How to Win Against Multiple Offers
Most of you know who have communicated with me or had friends go through the home buying process know our market is very competitive. In fact it\'s brutal. However it’s not too hard winning bidding wars. In fact it’s more exciting from my vantage. I win a good 2 out of 3 bidding scenarios by writing good contracts. There are a # of variables to manipulate to your advantage in a contract. Manipulate them all combined w/ having the “killer instinct” on the market regarding what it will take to get into this home.
A number of variables determine this \"instinct\" which is really nothing more than following the market like a hawk within the area my active clients are searching. Some of the variables include how well the home shows, the time of the year it\'s listed, how many agent cards are on hand, how long has it been on the market, was the property priced purposefully below the market value and calling other agents with homes under contract in that neighborhood and asking them to divulge how many contracts they received for their listing and what it escalated to. All of this give me a good idea how many contracts we will or will not be competing with. Not many agents go the extra mile because of the extra work involved. But from my perspective I\'d rather get my clients in a home on the first or second contract competing against other offers rather than writing 4, 5, 7 or more contracts that I\'ve heard about the last few years. Yes I don\'t name my computer Vulture Capitalist for nothing.
1. On the contract we are putting 10-20% down in most cases. Now if you decide with your lender to change your financing terms later that is fine. For example you may later determine a 5% down payment would be a better way to construct the loan. What matters is the money is at the table when we close and making a good impression with our contract. And we want to make a good impression with our contract by how much we are putting down.
2. Put as much of your down payment down into your earnest money deposit when you write the offer—very aggressive but it makes a REAL good impression. The earnest money is part of your down payment anyway so there is not much difference in putting it down a month earlier. The seller knows you’re for real and have $ based on your earnest money deposit more than your stated down paymet on the contract (at least good listing agents know that). If you break the contract you lose your earnest money deposit so a huge earnest money deposit says to the seller you’re for real and there’s no way in heck you’re going to lose your earnest money deposit by breaking the contract.
3. Closing date when seller wants
4. Approval letter up front from your lender
5. No contingencies if there are going to be competing offers. That\'s why it\'s a good idea to pay attention to the house when we view it to see if we are seeing any cracks in the foundation, etc. In many cases I state having a home inspection would not hurt your case, but in some instances I know there will be X number of other contracts most of which have cancelled out their home inspection. It\'s the market in which we have to compete.
6. Escalation clause—figure out where others are going to bid and then bid over it. In the blank where you list your increment of escalation (ex. $500 over nearest competing offer not to exceed a ceiling of _____) MAKE A STATEMENT WITH YOUR INCREMENT!!! Don’t go 500 or 1000 over the nearest competing offer. Think about it. If you’re talking about 550,000 house, 1000 extra dollars really doesn’t differentiate your contract except (1000 divided by 550,000). Increment 3-5,000 over the nearest offer. Almost all agents just increment in pathetic amounts. My buyers have won with everything equal because of earnest money deposit, strong increments and predicting where the others will escalate to.
7. When you escalate and figure other buyers might escalate to 570,000, then escalate to 572,700. DO NOT JUST STOP AT EVEN CUT-OFF MARKS LIKE MOST AGENTS DO. Always escalate 1700-2700 above where you think the cut-off mark is going to be. You want to predict where your enemy is going to finish and position yourself ahead of them. Think eBay bidding.
8. If you know the true market value is going to be up there to where you escalate and have no fears of it NOT appraising, strike the appraisal clause in the contract that says if the property doesn’t appraise for the sales price and therefore your lender will not lend you entire amount you can void the contract or negotiate or new sales price. By striking this clause you put seller at ease of the property not appraising to the escalated amount. Also instead of 10% down you could change the loan to 5% down and use the other 5% to make up the diff. between sales price and appraisal. Or I may tell you that the appraisal won\'t be an issue based on other comps that are available or will be available by the time the appraisal occurs. Having the option of a 100% loan is a great weapon to have in your arsenal because it allows you to take hypothetically the 5% you were going to put down and apply it to the difference between the appraisal and sales price. Striking the appraisal clause is very common in multiple offer scenarios and often very uncomfortable for the would be buyer. I WILL ALWAYS GIVE YOU AN INFORMED ANALYSIS OF WHERE WE STAND WITH THIS OPTION AND WHETHER I WOULD RECOMMEND IT IN TOTAL CONFIDENCE OR NOT. I WILL NOT PUT YOUR $ AT RISK--I PROMISE.
9. Free post-occupancy agreements to seller in case they need another 2 weeks in the property while they settle on another their new home, etc. Usually an owner would pay the new owner (you) rent for those weeks based on cost of new loan to you. But it is another variable to play in your favor.
10. Close at a settlement company convenient to seller or that the listing agent wants.
11. Agent to agent relations. Believe it or not it comes down to this in many instances of where things are so equal that my previous experience with this agent comes into play. Having started out a large office that dominates Arlington with 120 agents I know a lot of the listings agents or can drop names of contacts in that listing agent\'s office.
These are the first strategies that come to mind, but my point is multiple offers is nothing to be intimidated by---just play to win!