Multiple offers are a reality in today’s real estate market. Why is this happening? The Greater Seattle area only has about 1 month of available homes in most every market under one million dollars. Some markets and price points are even lower. To really understand the impact of our low inventory levels, use a base level of 6 months usually described as a balanced market. We haven’t seen that since before the crash of the market in 2007.
Today, it is just normal business to have 4 or more offers on a property. In most cases, it’s the offer with the highest net to the Seller or with the most attractive terms that wins. So, with every property that sells, there are 3 or more Buyers that lost out on that home. This adds to Buyer frustrations and the move to make higher offers with more risk.
Getting a good understanding of winning strategies before you start the process may put you into a stronger negotiating position from the start. Keep in mind that the NWMLS purchase agreements are designed to be as neutral as possible. There are safeguards in the agreement for both Buyers and Sellers. There is risk when the Buyer waives or releases any or all safe guards. Be sure you think these through and get help as needed before moving forward.
What Challenges are Buyers facing when making an offer on a property in today’s market?
- Bargain hunters and “Low Ball” buyers are out of luck.
- Buyers whose loan is maxed out at the list price are most likely not in contention.
- Multiple offers and escalation addendums on the property are almost certain.
- Some Buyers tend to look at the negotiation process as a bidding war and shy away.
What are the winning strategies Buyers can use in multiple offer situations?
- Be APPROVED by the lender’s underwriter for your loan … Subject only to the appraisal and title.
- Put 20% or more of the purchase price as the down payment on your loan.
- Minimum 5% earnest money deposit … the more, the better.
- Have very few or no conditions.
- Set the closing date and other terms so it fits the Seller’s needs.
- Pre-Inspect the property and make the offer “as is”.
- Sign off on the Seller’s Form 17 – Property Disclosure with the offer.
- Use escalation addendums wisely.
- There seems to be fewer cash offers. However, an all cash offer with the same net to the Seller and no conditions will usually win.
- Contact My Preferred Lender: Kenton Becker with American Pacific Mortgage
Additional tactics that are certainly riskier but sometimes needed.
- In most cases, properties sell for list price and more at the time they sell.
- Offer more than list price and escalate your offer from there.
- Buyers are releasing earnest money as “Non-Refundable” upon acceptance of the offer.
- Consider allowing the Seller to stay in the property after closing for 60 to 90 days with no rent.
- Waive the opportunity for an inspection and buy property “As-Is”.
Three questions to ask yourself when making an offer on a property.
- What is this home worth to me? You will see market information for the property. Although good information, your offer for a home may be guided more by emotion.
- Will you just walk away if the if the Seller counters you with a higher price? If the answer is no or maybe, rethink your offer.
- What would it mean to you if you lose out on this home? If this is truly the home for you, buy it!
So, does the Buyer pay more than market value?
It may seem so when the offer is written. However, in most cases the property does appraise at value. In any case, when the property closes, the SOLD price becomes market value and it is used as a comparable comp for future sales in the neighborhood.
Contact Tom Perry today to learn more about the strategies of writing and negotiating a winning offer. He has more than 25 years of negotiating experience and has been through markets like this in the past. Tom has created a system to ensure the best exposure of your offer in the best light to the Seller and their agent. If there is a chance to getting your offer accepted, it’s with Tom as your agent.