at following up and following through, other agents may share your opinion. Realtors like to work with other agents they know are experienced and capable. I’ve been selling real estate in Long Beach for 17 years so I have developed positive working relationships with many local agents. This can benefit our clients, particularly if we’re competing against an offer submitted by an inexperienced or out-of-area agent. These relationships also mean that we sometimes find out about properties before they hit the Multiple Listing Service.
9. Keep trying.
Just because you lost out on one house doesn’t mean the next offer won’t work. Keep looking and writing offers and stay positive.