HOW TO WIN AT MULTIPLE BIDS
We all know that feeling of buying a home. Elation, excitement, anticipation! And then you get into this market where it seems that the beautiful home you just looked at online is either gone in days, or if you are lucky enough to see it and want to put in an offer, you get the big news = there are multiple offers!!
What?? Where are the days of negotiating a price between buyer and seller, the back-and-forth, the resolution? Unfortunately, in this active real estate market, those days are gone! Instead, what we are seeing more times than not, is that as soon as a home hits the market, the buyers come out in droves, and so do the offers!
As a Buyer Specialist, I have had the honor(!) of being in numerous multiple bid situations over my many years in real estate. Have I gotten the house for my clients? Yes! All the time? No! But I do know that it is not an impossibility to get a house, and if you follow my steps and suggestions below, your chance will improve:
1. First, make sure your preapproval is up-to-date. No offer will be considered without one.
2. In this market, where prices are going considerably higher than the asking price, you should consider looking at properties below your price range, by as much as $75-100k lower, in order to give you the “wiggle” room to raise your offer, should you be competing with other buyers.
3. In this competitive market, it is harder for you to get a home if you have a sales contingency on another property. If you need to sell another home/condo/coop/etc in order to buy your next property, try to at least be “Under Contract” on that home before putting in an offer on your next property. Remember, if your first deal falls through, then your purchase here will also fall through. This does not make you a strong contender when competing against other buyers with no sales contingency. If you insist on still trying for a home, then be ready to increase your bid–ALOT!! Also be ready to provide documentation about the other sale, so that the Sellers here feel confident that it will go through (get your contract, your buyer’s pre-approval, a letter from your Board or agent and any other documents ready to share.)
4. The more money you can put into a deal, the better! Sellers love cash in a deal! This way, they don’t need to worry about whether or not the house will appraise, if you bring a high offer. An all-cash offer is the ultimate best, and will put you ahead of the pack! While that’s not everyone’s reality, do try to have at least 20% to put down, if you are competing with other buyers. (Although I have seen buyers with only 10% down win before!)
5. Tell the Sellers that you will have your home inspection within 5 days of completing Attorney Review on the house, and state in the contract that you will only request repairs or credits for major mechanical, environmental, and structural issues.. This still covers you on all the big stuff, but tells the sellers that you won’t give them a laundry list of home inspection items to fix. (Also, to sweeten the deal, you could put a cap amount on what you will ask the sellers to fix. ie: you will “be responsible for anything needing repair up to $5,000.” etc)
6. OK, this is the big one. Many buyers are waiving the appraisal contingency in their mortgage. This means that if the house does not appraise for the amount you have offered the Seller, then it will be your responsibility to come up with the needed cash to “bridge the gap”. Huh? Let’s look at this example:
List price: $500,000
Your accepted Offer: $550,000
Appraisal comes in for: $525,000.
By waiving the appraisal, you are telling the sellers that you will come up with the $25,000 needed to bridge the difference between what the bank has said the value is (and will issue a loan based off to) and your offer price. You will still pay $550,000. but need more cash in order to do so.
Because buyers have been bidding so much higher than the asking price, a few houses haven’t been appraising. This has become a strong negotiating tool, but should only be used if you are comfortable with it and you actually have more cash to put into the deal!! Most importantly, you need to speak to your real estate attorney about this before you offer it in your contract.
7. Try to have a flexible closing date–one that lines up with what the seller wants.
The thing here is–don’t panic! All buyers in our market are experiencing the same thing (and most of the don’t have these tips!). Hang in there, don’t get discouraged, and make sure you have a strong agent in your corner (like me and my team!) that knows the market and understands the process of multiple bids.
Love, Sheri Greenman
Buyer Specialist for the VP Team