5 Things You Must Know To Win Multiple Offers in Real EstateSetting the list price for a house above the estimated market value in order to leave a little room for negotiation was the way homes have been sold for decades. However with the limited supply and huge demand for homes that seldom happens these days.
Most properties coming on the market now are priced below the estimated market value. Each property is different and depending on how many recent sales there have been in the immediate area may dictate how far below the estimated value the list price is.
It is now a normal process when listing a house for sale for the sellers and their listing agent to set a date for offers to be reviewed. On the predefined offer date potential buyers submit their offers through their agent, and wait to find out if they are the successful bidder. This process is similar for condos, and town homes.
Most often the offers are presented in person by the buyers agent, either at the property or at the listing Realtor’s office. In some instances the listing agent requests the offers to be submitted by email at a predefined date and time.
Depending on the situation the sellers may or may not entertain a preemptive, or “bully” offer. A bully offer is an offer that comes in from a perspective purchaser before the offer date set out in the listing. A bully offer is a strategy that can work well, and is a topic that I will write about in detail in the future. Depending on timing of submission one bully offer may instigate a flurry of activity and more buyers may also submit preemptive offers. Suffice to say that the information below can be applied to preemptive offers as well as multiple offers.
Work with an experienced and trusted Realtor
There are several reasons for working with a Realtor who has the experience to guide you through the complicated process of bidding against other home buyers.
The first reason is to make sure as a potential purchaser you are represented and advised properly on the purchase, inform you on the offer process, explain how this particular situation is going to transpire, and to keep you informed throughout the process.
Secondly to ensure your offer is complete and correct including all schedules that are required to be submitted with the offer. It sounds like a no brainer but I have seen on many occasions where buyers offers are incomplete, having errors or omissions and end up not being considered by the sellers.
Thirdly sellers want to be assured the buyer can ultimately pay for the home on the closing date, and that they won’t get buyers remorse the day after the offer date. Being represented by a respected experienced realtor will help. A good Realtor can convey to the sellers with confidence that they have done their due diligence on you, the potential buyer.
The OfferThere are are 5 major components of an offer that distinguish it from the other offers when in competition. It is important to understand each one to make sure that you have the best chance of being successful
1 PriceObviously the price is the most important one. In order to be successful in the majority of cases you need to be the highest bidder. To help you figure out what that number should be you need to be informed about the market. Again an experienced realtor can help provide market statistics and historical sales data so you have an idea of what other homes of similar size in the area have sold for.
While it’s easy to get caught up in the moment, it is very important that before you put in an offer you ensure that your financing is in place. You should seek the advice of a good mortgage broker to get a pre approval on a mortgage if you need one. The mortgage professional should also caution you about the ramifications that can happen if the bank does their appraisal of the property and it appraises for less than what you have just paid for it.
When deciding on a price many people think it is better to start low and work up to their maximum. The theory is that they may end up saving money by not "leaving any money on the table". This can backfire depending on how the offers are being handled, and how many offers there are.If the sellers and their agent decide to take the best offer on the first round of negations you may not be successful. Even if they end up going into multiple rounds of negations, it may still not be the best approach as it can lead to a progressive climbing of prices throughout each round which could eventually exceed a price if you had started out with a higher number.
2 Deposit AmountWhen submitting an offer you need to declare how much of a deposit you are submitting with your offer. More is better to a degree. The deposit speaks to the commitment and qualifications of a prospective buyer. The deposit amount should be high enough to show that you are committed to the purchase, and that you can afford to buy the home. If the deposit is too high it can signal to the seller that you have excess funds available and may lead to further negotiation on the price.
The exception is in some markets the listing spells out how much of a deposit is requested with an offer. Again discuss this with your Realtor.
In multiple offers make sure that you have the deposit in the form of a bank draft or certified cheque submitted with the offer. Unless otherwise described in the offer, your Realtor will be able to help you with each individual situation.
3 Closing DateYour realtor should be able to find out from the listing agent on when the best date is for the sellers to close the deal. Use this date.
If you as a buyer have flexibility on when you close it may be advantageous to include a clause in the agreement of purchase and sale that reflects this situation.
4 Irrevocable TimeWhen you sign an offer to purchase a house you included a time frame that the offer is valid for. This is a complicated legal topic but you agent should be able to advise you on this. Depending on the situation there are strategic advantages of including a short amount of time here. This is specially true in bully offers.
5 ConditionsWhen in competition to purchase a home, having conditions on an offer can lead to someone else being the successful bidder, sometimes even if they are not the highest price.
I cannot stress enough to get good advice here. Homes do not come with a sales receipt and you cannot return them to the seller if you are not happy.
If possible and you have time, have a home inspector come in and do a pre-purchase home inspection. This type of inspection can be less money if you don’t obtain a written report.
In some cases the seller will have a recent home inspection report available for potential buyers and their real estate agents to review.
I’ve touched on mortgages but will stress again here to speak with a mortgage professional about getting pre approved for financing before putting an offer in on a new home. They will help you figure out how much you can afford.
Get Advanced Notice on New Listings
Time is of the essence when looking for a new home.
Get notified about new listings as they come on the market.
Be the First to Know About New Listings
What Not to Do
Don’t write a letter about you and submit a picture of your family. It sounds harsh but the reality is the best price usually wins regardless of who is buying it.
Instead of this discuss with your Realtor what you are comfortable on them telling the sellers about you. Remember you want them to be assured that you can pay for the property and are qualified to do so.
Don’t get caught in the heat of the moment. Think about the maximum you are willing pay for a particular house and stick to it.
This information is to be used as a guideline only and is not meant to be, and does not substitute for legal or professional advice. I recommend that you seek professional advice when purchasing or selling real estate.