How Can I Increase My Chances of Winning in a Multiple Offer Situation?
According to the 2013 Housing Market Survey presented by the Silicon Valley Association of Realtors, 70 percent of properties sold last year had multiple offers. That is the highest rate in at least the last 15 years. (link to this article: http://www.mercurynews.com/business/ci_24309947/sales-1-5-million-plus-homes-are-rise)
If you’re looking to buy a house on the Midpeninsula, you don’t need a study to tell you that competition for homes as fierce as it’s ever been. Some homes have had 20 or more offers! That leaves at least 19 very unhappy, empty-handed bidders. So how can you increase your chances of being the lucky winner in a multiple offer scenario?
While none of these are guaranteed, the following advice can help you move to the top of the pack:
Bid over asking price—but be smart about it.
A frequent strategy among realtors these days is to price a property below market value to generate a lot of interest and excitement among buyers. The intent is to create a situation in which multiple offers will come in and a bidding war might break out.
Sometimes selling agents will specify a date that their clients will “accept offers” and they will accept the best offer that is made that day. Other times, agents will be willing to go back and forth between the seller and buyers negotiating the best deal.
It’s important to understand how the seller’s agent operates so that you can devise the best offer strategy. If you think you’ll get a second chance to raise your offer, you might not need to make your best offer right away. However, if the seller’s agent is only giving you one shot, you should think hard about how much you want the property and make the highest offer you feel comfortable with.
It’s easy to get caught up in the emotion and want to do whatever it takes to win. No matter how much you want the house or how much competition there is, be sure to make an offer with your head, not your heart, so that you don’t end up with buyer’s remorse and a big mortgage that you can’t afford.
Make an offer with few or no contingencies.
The most attractive offers have few or no contingencies. This means that you need to have your financing in order and be pre-approved for a loan, or if you’re in the position to pay cash, even better.
If possible, sellers like to see the appraisal contingency waived. In these dynamic times, appraisals often don’t keep up with the skyrocketing value of homes and banks won’t make loans amounts for over the appraised value of a home. A good agent can help you find an appraiser who keeps up to date with the very latest in home values, but the appraisal for the home you want may still come in under the agreed-upon purchase price.
If this happens, and you’ve waived the appraisal contingency, you must come up with the extra cash to make up the difference, or you are at risk to lose your earnest money. Caution must be exercised when waiving this contingency.
Another type of contingency is the inspection contingency. Many times a seller will have inspections done and available to review before you make your offer. If it makes you uneasy to accept the seller’s inspection reports, you can ask to arrange to have your own inspections done prior to making an offer.
And that old contingency that allows you to sell your current home before committing to the purchase of a new home is practically extinct. In this hot market, sellers don’t need to wait around—there are too many buyers. If you need the equity in your current home to purchase a new home, it’s best to either sell it first, before you start your search for a new home, or secure some bridge financing that will enable you to make the down payment before you sell your current home.
Make sure you are working with an agent with local knowledge and experience who is respected by her colleagues in the real estate field.
An agent who knows the local market will not only be able to guide you to properties that fit your needs and are within your budget, but she will be able to help you understand how much you can afford and strategize exactly how to put together an offer that gives you the best chance of winning. An experienced agent can suggest lenders and help you get pre-approved for a loan. She can go through the disclosures and note anything that is unusual or that might be a red flag where a contingency might be advisable.
A very important aspect that most buyers would never consider is the reputation of their agent among her colleagues. Agents like to do business with other professionals who are likeable, detail-oriented and who have integrity. These qualities ensure a smooth transaction, which is pleasant and easy for the seller’s agent. You may think that a very forceful agent will work in the best interest of her client, but sometimes a buyer’s agent who is very aggressive may actually repel seller’s agents and be a detriment for her clients. Real estate agents are people, too, and we like to do business with people who we enjoy and who we can trust. I have seen deals in which the best offer did not win because of the harsh nature of the buyer’s agent.
In this hot, seller’s market there is no secret to making sure that your offer is the winning bid, but there are a lot of things within your control that can help you improve your chances.