You finally found a home that you’d like to offer, but you found out there are 4 other offers on this house already. Someone outbids you. Fine, let’s move on to the next one. Immediately after a listing hits the market, you submit a full-price offer, then the dreadful news: there are multiple offers, again!
What to do?!
It’s a really common thing these days. With really limited supply and more buyers waiting to buy, competition is almost unavoidable.
As an example, I recently experienced a crazy case: a beautiful and affordable home hit the market, within 4 hours, there were about 7 or 8 parties toured the home, and multiple offers streamed in that very night. The house finally sold for 5% over asking price, by a cash buyer.
So is there any way for a buyer to win out of a multiple offer situation?
1. Emotion Control
Before any tactical strategies, it is most important to reign in your emotions. Know that there isn’t a single perfect home in this world, the one that you HAVE TO get. When facing competition, it’s really important to cool down and examine what you really want, what your bottom line is. After all, with time, new and better options will appear. If this one is lost, we can immediately move on, or wait a while. If this one has strong appeal, then don’t worry too much about a couple of grands in price. And when you make a decision, proceed with no regret. Seriously, there is no right or wrong.
2. Price
Of course, when there are multiple offers, the most practical strategy is to increase your offer price. Sometimes the listing price is deliberately set a little lower than market to drum up competition. Consult with your realtor to offer a reasonable market price. Don’t have a mental burden that you are offering above listing price.
3. Pre-approval or Cash Offer
When you submit an offer, it’s imperative to provide a loan pre-qualification letter or pre-approval letter. Pre-approval is always better than pre-qualification, because the lender has underwritten your complete income and credit info, meaning it’s more reliable.
Cash offer is stronger of course. But it’s not guaranteed that cash offer will win out every single time. After all, the sellers will get the purchase price. If you are pre-approved at a higher purchase price, you can beat a cash offer.
4. Fewer Conditions
A house is not sold the moment a contract is signed. There are many clauses in a contract that offer exits for the buyers, called “contingencies”. For example, the buyer has an out after an unsatisfactory inspection, or the buyer has to sell a home first to buy this one. These contingencies make the offer weaker. If you are comfortable with eliminating some of these conditions, it could boost your offer strength.
5. More Flexibility
Sometimes the sellers have some limitations, say they can’t commit to a closing date, or need some time to move the big furniture. If you have the flexibility, you can put that in your offer to show a willingness to work with them. This gesture sometimes is worth quite a lot to the sellers.
6. Show Sincerity
Other ways you can show your sincerity is by raising your earnest money amount, shortening the contingency period, letting go of some minor conditions, etc. Talk with your realtor. Each case is different. We’ve heard of a practice of writing a “love letter” to the sellers. We DON’T recommend it! You pour your heart out and it may not work, or may be viewed as a violation of the Fair Housing Act!
7. Extreme Measure
If you really, really want a certain house, talk to your realtor. Some methods, like an escalation clause, might work. But in reality, you can not control how the sellers think and act. Even if you offer a sky-high price, they may not take it for other considerations, e.g. appraisals, cash offers, etc. We brought this up as an extreme measure, but also to let you know that there is no 100% guarantee.
8. Good Realtor
When you do all that you can to prepare yourself, mentally and financially, you also need a responsible realtor to enhance your chance of success. A good realtor will know how to guide you in a multiple offer situation, and has reliable communication. We have worked with some agents from famous companies, that basically went offline for about 48 hours in a multiple offer situation, no phone calls, no emails. Of course we proceeded without them. But it’s the buyer that lost out.
9. Secret Weapon
There is a secret weapon to significantly boost your purchase power: use a realtor that gives rebates! For example, at Realex Realtor we give our buyers average 1%+ rebate, up to 1.75%. We give the money back to you at closing, so you can feel comfortable offering more. Sometimes, 1% makes the difference between a winner and a loser.