Q: What should a buyer know when there are multiple offers on a property and how should you negotiate to make your offer the better one?
A: To those who are not active in the market, this question might seem a little farfetched. Are multiple offers in this buyer’s market possible? Absolutely! The best priced homes in the best condition in the most desirable neighborhoods are receiving multiple offers, even in today’s market where so many sellers are struggling just to get a single one. In fact, even homes that need more than a little TLC can get multiple offers if they are priced or located “right” or both.
There are actually a number of things you can do to make your offer competitive when you’re not the only one for whom that house is a dream house. The reality is that the price you offer is probably the single most important factor in making yourself competitive. Unless you’re offering cash, your goal should be to offer as high a price as possible within the range of values that the home will realistically be appraised for in value.
Savvy listing agents tend to advise their seller clients that an offer may be later renegotiated downward when the home does not appraise for the purchase price. So, if you’re offering an amount significantly higher than the list price, you may be asked to remove your appraisal contingency or even — especially in the case of bank-owned homes — ask you to document that you have cash on hand to make up the difference between the listing price and the offer price, in the event the property doesn’t appraise.
If cash is every seller’s No. 1 priority, closing is a very close second, or even a tie in some cases. Many sellers will choose a lower offer that is highly likely to close over a higher offer that is highly unlikely to close. This is why cash offers tend to be considered over offers with mortgage financing, even when the cash offer is lower, the seller has some level of assurance that none of the common mortgage related glitches such as low appraisals, condition issues, loan underwriting problems or any issues that will get in the way of the sales transaction closing.
Make sure you have a mortgage approval letter which gives the seller and the listing agent a fairly detailed briefing of your qualifications and ability to procure the loan and what amount of cash you are investing into the transaction. Why does the seller care? The more cash you’re putting into the deal, the more likely you are to close the deal.
You should be aware of the seller’s priorities. Your Realtor should be in touch with the listing agent to find out what the seller’s wants and needs are all about for the successful offer. Some sellers need a fast close and others place a high priority on taking an offer from a buyer who can take the property in “as-is” condition. Also, some of the other offers may be “all-cash offers,” which can be very difficult to compete with unless you beat them substantially on price. Contract issues such as contingency length of time, waiving or removing some contingencies entirely and even the personal property that you include or exclude are all factors into a seller’s evaluation and decision making around your offer.
Finally, your offer should be presented to the seller along with a pre-qualification letter from your mortgage professional and possibly a cover letter from your Realtor. But, sometimes it’s often a good idea for you to submit a letter to the seller, as well. You may want to tell the seller a little about yourself and/or your family and respectfully let the seller know what you like about the house and neighborhood, concluding with a respectful request to consider your offer and let them know that you have a personal and heartfelt interest in the property.
Many sellers in today’s market, even those with the luxury of multiple offers, are still selling their homes for far below what they once thought they would be able to get for it. Your efforts in presenting an offer with all the right ingredients can make the difficulty of considering an offer below their expectations go more smoothly. Also, it might serve to differentiate you from all those other buyers in the eyes of the seller. Raising your likeability quotient and humanizing yourself as a person, rather than just some numbers on a form, can help get your offer accepted even without multiple offers.
Get answers to questions you might have about real estate from Randy Durham, who is president of the Chattanooga Association of Realtors and a broker with Keller Williams Realty. His column appears on Sundays. Send your questions to Business Editor John Vass Jr. at jvass@timesfreepress.com