How to WIN in a Multiple Offer Situation
1. Be Readily Available to View Homes and Take Action
Listings that are new to the market are the homes most likely to get multiple offers. By submitting an offer promptly, you may be able to eliminate or at least reduce the amount of competition, which in turn increases your chance of getting the home. Having good timing can work to your advantage. If you are ready to submit an offer just prior to an open house, it's generally in your best interest to submit the offer after the open house is over (so the listing agent can't tell open house visitors there is an offer in hand and cause the other buyers to rush to submit an offer). Be prepared by having your loan pre-approval completed before starting to view homes. It’s ideal to get your pre-approval done months before you plan to buy so there is time to correct any credit report errors that may exist. Also, if you discover that your credit score needs a boost to qualify you for a better rate, you can begin taking the appropriate steps. Should the pre-approval letter expire before you find a home to buy, it’s quick and easy to get it updated.
At the end of negotiations the vast majority of sellers end up taking the highest offer… but not always!
3. Loan Pre-Approval
Having a strong pre-approval letter and down payment is essential. Some sellers prefer to go with the offer that can close the soonest, so it's good to work with a lender who offers the option of a quick close if this is a possibility. Once approved, a commitment to lend will be issued, which may allow you to waive your loan contingency. This helps make your offer stronger and more competitive in the current low inventory market. If you have a great credit score, your lender should also mention that in your pre-approval letter.
Waiving loan and appraisal contingencies is great if that’s an option for you (discuss the possibility of doing this with your lender and Realtor). It’s quite risky to waive the inspection contingency unless you do a pre-inspection prior to submitting your offer or if you are buying a tear-down.
5. All Cash Offer
An all cash offer eliminates issues that can come up when financing a property, so many sellers view this additional security as a huge benefit to them (particularly if they had another offer fall apart due to financing issues). For foreign buyers, it is advantageous to move your funds to a U.S. bank before making an offer so there is no concern about delays transferring the funds into the country.
6. Down Payment Amount and Verification of Funds
If you are getting a loan, the larger your down payment is, the chance of the offer having financing issues becomes much less likely. This helps to make your offer stronger. When you submit verification of liquid funds to cover your down payment and closing costs, it's best to show extra cash (and the stronger the competition, the more you should show). Present yourself as the buyer that the sellers don't want to miss out on working with.
7. Have the Right Buyer’s Agent on Your Side
Is your agent experienced, knowledgeable about the area, well organized and do they have a great reputation? Their online reviews may help provide you with some insight on how they operate their business. It’s the agent’s job to dig deep in a conversation with the listing agent to find out exactly what the seller is looking for in an offer: long or short escrow, leaseback, etc. Then the agent should report back to you with what they learned, help you determine the offer price and terms and submit the offer in a very clean and organized package. Knowing the listing agent's plan for reviewing offers is essential. Your agent will find out the offer deadline and ask whether they would sign off on a very strong offer in round one. Once the counter offer comes in, your buyer’s agent should be able to get at least a few details on the competition such as number of offers received and how many of the offers were countered.
8. Put Your Best Foot Forward
The listing agent pays close attention to buyers who visit the home at showings and open houses so be sure to make a good impression. If there are two nearly identical offers but one buyer came across as particularly negative or difficult during their viewing, it’s likely that the listing agent will recommend that the seller accept the other offer. Occasionally, sellers are home during a showing so always refrain from making any negative comments while inside or near the home.
9. Write a love letter (really!)
This explains who you are, what you do and what you like about the home and neighborhood. You can also mention connections you have with the seller based on what you see in the home such as a diploma that indicates they went to the same college as you, memorabilia indicating you are fans of the same sports team or if you have similar tastes in art or furnishings. This is your chance to sell yourself to help convince the sellers that you are the right buyer for the home and aren’t likely to change your mind and cancel the transaction. Some people also submit a photo of showing them and possibly also their family or pet.
10. Counter Offer Expiration
Take your time but hurry up. Just because there is an expiration on the counter offer does not mean the seller has to abide by it, so never wait until the last minute to respond. If you can't respond promptly, make sure your agent communicates this to the listing agent. Also, the listing agent might continue showing the home, so the longer you take to respond, the chance of additional competition increases.
11. Initial Deposit
The initial deposit funds are generally 3% of the purchase price, but a way to make your offer stand out a bit more, which does not cost you any extra (other than possibly a small amount of lost interest money), is to make the initial deposit larger. This shows additional interest and commitment to the property - more 'skin in the game'.
12. SECRET WEAPON: Escalation Clause
This is a great tool that you may want to add to your counter offer response, but only if the seller and listing agent are open to it. In an escalation clause, you list your offer or counter offer price but state that you are willing to exceed the price of the highest offer that comes in by a set amount (such as $5,000 or $10,000). Generally, you will want to set a cap on how high you are willing to go and also request that the listing agent provides you evidence of the offer (in the form of a copy of the highest offer).
Set Your Expectations
Remember that at the end of negotiations only one person gets the property. Don’t get caught up in the competition and overpay to the point that you may regret it later. If your offer is not accepted, you can always accept backup offer position while you continue looking for a different home.