The first thing you need to do is hire a highly experienced buyer’s only agent
With listing inventory down 40% year over year and homes selling at breakneck speeds, buyers looking for homes under $450,000 along the Wasatch Front are finding out how competitive this market is.
There are quite a few different strategies you can use in a situation where you’re competing upfront for a property that has multiple offers. I’m going to mention a few then I’m going to convince you to create a backup offer in the event you lose your multiple offer situation.
The first thing you need to do is hire a highly experienced buyer’s only agent who knows how to win in this market. That’s no joke, so don’t mess around here.
Second, raise your earnest money level up to or close to your down payment. Earnest money belongs to the buyer and is applied to the downpayment and or closing costs at the time of settlement. If you’re making your offer contingent on inspections, appraisal, or finance, you have 3 different options for getting out of the contract and keeping your earnest money. Your agent can help to ensure the protection of your earnest money with these contingencies and their corresponding deadlines.
Third, write the highest offer you can afford. This last weekend we listed a home at $425,000 and took an offer at $507,000. That’s not the norm, but normally in multiple offer situations, we’ll see prices increase by 5-15%. Write a strong offer, if it is contingent on appraisal and the property doesn’t appraise you can negotiate the offer or you can cancel and retain your earnest money if it is done so within the contract deadlines.
Fourth, this is an easy one, a no brainer. But write a letter from you to the seller telling them a little about you and why you’re head over heels in love with their home. Be genuine, be yourself. For a seller who’s lived in their home for many years it can be as emotional to sell as it is to buy, so make a connection with them using your letter. Make sure the agent communicates the letter in the body of the email as well as in a document attached to the offer.
Fifth, be sure your agent calls the listing agent to ask them what, besides the price, is important to the seller. I find many sellers need extra time to move out of the house. Perhaps they are in a situation like you are where they are also buyers competing in a competitive market. They may need some time to find their relocation residence. Consider offering them an interim occupancy with your offer. Give them 30 days, perhaps even for free, and then if they need more you can rent to them for the next up to 60 days at the cost of your loan. This one is huge and goes a long way for sellers who are in need.
Sixth, have short due diligence time frames as well as short appraisal and finance deadlines. The shorter your time frames the less the seller will worry about how long they’d be off the market in the event a buyer cancels. Time is of the essence.
Consider having your agent get in touch with a qualified inspector upfront to see if you can get an inspection done within 3 days and then use a 5-7 day due diligence time period. Talk to your lender upfront and have them collect all necessary documents and then run those through an automated system for underwriting. This ensures that your loan closes quickly. Then have the appraisal ordered right when the property goes under contract. It will take an appraiser 4-7 days to get out to the property. By then you’ll have your due diligence done and repair requests, if any, negotiated.
Seventh, consider waiving or compromising certain contingencies. For example, you may agree to waive the due diligence or home inspection contingency. If you’re comfortable taking the home in as-is condition, then consider waiving that contingency. You can always purchase a home warranty on the property that can assist should any of the major systems in the home break down. Talk to a good home warranty company and what their policies will cover upfront so you know before you go. A good home warranty will cost less than $500 for peace of mind.
You can consider waiving your appraisal contingency as well. Even if you offer above the list price and are maybe concerned about the appraisal coming in at value, and you have enough cash savings that you can cover the difference, then don’t make the offer contingent upon appraisal.
Also, you can choose to void the financing deadline. If you’re super well qualified and have a lender that you trust who ran you through underwriting, then you may have the peace of mind to move forward without the concern of obtaining financing.
Eighth, make your earnest money or part of your earnest money hard upfront. Earnest money shows the seller how serious you are about purchasing your home. I’ve referenced already putting up as much earnest money as you can when competing. I’ve also given you the caveat that you need a really good buyer’s only agent that you can trust in an effort to protect your hard-earned dollars. Say you offer $10,000 earnest money, consider making $2,500 of that hard upfront, then consider making another $2,500 hard after your due diligence inspection period. That shows the seller your level of sincerity in completing the process.
Finally, if you’ve done everything you can do and listened to the advice of your expert Realtor and still didn’t get the home, then consider writing a backup offer on the property. This is an addendum to the initial contract that states that the seller has in fact accepted a primary offer, however, if that primary offer fails, then you will move forward with your offer as previously agreed upon and your deadlines won’t start on contingencies until you’ve been provided written notice.
More than 25% of all offers accepted between a buyer and a seller fail to reach the closing table. This means you get a 1 in 4 chance of still getting this home. While at the same time a backup offer does not prevent you from going out and offering on other homes.
There are even more techniques we use with our buyers to help win in a multiple offer situation. From escalation clauses to guaranteed single offer verbiage we deploy the ones that will work for you to win. We also offer a “Love it or Leave it Buyer Protection Program” which guarantees you’ll love your home or we’ll sell it for free so please give us a call if you feel you need an expert to help navigate this difficult market.