Surviving a Hot Market
Buyer’s Guide to Multiple Offers in a Hot Market
Making an offer on a house in a hot market can be challenging, anxious and frustrating. Prices are rising, buyers are circling houses and, with a short supply of homes, many buyers are chasing fewer homes. These tips will increase your success in being the winning buyer for the house that you want.
Be pre-approved. Pre-plan your financing by meeting with a mortgage lender ahead of time and receive a pre-approval letter that can be submitted with a written offer. The more assurance of your creditworthiness and ability to close that you can offer the seller, the more competitive your offer will be.
Choose one house. It’s important to find one home that works best for you, and pursue it. Some buyers think that by making offers on several homes at once, they will be able to pick one. This is a recipe for buyer’s remorse, and if the seller gets wind that you are pursuing multiple homes simultaneously, whey won’t take your offer seriously, compared to other offers that they have received.
Collect information. Your agent will speak personally with the listing agent to find out as much as possible about the seller’s desires and timetable. This exploratory mission will reveal when the seller would like to close, their preferred title company, if they would like to temporarily lease back, etc. Crafting an offer that is palatable to the seller’s expectations will increase your likelihood of serious consideration by them.
Act quickly. In a hot market, taking time to see the house a second time or “sleeping on it” will likely cost you the opportunity to buy it. When you see the house, even if your spouse or partner hasn’t had a chance to see it yet, and if it feels like “the one”, go ahead and submit an offer, because other buyers will be doing the same.
Offer favorable terms. Sellers will look at price most importantly, but they will also consider many other facets of your offer. Important considerations will be option and financing contingencies, the reputations of the lender and your agent, your creditworthiness and if you have a house to sell. Clean offers with meaningful option fees and earnest money and fewer contingencies or seller obligations will make your offer most appealing.
Offer a compelling price. In a strong market where prices are rising quickly, sellers often price their homes based on sold comparables or appraisals, which reflect historical and often outdated information. Study the sold comps, but also compare the house you want to other homes that are available, and ask yourself, “what price am I willing to pay, and at what price am I willing to lose the house?” Many homes are selling for more than the asking price, and if you plan to lie in and enjoy the house for many years, you will never look back.
Include a personal touch. If a seller can identify with your personal story, they might develop an emotional interest in wanting to convey their home to you. Many buyers include a cover letter or an email with their offer which expresses how much they love the house and why the house fits their needs.
Be flexible. A successful negotiation involves a meeting of the minds and compromise from each party – especially from the buyer in a seller’s market. Try not to begrudge what the seller is getting, but focus on the terms of the purchase which fit your needs and criteria, and be flexible with the terms of a counter offer if it can work for you.
You have options. It is normal to feel a bit uneasy when you have made a quick decision to purchase a home. But in most cases, you can feel assured that you have time during the option period to make inspections, secure financing and confirm your decision to buy your dream home.
Go back-up. In a fast paced market, buyers make quick decisions so that they can win over competing offers. Sometimes, the buyer that signs the winning contract second guesses their decision and quickly terminates the contract during their option period. You have little to lose and much to gain by executing a back-up contract. You even have the flexibility to continue to look for homes while in the back-up position.
Guide for Sellers with Multiple Offers in a Hot Market
When the real estate market is robust, Sellers can enjoy quicker sales and often achieve premium prices when more than one Buyer becomes interested in buying a house at the same time. Here are some tips for successfully navigating the process of handling multiple offers.
Properly position your home. Even if you have a sense that your home might sell quickly, don’t risk selling faster and skimp on marketing. Stay with the plan of using professional photography and marketing materials, properly staging your home and listing the information in all media. A well-presented home will attract more qualified purchasers quicker.
Market to everyone. You have the best chance of selling your home for the highest price by exposing it to the most number of potential buyers immediately. Sure, your agent will initially alert their colleagues, clients and peers that a new listing will be available soon. But, as soon as we take advantage of the MLS system and our Internet sites, your home will be accessible to agents and Buyers outside of the immediate neighborhood – and worldwide.
Entertain offers. If multiple offers begin to arrive, plan a time to meet with your agent ot review all offers. Your agent will alert purchasers and Buyer’s agents that multiple offers are being received and reviewed by the Seller at a specific date and time, and invite best offers by that time.
Keep offers private. You have the best chance of obtaining the highest price by inviting “best offers” from Buyers rather than divulging terms of an offer that has been received – which might only achieve an incremental increase from a Buyer who has been told about the offer “on the table”. You have the opportunity to receive a much higher bid, if the Buyers are not aware of the competing offer terms.
Which offer is best? Even though price is important, the highest offer is not always the best offer. It is important to review with your agent the financing terms, qualifications of the Buyer, closing date, etc. My mission is to achieve the highest price for you, and we have to make sure that when we achieve the highest price – it is with a well-qualified purchaser, and your home actually closes.
Don’t be greedy. Keep in mind that if a Buyer offers the price and terms that you desire, you have won. Even if it happens quickly, that much better for you. You are seizing the opportunity of a vibrant market. Sign the offer and schedule the closing. Trying to squeeze more from a Buyer, or shopping an offer to try to get even more money, often dissuades a Buyer from continuing with the negotiation. You might wonder if you could have gotten more, but when a property is offered for sale with educated pricing, it sells for what it is worth whether it is less than, equal to or more than the offering price.
Respond and keep momentum. There is an old adage that “time kills deals”. Sellers are wise to act on their best offer and not delay responding to it, in hopes of receiving a better offer. A Buyer’s interest is at a peak level at the time that they submit their offer. Keep the momentum going, choose the best offer, and respond in writing promptly.
Offer deadline. Always include a response deadline to the Buyer when submitting a counter offer to them. You don’t want an open ended offer lingering with a Buyer, while a better offer might arrive. Even if you include a response deadline and a better offer arrives, your agent can advise you on the course of action to execute the best offer.
Execute and invite back-up contracts. In a fast paced market, Buyers make quick decisions so that they can win over competing offers. Sometimes, the Buyer that signs the winning contract second guesses their decision and quickly terminates the contract during their option period. In this event, you greatly benefit by executing a back-up contract with another Buyer.
Have a destination plan. Since homes are selling quickly, it is prudent to have a plan for your next home, whether you have identified and contractor for it, or if you plan to live in temporary housing while continuing a search. Most contracts close in 50 days, so if you are able to sign a contract in the first days on the market, plans might need to be arranged to move in about a month and a half’s time.