It’s no secret that the Spring market can be one of the most competitive times of the year for house buyers. As people are awakening from their winter dormancy with visions of green grass and tulips, they are also starting to dream and work towards their goal of owning a new home.
For some, that means saving money, finding a great realtor and lender and hitting the open market with a pre-approval in hand. For others, that means completing projects around their current home to get it ready to find a new owner which results in a slow trickle of homes hitting the market one by one as their shiny new paint and decluttered rooms become ready to go.
We tend to see a multitude of buyers eager to purchase with each new year, but with only a few new homes available each and every week. So, what does this mean for you as a buyer? Multiple offers!
Multiple offers is when a number of different buyers (sometimes as many as six or more!) all submit an offer for the same house at the same time. The seller can only choose one, so it’s important for you as the buyer to know how to set yourself up for success. Here are a few helpful tips to help make your offer stand out in multiples!
Choose an amazing realtor
This should be an obvious first choice, but surprisingly enough I have heard more stories than I can count of people who have had a horrible first experience buying a home due to a not-so-
great realtor (myself included). “My neighbor’s uncle’s granddaughter’s boyfriend twice broken up is a realtor I think. You should use him!” Ok, Karen!
It is absolutely ok to meet with multiple realtors to find someone you feel comfortable with. Keep in mind, too, that a listing agent, when reviewing multiple offers, will take into account the realtor who is representing the buyer. A listing agent may share with their seller that a particular buyer’s agent was horrible to work with in the past which can make for a really long and stressful buying/selling process. If a realtor comes off in a bad light to you, they will most likely be making that same impression on another agent which may make the sellers more inclined to choose another offer. On the flip side, an amazing realtor who has a great reputation and wonderful recommendations from past clients may just be the reason your offer comes out on top!
Choosing an amazing mortgage lender
Chances are that the amazing realtor you have already chosen to work with has recommendations of amazing mortgage lenders, too. Most realtors will have a handful of mortgage lenders they have worked with regularly in the past that they know are trustworthy to get the job done on time every time! It is especially important to get pre-approved by a lender before submitting any offers. A seller will most likely not even entertain an offer from a buyer without a pre-approval in hand.
“But Karen, why can’t I just use the lender I found online with all of the commercials I see on TV??”
It is true that a lot of the online lenders can offer great rates, but what is lost to them in interest is made up and disguised by fees that you will have to pay at closing. It is also most likely that you will not have one dedicated loan officer to watch over your purchase, and when too many cooks are in the kitchen, mistakes can be made and missed.
In my time as a realtor, I have experienced delayed closings and lost financing and the names of the lenders who were responsible will be forever burned in my brain. If/when those names present themselves in future sales, I, as the listing agent, will make sure the seller is aware of my concerns which may lead to choosing another offer or at the very least, proceeding with extreme caution.
Listing agents will always check up on lenders before advising their clients on different offers presented. A lender can make or break a successful closing, which is why when a seller is presented with two very similar offers and one has a great lender and the other has a not-so-great lender, the offer with the great lender will win every time!
“Dear Seller, I love your home!”
Writing a letter to a seller may be a winning move that can edge out the competition. A retiree who is looking to downsize may love the fact that the buyer plans to raise their family in the home. A devoted animal lover may love that the buyer volunteers and fosters rescues. Whatever it may be that excites you about a home is worth sharing because that just might be what excites the seller, too.
However, this may not always be the case. Some sellers are business focused and have little to no emotion in the sale, in which case, trying to evoke emotion with a letter probably won’t get you very far. Your realtor can help you decide if they think a letter will be helpful and if so, write from the heart about why you love the house and why you hope that someday you will get to call it your home!
Let’s get earnest about earnest money.
Earnest money is good faith money that must be paid within two business days of an accepted offer. This is a buyer’s way of telling the seller I am a serious buyer and want to buy your home!
A buyer must state in the offer how much money they would like to put forth. On average, most buyers will do about 1% of the purchase price. The earnest money will be held by the listing agent’s brokerage until closing, at which time it will be put towards your down payment. Your amazing realtor will write your offer in a way that protects your earnest money in certain instances if you need to back out of the sale.
If you have an inspection contingency and cancel the sale during that time or if at any time you lose your financing, your earnest money will be returned. If you decide to back out a day before closing due to cold feet, you will be at risk of forfeiting your earnest money to the seller. In a multiple offer scenario, the more earnest money you feel comfortable putting forth, the stronger and more serious your offer will be. And, when presented alongside another very similar offer, it may just be the factor that sets your offer apart!
Inspecting the inspection contingency
An important part of buying a home is making sure you are knowledgeable about the home’s possible issues, and comfortable with what you are buying.
“No Karen, there is no such thing as a perfect house!”
You do have the option as the buyer to have a home inspection. In your offer you must state whether or not you are doing an inspection and how long your inspection period will be. During your inspection period, you will need to have your inspection performed (a home inspector is also someone your amazing realtor will be able to recommend to you) and then have your realtor negotiate any potential repairs you would like the seller to make before closing based off of the inspection report.
In a multiple offer scenario you will want to have as quick of an inspection period as possible. This is appealing to the seller so that if you do choose to back out of the sale they can reach out to the other offers while they are still viable.
You may also choose to waive your right to perform an inspection (which is also very appealing to a seller), but as a realtor, I always recommend that you do an inspection so you are aware of any potential issues with the home.
Closing the deal with closing costs
Both a seller and a buyer will each have their own closing costs that will need to be paid at closing. Closing costs will include such things as financing fees, title fees and taxes. A seller’s closing costs average around 1% of the purchase price and a buyer’s can be up to 6%, but average around 3%. A buyer can state in the offer that they would like the seller to pay up to 3% of their closing costs.
When in a multiple offer situation, only if you are financially able to pay the closing costs out of pocket at close, it may be worth considering not asking the seller to pay for any of your closing costs or at the very least, asking them to pay a minimal amount. By not asking them to pay for any of your closing costs it will increase the seller’s potential net profit from the sale, thus making your offer more appealing!
The low down on price…because sometimes it is a lower priced offer that takes the cake!
Believe it or not, but the overall sales price isn’t always the determining factor as to why a seller may choose one offer over another. Yes, some seller’s main objective is to net as much from their sale as possible—so if you are able and feel comfortable submitting a rocking offer because you will mourn the loss of this home for the next 10 years, then by all means, do what feels best for you.
For other sellers, there may be other terms (such as the ones we have already discussed) that come into play that end up being the most important to them. One thing that I like to do before submitting an offer is to ask the listing agent what is most important to their seller. For example, a busy family with 25 kids may really appreciate a long closing timeline to give them as much time as possible to pack and move, versus a seller who flipped a home would much prefer a really quick closing timeline.
Besides, not just the lender, but sometimes the type of financing can come into play as well. FHA financing, for example, can be very selective on the homes they will finance, so submitting an offer on a home that needs a complete renovation using FHA may not be appealing to a seller because they know they may run into financing issues that could affect that buyer’s ability to be able to close on the home.
Knowing what is important to a seller, besides just price, will undoubtedly set your offer apart from the crowd! There is a lot for a seller to consider when choosing the right offer in a multiple offer situation. Knowing that the buyer chose a trusted and competent realtor and lender will, without a doubt, set a sale up for success. Offering competitive terms such as earnest money, quick inspection timelines, and minimal closing costs may prove to be more important than just a high offer price.
Knowing what is most important to a seller and letting that seller know how much this home means to you may just be what is needed to make your offer stand out in multiples!