Multiple Offers

Navigating Multiple Offers: A Guide for Buyers from REALTOR®, Dan Wood

Understanding the Situation

When you're in the market for a home, encountering a situation with multiple offers can feel overwhelming. As your real estate agent, my goal is to help you navigate this competitive environment wisely and strategically. Let's explore how we can position your offer to stand out.

Assessing Your Financial Position

Pre-Approval and Budget

Before we dive into crafting an offer, it's crucial to ensure you're financially prepared:

Get Pre-Approved: A pre-approval letter from your lender shows sellers you're a serious buyer. It also helps us understand your budget constraints.
1. Pre-Qualified Letter: This means the mortgage professional has received even less information than a Pre-Approval status.
2. This is the least qualified type of mortgage letter.
3. Almost anyone can obtain a Pre-Qualified Letter.
4. Most seasoned agents, will require a stronger mortgage letter.
Pre-Approval Letter: This means the letter is conditional as various items from the buyer have not been fully verified. It’s not a guarantee, but it’s an indicator of the buyer’s financial situation.
1. Pre-Approval buyers can be denied a loan, even after receiving the pre-approval letter.
Approval Letter: (Dan’s Preferred Option) This means the letter is fully verified and all aspects of the buyer have verified from the mortgage professional, in writing.
1. Income, Job Employment, Bank Accounts, Pay Stubs, W-2 forms, Cash on hand, tax returns and so on. All aspects have been verified.
2. Much stronger than a pre-approval letter.

Cash Buyers

Provide a Proof of Funds Letter with your bank letterhead: Contact your banker and ask them to send over, what’s known as a POF Letter or Proof of Funds Letter.

Sometimes a cash buyer will need to obtain multiple POF Letter’s from multiple banks to proof that the buyer has the full amount of their offer.
Screen shot pictures of various bank statements are not preferred. A POF letter is a much more legitimate form to include with your offer.
However, if you can’t get a POF, please sharpie or black out any important account information before sending it to Dan.

Set a Budget: Know your maximum limit, but also be flexible to offer a bit more if the situation demands it. This flexibility can sometimes make the difference.

Crafting a Competitive Offer

Price Considerations

Offer a Strong Price: While offering the highest price isn’t always necessary, it often plays the highest and most significant role in a seller's decision. The buyer's agent should review comparable sales to determine a competitive price, while at the sametime also appraising for value, during the mortgage appraisal. Highest and best, means just that... Your very highest and best offer, is what needs to be presented. There won't be another opportunity for the specific XYZ house. Once all offers have been presented, there won't be an extra opportunity to modify your offer last minute, before it's been presented to the seller.
Appraisal waiver: It is possible for the buyer to waive their appraisal, but it's typically not recommended. In other words, if the home appraises for $400,000, but the sales price is $500,000 including an appraisal waiver, the buyer would be required to bring an extra $100,000 to closing in addition to their closing costs, which include down payment, prorated taxes, mortgage lender fees, survey, home owners insurance, title company escrow closing fees, and so on.
Earnest Fee: If your Earnest fee is higher than the typical 1%, your offers will stand out, especially to the agent representing the seller.
It says, you are confident that you want to buy the house.
Home Warranty Providers: Instead of asking the seller to cover the costs of purchasing a Home Warranty for you, instead leave this section out. In other words the cost to the seller is zero.
If you want to purchase a Home Warranty, you can do so on your own and arrange it with the title company to be included at the buyer’s expense, on the close date.
It is possible for the buyer to purchase the title policy, which is typically a seller expense. By doing this the bottom line for the seller will increase, making your offer stand out over the others.

Terms and Conditions

Minimize Contingencies: Sellers often prefer offers with fewer or absolutely no contingencies. If possible, consider waiving certain contingencies like inspections or financing. However, do this cautiously and only if you're comfortable with the associated risks.
1. Appraisal Waivers mean if the house doesn’t appraise, you the buyer, would be responsible for bringing the difference from the appraisal price to the sales price in cash, in addition your down payment.
2. Obviously, if one of your contingencies is that you have to sell another home before you can purchase the house you want to buy, it will affect your results.
  1. Often home sale contingencies are not considered at all, unless the contingency home is currently in contract with another buyer.
Flexible Closing Date: Align your closing date with the seller’s needs, whether they prefer a quick close or need more time to move.
Offer Seller Temporary Lease back: If allowable, it’s common to offer a short leaseback to the seller. Typically a small deposit can be included to protect the buyer in the event of any damage upon move out.
1. Common Timeframe: 2-4 days at no cost to the seller
2. Less Common Timeframe: 5 - 90 days maximum
3. A daily rate can be charged for either timeframe option
4. Small deposit is recommended

Option period: If possible, you may consider a short, or even no option period.

Typical Option period is between 7-10 days. The typical rate for each day is between $35 - $50 per day.
1. The option period starts the following day after all parties have signed the offer. The last day of the option period ends at 5:00 pm, calendar day. There are no exemptions for holidays or weekend days.
Sometimes sellers have a pre-inspection to use, but keep in mind this is coming from the seller’s choice of inspectors and not yours.
1. Additionally, if the property was previously in contract, there may be an existing inspection from the previous buyer that we could use.

Building a Personal Connection

Personal Letter: Writing a heartfelt letter to the seller can create a personal connection that goes beyond numbers. Share what you love about the home and your plans for it. This emotional appeal can sometimes sway a seller's decision.
1. Pictures can also be included, but are not recommended due to possible discrimination from the seller.
2. Anything with race, religion, or familial status, may influence a seller’s decision and potentially violate the Fair Housing Act.

Collaborating with the Seller's Agent

Communication: Dan will maintain open lines of communication with the seller's agent to understand their priorities and motivations. This can provide insights that help tailor your offer to meet the seller's specific needs.

Finalizing the Offer

Reviewing and Submitting

Review Everything: Before submission, we'll review every aspect of your offer to ensure accuracy and completeness.
Timely Submission: Submit your offer promptly. In hot markets, timing is critical, and a delay could mean missing out.
The bottom line is always the bottom line. The seller's agent will put together a net sheet for every offer and typically the highest net to the seller almost always wins over the other lower offers.

Deadline

Typically in a multiple offer situation, notice is given to the agent and often the public that there are multiple offers.
Often a deadline is posted or given by some kind of notice, like phone call, text, or email. It's often also posted in the main description of the property details.
It's important to note that just because a deadline is given, the seller can still choose to negotiate one of the multiple offers prior to the deadline, and can even go into contract before the deadline is over.
- So get your best offer in early, rather than later.

Remaining Flexible and Positive

Remember, even if your offer isn't accepted, it's essential to stay positive. Each experience is a learning opportunity, and we'll refine our strategy for future offers.
Keep in mind, if the offer is accepted, the earnest fee and the option fee will be credited to the buyer at closing.
If the buyer terminates the offer and wants to back out, they must do it within the option period. If termination is done within the option period, the earnest money is returned to the buyer with a signed by all parties, release of earnest money document.
If your offer is not accepted, keep in mind, you can submit the same initial offer, but with a back up addendum attached to it. If it's accepted by the seller and the first buyer terminates, your offer will move into first position and immediately become in contract, by default.

Final Thoughts

Sometimes seller agents recommend a low market starting price to encourage multiple offers. It happens...
Your agent, hopefully that's me, should provide you comparable sales that are nearby and recent.
Each week, new homes hit the market. So if you miss this house, there will be another one. However, be patient. Sometimes buyers become eager and want to see more homes that they haven't seen over the weekend, early on Monday or Tuesday of the next week. However, buyers must understand that the bulk of the new homes that will be hitting the market occur in the middle to the end of each week. So, you're probably better off waiting till Thursday or Friday to schedule home tours, for homes you haven't seen.

Multiple offers often indicate that the starting asking price is in reality, below the actual market value. It's just how it typically works. See the graphic below to understand. The lower the price, the higher the amount of interest. It's the opposite for the reverse of that too. So just because your offer is over the asking price, in reality, it may just be closer to the actual "market value", and often is.